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Japan's New Regionalism: The Politics of Free Trade Talks with Mexico

Published online by Cambridge University Press:  24 March 2016

Mireya Solís
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Since late 1998, Japan reversed its exclusive support for the multilateral trade regime and endorsed for the first time bilateral and preferential trade pacts, signing one with Singapore, negotiating another with Mexico, and announcing free trade talks with South Korea. The newfound Japanese interest in pursuing free trade agreements (FTAs) therefore represents one of the most significant departures in Japanese trade diplomacy of the past half-century. This article seeks to explain the birth of a preferential trading policy in a country that until recently had been a staunch multilateralist, and to analyze the reasons for the launch of FTA negotiations between Japan and Mexico. Indeed, one of the most remarkable aspects of Japan's new trade bilateralism is its cross-regional orientation, seeking preferential trade with a Latin American nation. Trade negotiations with Mexico are of great consequence to the development of Japan's FTA strategy for one more reason. Japan has embarked on this new regionalism to offset the negative effects of competing FTAs, but at the same time it has tried to minimize agricultural concessions to bilateral trade partners. Mexico is the first large agricultural exporter that Japan has approached for trade negotiations and is therefore an important test for the success of the Japanese FTA strategy.

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Journal of East Asian Studies , Volume 3 , Issue 3 , September 2003 , pp. 377 - 404
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Copyright © East Asia Institute 

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References

Notes

I greatly benefited from the feedback offered by Ellis Krauss, Ed Lincoln, and Saadia Pekkanen to different versions of this work. Moreover, I was fortunate to receive exceptionally insightful and thorough comments from two anonymous reviewers. I am of course responsible for all remaining errors.Google Scholar

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51. Mexico now exempts the payment of the lower of two import duties: the one paid for the import of inputs into Mexico, and the one paid for the import of the final product in the United States. For example, if the tariff in Mexico for the import of component X is 9 percent and the tariff on the import of the final product Y in the United States is 2 percent, the tariff to be paid in Mexico is 7 percent.Google Scholar

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57. In addition to NAFTA, Mexico has signed trade agreements with numerous Latin American countries: Chile, (1992), Venezuela, and Colombia, (1995), Rica, Costa (1995), Bolivia, (1995), Nicaragua, (1998), El Salvador, , and Guatemala, and Honduras, (2001). Outside the continent, Mexico has an FTA with the European Union and one with Israel (both became effective in 2000).Google Scholar

58. Japan International Cooperation Agency (JICA), “Master Plan for Promotion of Supporting Industries in Mexico” (JICA internal document, 1996), pp. 2, 4–9.Google Scholar

59. JETRO, “Report of the Committee for Closer Economic Relations Between Japan and Mexico,” p. 22.Google Scholar

60. In the 1990s, these bilateral investment treaties greatly proliferated as developing countries sought to promote foreign investment into their economies. Although there is a great deal of variation in the hundreds of BITs signed to date, some of the most noteworthy components include the most-favored-nation and national-treatment principles (i.e., that multinational corporations [MNCs] from a nation party to the BIT will not suffer discrimination vis-à-vis other multinationals or domestic enterprises); elimination of some performance requirements previously imposed by the host government on MNCs; the principle of prompt and adequate compensation in case of nationalization; and MNC access to international arbitration panels in case of a dispute with the host government. Graham, Edward M., Fighting the Wrong Enemy: Antiglobal Activists and Multinational Enterprises (Washington, DC: Institute for International Economics, 2000).Google Scholar

61. Interview with officials from Mexico's Ministry of the Economy, Mexico City, June 2002.Google Scholar

62. Japan-Mexico Joint Study Group, “Final Report,” p. 14.Google Scholar

63. The Japanese business community has some novel ideas on rules of origin for trade in parts. It is widely understood that a Japan-Mexico FTA would not completely solve the problem for Japanese enterprises that import substantial amounts of components from Asia and other third countries. Therefore, Keidanren has circulated the idea that rules of origin in a Japan-Mexico FTA should allow parts made in Asia with some value added in Japan to enjoy zero tariff concessions in Mexico. Whether Mexico will agree or not to such rules is not clear yet. Keidanren, , “Report on the Possible Effects of a Japan-Mexico Free Trade Agreement on Japanese Industry,” p. 9.Google Scholar

64. Keep in mind that NAFTA's investment chapter is unprecedented: For the first time Mexico allowed foreign investment disputes to be heard in binding international arbitration panels (and not in national courts); and it grants for the first time private foreign investors legal standing in that they can directly initiate a dispute settlement proceeding when they believe host state policy is in violation of the NAFTA treaty.Google Scholar

65. Japan-Mexico Joint Study Group, “Final Report,” pp. 18, 22.Google Scholar