Towards the Active Promotion of Free Trade Agreements

Minoru Makihara Vice Chairmen, Keidanren Chairman of the Board of Directors, Mitsubishi Corporation

In July, the Japan Federation of Economic Organizations (Keidanren) urged the Japanese government to promote the establishment of free trade agreements. This topic was also raised at the Japan-U.S. Business Conference held from July 9 to 11, 2000, and participants expressed interest in such a proposal. At the same time, the Japanese government, which had previously espoused a policy of bolstering only multilateral trade setups, has since changed its position, and is currently considering the possibility of concluding a free trade agreement with Singapore and other countries, although progress has been very slow. While it is necessary to study the issue in-depth, priority should also be placed on quick implementation and the business community is ready to extend its full support to the government on this front.

There is no doubt that liberalization of international trade and investment will bring great benefits to Japan and will help stimulate structural reform in this country. While global liberalization under the WTO would be ideal, it is difficult to obtain a consensus among all the 137 member countries and to meet their various needs in a timely manner. This is one reason that the number of free trade agreements, of which there are currently 120, sharply increased in the 1990s. As a result, free trade agreements have emerged to coexist with and supplement the WTO and to meet the delicate needs of signatory countries. In addition, it is important to note that some free trade agreements cover issues such as investment which at the moment cannot be taken up by the WTO.

There are also many drawbacks to not participating in a free trade agreement. Japanese exports to Mexico face a great disadvantage in terms of tariffs (10 - 20% on automobiles and household electrical appliances) in comparison with exports from the United States and the European Union, as Mexico is a member of the North America Free Trade Agreement (NAFTA) and also has a free trade agreement with the EU. Japan, China, South Korea and Taiwan are the only large trading nations and regions that do not fall under any free trade agreement and exports from Japan face disadvantages in terms of tariffs in other countries as well. It is therefore of prime importance that Japan quickly conclude free trade agreements within the framework of the WTO, in particular with Asian countries, and also with countries in the Americas, where the formation of multiple free trade agreements is already underway.