Japan must rethink trade policy

Yoshio NAKAMURA (Senior Managing Director, Nippon Keidanren)

The outcome of the World Trade Organization's ministerial conference in Cancun, Mexico, in September was extremely regrettable and damaging to multilateral trade liberalization based on rules. However, we should not simply resent past failures. We should turn them into lessons for achieving the goals of Japan's future trade policy. I would like to emphasize that for Japan and many other countries, the WTO will continue to be the basis of the world trading system. We must never let the WTO, which sets the basic rules for international trade and provides an effective dispute-settlement mechanism for its 148 members, lose its relevance.

For that reason, it is imperative to put the WTO negotiations back on track. Each of its member nations needs to not just insist on what it wants to obtain or defend, but also seek common ground by making concessions where possible.

At the Cancun talks, Japan was represented by the foreign, trade and agricultural ministers. But I wonder if the trio entered the conference with a unified negotiating position that reflected Japan's national interests.

For example, the U.S. Trade Representative and the European Commissioner in charge of trade engage in international negotiations after making internal adjustments so they can correctly represent their national or regional interests and table their proposals.

The Japanese government appears to be discussing the creation of a mechanism or a new organization that would prevent bureaucratic divisions from tying its hands during international talks, and I hope the failure of the Cancun talks will prompt the business community to start playing a more active role in the matter.

True, it is the government that handles the negotiations. However, it is a long-established practice in the Western business community, which stands to be affected by the outcome of the talks, to directly take part in the negotiating process. Moreover, in the Cancun talks, I hear that private-sector businesspeople in some Asian countries like India and Indonesia joined their respective government delegations as advisers. Japan should start discussing how representatives from the business community or other interest groups can take part in government-led negotiations.

The outcome of Cancun highlighted the need for bilateral and regional initiatives for liberalizing trade and investment. Since 1999, even before the WTO ministerial conference in Seattle, Keidanren has been stressing the importance of bilateral and regional free-trade agreements. Japan should weigh the respective benefits of multilateral trade liberalization under the WTO and bilateral/regional approach, and strategically select its FTA partners and determine the contents of any prospective agreements.

In this sense, Japan's failure to reach an agreement on an FTA with Mexican President Vicente Fox here last week was extremely damaging to Japan's future trade policy. It will have a far-reaching impact that goes beyond trade relations with Mexico. In light of the worldwide trend toward FTAs, Japan needs to conclude more such agreements with Asian nations it has close economic ties to. To do this we should quickly review our strategy on trade.

(This article originally appeared in the October 20, 2003 issue of The Japan Times. Do not quote without the author's permission.)