[ Nippon Keidanren ] [ Journal ]
Messages from "Economic Trend", November 2010

Political Determination and Promoting EPAs

Vice Chairman of the Board of Councillors, Nippon Keidanren
Chairman, Marubeni Corporation

Soon APEC (Asia-Pacific Economic Cooperation) will be holding its Ministerial and Economic Leaders' Meetings. Years ago, in the APEC Bogor Declaration, the industrialized economies of APEC committed themselves to achieving free and open trade and investment by no later than 2010. This year marks the final year in which to accomplish that goal and will be an important turning point in affirming APEC's post-Bogor direction.

Up until now, Japan has concluded one regional and 10 bi-lateral EPAs (Economic Partnership Agreement). And, while the number of these agreements is by no means slight, economic impacts may be limited as these EPAs are mainly with countries with relatively small trade volumes. In contrast, Korea has put together an economic agreement with the EU that is scheduled to go into effect in July of next year and is working hard toward implementation of a similar economic accord it has already signed with the U.S. If these agreements go as planned, I fear that Japanese firms will be at a huge comparative disadvantage versus their Korean counterparts as Korean firms gain access to these two giant markets ahead of Japan.

Moreover, there has been much discussion recently on expanding the Trans-Pacific Strategic Economic Partnership Agreement (TPP) and on Asian regional integration centering on ASEAN, as well as talk of creating a free trade zone encompassing the entire Pacific Rim. If this was 20 years ago, or even 10 years ago, Japan would naturally be considered an important part of this integration. However, with the rise of the newly emerging economy countries and the corresponding decline in Japan as an economic power, the climate has changed. If Japan continues to remain a "partially isolated country", there is real concern that so-called Japan passing may intensify and harnessing Asia's economic vigor as part of Japan's new growth strategy will become problematic.

It is said the key for Japan in promoting EPAs is to open its agricultural sector. However, even without EPAs Japan's agricultural sector is in need of reform. The most suitable way would be to build a framework to support the creation of "competitive agriculture in Japan" through consolidation, large-scale farming and by adapting sound business principles. It is important for Japan to begin this process on its own instead of waiting for the inevitable overseas pressure, as EPAs and Japan's agriculture need not be exclusively tied together.

The Industrial Structure Vision, released by Japan's Ministry of Economy, Trade and Industry in June, analyzed the causes of Japan's deteriorating competitiveness and expressed the need to pursue both an export centered "external strategy" as well as an "internal internationalization strategy" promoting the inflow of foreign capital, human resources and products all at the same time. To make up for lost time, I strongly urge Japan's policy makers to summon the political determination to take advantage of this APEC opportunity by moving quickly to establish EPAs.

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