Japan signs pact with ASEAN, lays groundwork for free trade area
Japan signs pact with ASEAN, lays groundwork for free trade area
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.