As evidenced by a succession of Nippon Keidanren proposals, we have long advocated that Japan should seek to strengthen the free, nondiscriminatory, and multilateral international trading system centered on the World Trade Organization (WTO) from the perspective of "a nation built on trade" that invigorates economic activity through trade and investment. In parallel with work in the WTO, we have called for multi-leveled efforts to create a foundation upon which free economic activity can be conducted through the formation of comprehensive economic partnership agreements (EPAs) with countries and regions important to Japan. These EPAs are to be formed with the aim of realizing a higher level of liberalization and creating wider-ranging rules, while remaining rooted in the WTO.
East Asia in particular is a strategically important region because of its geographic proximity to Japan, its close economic ties with Japan, and its prospects for ongoing growth. Therefore Japan should aim to achieve "synergy" with East Asia by concluding EPAs with countries in the region at an early date. Nippon Keidanren has long maintained that domestic structural reforms and strong structures for promoting EPAs are prerequisites.
Negotiations are currently in progress for the conclusion of EPAs with the Republic of Korea (ROK), Thailand, the Philippines, and Malaysia, following substantial agreements with Mexico on March 12, 2004. At in joint study group meetings composed of representatives from business, academia, government, and at other forums prior to the negotiations, the Japanese business community has emphasized importance of closer economic partnership and advocated concrete measures of translating it into reality. But a look at the present state of negotiations with individual countries and the discussions in joint study group meetings and elsewhere gives little cause for optimism about future progress. Key issues - specifically, liberalizing trade in goods, cutting high tariffs, and developing investment rules in these countries - must be resolved quickly. Japan should tackle with such areas as the liberalization and facilitation of the movement of natural persons, the acceleration of agricultural trade and domestic structural reform of agriculture, and the establishment of the structures for the promotion of these EPAs.
In consequence, Nippon Keidanren has established a joint task force of its relevant committees. This task force has been studying matters such as these important issues, which are prerequisites for EPAs. In this paper we have arranged the results of these studies into issues that should be realized through EPAs and issues that Japan should address promptly in order to promote EPAs. Based on that, we will present our opinions in the form of urgent proposals for concrete measures to resolve these issues.
EPAs concluded by Japan must be consistent with the WTO agreements, which aim for the liberalization of substantially all trade. It is therefore necessary to address forcefully the liberalization of trade by removing tariffs, including those on high-tariff goods, and to facilitate trade by ensuring the transparency of customs procedures and their simplification, acceleration, and cost reduction.
At the same time, with respect to rules of origin, under which benefits of the EPA preferential treatment may be enjoyed, it is necessary that rapid customs clearance be made possible while assuring fairness, impartiality and other principles.
In order support cross-border business activities, It is essential to assure consistency among the rules of origin that Japan agrees to with each member country. These rules should also be applied when studies are undertaken to encompass future Japanese and ASEAN cumulation rules.
In order to build internationally harmonized foundations for free and smooth business operations, and to enhance the attractiveness of countries as investment destinations, it is necessary to develop high-level investment rules and to enhance infrastructure of all types, including legal systems. In particular, we call strongly for provisions relating to high-level investment rules of the kind found in the Japan-Singapore Economic Partnership Agreement (JSEPA), the Japan-ROK Investment Agreement, and the Agreement between Japan and the Socialist Republic of Viet Nam for the Liberalization, Promotion and Protection of Investment (including the granting in principle of national treatment and most-favored-nation treatment at the pre-establishment stage, and the prohibition in principle of performance requirements such as the obligation to employ local nationals).
For its part, Japan should formulate more vigorous policies to attract foreign investment in Japan. It is important that Japan also endeavor to create business opportunities by such means as regulatory reforms of various fields, and to rectify its high-cost structure so as to increase its attractiveness as a market.
It is also necessary for Japan to actively accept people of various occupations, irrespective of their nationality, for such purposes as invigorating Japan's society and economy, smoothing the global activities of Japanese companies, and addressing the decline in the country's birth rate and the aging of its population, as well as realizing mutually beneficial EPAs. To that end, the conditions of required status of residence should be eased and the limit of maximum period of stay should be extended for industrial personnel such as engineers, specialists in the humanities and international services, and intra-company transferees.
