Japan signs pact with ASEAN

Japan signs pact with ASEAN

Karl Malakunas, Agence France-Presse, Phnom Penh

A free trade area (FTA) between Southeast Asia and Japan could
be a reality within 10 years, around the same time when the
region links up with China for the world's largest free market,
following a pact signed by the nations' leaders Tuesday.

Japanese Prime Minister Junichiro Koizumi sealed an economic
pact with ASEAN leaders after their two-hour summit here to work
on a framework to develop the FTA forging an economy worth at
least US$4.9 trillion.

"We viewed that a comprehensive economic partnership between
ASEAN and Japan would provide greater market opportunities to
their economies, through the creation of larger and new markets
and enabling the industries to enjoy bigger economies of scale,"
the leaders said in a joint declaration to announce the signing.

"Such partnership would bring about greater stability and
prosperity to this region, nurturing a sense of community between
ASEAN and Japan."

The agreement comes a day after China signed a deal with ASEAN
to create the world's biggest FTA by between 2010 and 2015,
embracing 1.7 billion people and trade worth $1.2 trillion.

Koizumi arrived in Phnom Penh looking to ensure Japan, one of
the biggest investors in the region, was not left behind
following the ASEAN-China trade pact.

Negotiations to set up the Japan-ASEAN deal are not as
advanced as the group's dealings with China.

Under the deal signed on Monday between China and ASEAN, the
group established a framework to set up their FTA. But the Japan-
ASEAN pact is only at the stage of agreeing to develop a
framework.

And there were already major obstacles highlighted with ASEAN
officials saying Japan was reluctant to open up its sensitive
agriculture sector.

The officials said Japan refused to offer immediate tariff
reductions for agricultural products from Southeast Asia.

They pointed to a section of the ASEAN-Japan declaration that
said the free trade deal should take into account "the economic
levels and sensitive sectors" in each country as highlighting
Japan's stance on the matter.

However, Koizumi said he expected the agreement signed on
Tuesday would help to fast-track the negotiations to bring about
the Japan-ASEAN free trade area.

"(This) spells out our basic policy to accelerate this
initiative," Koizumi told reporters after signing the deal,
adding that ASEAN and Japan needed to "intensify relations and
exchanges to our mutual benefit".

Analysts also said Southeast Asia might use its newly
established political, economic and security links with China to
seek trade concessions from Japan.

"ASEAN may view the latest pacts with China as a leverage when
negotiating with the Japanese," Ralf Emmers, an analyst with the
Singapore-based Institute of Defense and Strategic Studies, told
AFP.

China accounts for only five percent of ASEAN exports, less
than Japan's 10-15 percent share.

The ASEAN-Japan declaration forecast bilateral trade would
expand rapidly if the FTA, which they aim to realize within 10
years, bears fruit.

By the year 2020, ASEAN exports to Japan would increase by
$20.6 billion or 44.2 percent from 1997 levels, while Japanese
exports to the region would rise 27.5 percent or $20 billion,
according to the document. From 1993 to 2000, Japan's trade with
ASEAN increased at an annual rate of 15 percent, it said.

ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.