5 - Japan's FTA Strategy and a Free Trade Area of the Asia-Pacific

Summary

INTRODUCTION

Japan enacted its first free trade agreement (FTA) in November 2002 with Singapore. The formal name of the agreement is the Agreement between Japan and the Republic of Singapore for a New-Age Economic Partnership, or Japan-Singapore Economic Partnership Agreement (JSEPA). JSEPA is a comprehensive economic partnership agreement (EPA), which includes not only the removal of tariff and non-tariff barriers — the traditional elements of FTAs — but also the liberalization of foreign direct investment (FDI), trade and FDI facilitation, economic and technical cooperation in a wide range of areas including development of human resources, information and communications technology (ICT), small and medium enterprises (SMEs), tourism and others. Both Japan and Singapore realized the importance of a broad-ranging comprehensive agreement, in order to have significant impacts on economic activities in the emerging international economic environment where not only goods but also people, funds, and information cross borders freely. Since then Japan has enacted two more FTAs (EPAs), one with Mexico in April 2005 and the other with Malaysia in July 2006. Japan is currently negotiating or studying a number of FTAs.

Japan had pursued trade liberalization under the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) until the late 1990s, and therefore, the recent pursuit of FTAs by Japan is a reflection of the change in its trade policy from a single track approach based on the GATT/WTO multilateral trade liberalization to a multi-track approach including bilateral and plurilateral liberalization. The White Paper on international trade 2003 published by Japan's Ministry of Trade and Industry argued the need for pursuing a multi-track approach. Several reasons can be identified for Japan's emerging interest in FTAs.

One important reason is new developments in global trade, the scene where multilateral trade negotiations under the WTO are making little progress and regional trade agreements such as FTAs are rapidly increasing. Faced with this situation, the Japanese government recognized FTAs as an option for achieving trade liberalization.