[ Nippon Keidanren ] [ Policy ]
(Provisional Translation)

Urgent Call for the Opening of Negotiations toward Japan-Thailand Economic Partnership (JTEP) Agreement

May 12, 2003

Nippon Keidanren
(Japan Business Federation)

I. Conclude JTEP Agreement to achieve the Initiative for Japan-ASEAN Comprehensive Economic Partnership

In January 2003, Nippon Keidanren announced a plan entitled "Envisioning a Vibrant, Attractive Nation in the Twenty-First Century." This plan constitutes a grand design of Japanese economy and society by the year 2025. As part of this plan, we emphasized that it is important for us to act promptly to create a zone of free economic activity in East Asia focused on the ASEAN+3 nations in order to maintain and improve Japan's economic competitiveness. Toward that end, Nippon Keidanren believes that Japan needs to further liberalize the movement of goods, people, and capital in "the third national opening", thereby exerting leadership in the East Asian region.

In September 2002, Keidanren issued a position paper entitled "Urgent Call for Implementation of the Initiative for Japan-ASEAN Comprehensive Economic Partnership." With China playing an increasingly prominent role in the East Asian economy, we called in our position paper for more balanced development, to be achieved by establishing stronger economic partnership with the ASEAN nations.

In order to build comprehensive economic partnership with the ASEAN nations, Japan should start negotiations for the economic partnership agreement with Thailand, which is one of the highest priority nations in the region, to add to already established Japan-Singapore Economic Agreement for a New Age Partnership.

II. Negotiations for the JTEP Agreement should be launched

Japanese corporations have been operating in the ASEAN region for the past 40 years, developing the qualities of the labor force and building up a wide range of industrial capacity ranging from parts manufacturing to assembly. Direct investments by Japanese corporations in ASEAN over the last five years totaled ¥2,619.4 billion, of which ¥708.8 billion, or 27.1%, was invested in Thailand, thus making Thailand the largest single destination for direct Japanese investments in ASEAN. Most of these investments were in the manufacturing sector. In total, more than 1,300 Japan-invested enterprises employ some 388,000 persons in Thailand, which is becoming Japan's increasingly important base for manufacturing and sales in ASEAN.

At the same time, the influence of the Chinese economy continues to grow. With inexpensive, high-quality products from China available in great quantity on the market, Japanese companies, especially in the manufacturing sector, are seeking to locate their manufacturing operations at optimum manufacturing bases in Thailand and elsewhere in the ASEAN region, and to balance their direct investments in China and the ASEAN nations. But unless the investment environment in Thailand is quickly improved, China will become an even more attractive destination, prompting Japanese corporations to reconsider their operations in Thailand. In the end, they might be forced to restructure their business. As a result, co-existence and co-prosperity in East Asia would become a more difficult prospect, and business conditions for Japanese corporations become worse.

Japanese companies in Thailand must deal with competition in the global marketplace with the China-located companies including those in their own corporate groups. At the same time, they face competition with companies of other nations that have set up a presence in Thailand. In particular, American companies are enjoying national treatment with respect to their investment activities in Thailand by Treaty of Amity and Economic Relations. As a result, Japanese companies in Thailand already find themselves at a disadvantage with respect to their US counterparts. In addition, China is now in talks aimed at establishing free trade area with Thailand, as well as ASEAN. If other countries move ahead of Japan in establishing economic partnership agreement with Thailand, Japanese companies will be in an even more disadvantageous position.

Thailand is currently mulling the possibility of establishing economic partnership agreement with Australia, India, and other nations, in addition to Japan and China. But, we understand that Thailand is determined to make a special effort to overcome the barriers to bilateral economic partnership between Thailand and Japan. Taking advantage of this situation and the progress achieved since May 2002 in the preliminary consultations and the working group sessions for the establishment of economic partnership between the two countries, Japan should find a constructive way to establish JTEP Agreement and enter into negotiations as soon as possible. We highly expect that both countries agree to start the negotiations for JTEP Agreement at the summit meeting to be held in June 2003.

In particular, import tariff on agricultural imports is one of the most difficult issues between two countries. Accordingly, Japan must strengthen the competitiveness of agricultural sectors by structural reforms. Moreover, Japan must review the agricultural policies by which it seeks to ensure that the required level of food self-sufficiency is maintained. Through the negotiations, we would find the necessity to take such measures as making exception of rice and other sensitive items, or delaying tariff reduction regarding such sensitive items, and this is a point that Thailand also acknowledges. In so doing, the agreement should be fully consistent with GATT and GATS.

Average customs tariffs in Thailand stand at more than 20 percent, which is quite high, and regulations, symbolized most notably by the Alien Business Law, remain quite restrictive. For this reason, we strongly request Japanese government to urge Thailand to: (1) carry out the elimination of tariffs typically associated with the establishment of FTAs; (2) liberalize the services and investment sectors; and (3) take concrete steps for the facilitation of trade.

III. Position JTEP Agreement as part of Japan's multi-tiered trade policy

In light of the situation described above, we feel it is very important for Japan and Thailand, who have very strong economic relations, to create an economic partnership agreement, and to use that agreement as a springboard to strengthen economic partnership with other ASEAN nations. Consultations with the Philippines and Malaysia are also proceeding at the working group level. We believe that positive efforts to establish economic partnership agreement with a range of different nations are important, not only for the establishment of comprehensive economic partnership with ASEAN, but also for the sake of a zone of free economic activity in East Asia.

Nippon Keidanren believes that it is important to pursue a multi-tiered trade policy that encompasses bilateral, multilateral, and regional approaches. The Japanese government should actively pursue negotiations toward JTEP Agreement, in parallel with promoting bilateral consultations with such countries as South Korea and Mexico.

Home Page in English