With respect to personnel in the field of nursing and caregiving, persons who earn Japanese national qualifications should be permitted to work in Japan taking into account the situation within Japan and overseas. At the same time, Japan should revise its eligibility requirements for examinations and remove restrictions on employment types and periods. In addition, to encourage potential applicants to improve their qualifications, steps should be taken to support Japanese-language education and establish training schools and courses in other countries. In Japan, meanwhile, programs such as those for training and practical internships for people from overseas, including attendees of such schools and courses, should be developed.
In doing so, a system for accepting foreigners in an orderly manner should be developed, while the socioeconomic impact in Japan, in such areas as security and employment, should be monitored.
We also call for the easing of the strict regulations on intra-corporate movements (the assignment of Japanese company employees to branch offices and other units established overseas), such as the necessity of securing work permits even for short stays. In addition, we call for greater transparency in procedures for obtaining visas and work permits, and also for the simplification and acceleration of those procedures.
Given that conformity with the WTO is required, the field of agricultural commodities cannot be entirely excluded from EPAs. In order to deal with issues such as the aging of farmers, the difficulty in finding the next generation of farmers, and the degradation of agricultural land, structural reforms should be pursued for the purpose of maintaining and strengthening Japan's agricultural production base. In addition, efforts should be made to enhance international competitiveness by differentiating, adding higher value, and lowering costs. From these perspectives, it is necessary for the nation as a whole to share the sense of crisis and support the structural reforms being pursued by the agricultural sector.
The following specific steps are necessary. (1) In order to ensure the effective use of farmland with original purpose, to reorganize regional agriculture by building a consensus within individual farming communities, and to study how best to re-cultivate abandoned farmland. (2) Secure and nurture diverse entities to undertake farming activity in the region alongside the individual farmers that endeavor to expand their scale. For this, it will be necessary to assure maximum flexibility in the requirements regarding the form of agricultural production corporations and their establishment, so that they can be adapted to actual conditions in each region. (3) Introduce new assistance measures, such as direct payments to certain farming businesses (basically funded from the rearrangement of the present agriculture budget).
At the same time, aspects such as the current state of Japan's agriculture and trade in agricultural commodities, and the situation with respect to how domestic structural reform is being addressed, should be communicated effectively both within Japan and overseas to encourage a mutual understanding of each country's domestic situation. Certain exceptional measures are allowed under WTO rules.
In view of the role that Japan should play in East Asia and in the world, the leadership of the prime minister is indispensable for formulating and implementing EPA strategies while at the same time accelerating essential domestic structural reforms. Strong headquarters led by the prime minister in this area should be established as early as possible so that the realization of EPAs with major East Asian countries is pursued in a unified and intensified manner as an urgent priority.
Accordingly, Japan should set up a body such as an "Economic Partnership Strategy Headquarters" (provisional name) within the cabinet for a limited period, headed by the prime minister. A "minister of state for economic partnerships" (provisional title) should be named his deputy, thereby unifying efforts to pursue negotiations with foreign countries under prime-ministerial leadership.
It would be best to simultaneously strengthen collaboration with the Headquarters for the Promotion of Special Zones for Structural Reform, the Council on Economic and Fiscal Policy, and the Council for Regulatory Reform (and their successor organization), as well as to strengthen collaboration between the government and ruling parties by such means as the establishment of a joint committee of representatives from the two sides.
The success or failure of these endeavors with respect to EPAs will have a major impact not only on the future course of the Japanese economy as "a nation built on trade," but also on Japan's status in the East Asian region and in the international community. Regarded in this view, EPAs are an urgent issue that should be addressed by the nation as a whole.
Nippon Keidanren is pledged to continue lending the support of our entire organization to the active efforts by the government and ruling parties. We are also dedicated to promoting both Japan's EPAs and the people's understanding of them by making greater efforts to collaborate with various bodies of all levels and all sectors, including other economic organizations and national council promoting economic partnership negotiations.