Japan-Mexico deal points way for Asia trade

Reviewed by Hitoshi URABE

Article:
"Japan-Mexico deal points way for Asia trade"
(David Pilling and Bayan Rahman) Financial Times
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381675718

Comments:

What may be described as euphoria is the response of Japanese people, at least those in business sectors and economists in general, not to mention the politicians and government officials, even those involved in agriculture.

When the talks with Mexico bogged down last October despite the earnest desire of the government to conclude the deal in time for President Fox's visit to Japan, there was a sort of fatigue felt among not only the negotiators but also by the cheering squads from industries and academia.

The culprit leading to the failure was reported, at least in Japan, to be Mexicans suddenly demanding duty-free quota for Mexican orange juice at the very last moment, which would not amount to much in terms of dollars but aroused a certain level of disaffection toward Mexico.

The collapse, however, did not lead to total failure. Many in Japan had been well aware that, whether for good or for worse the world was being covered by an extensive web of bilateral and regional trade and economic agreements, and staying on the sidelines would force Japan, an economy that could not survive without trade, to eventually suffocate.

Even the largest opposition group, the agricultural sector -- as in any industrialized country --, although formally opposing to the proposed deal with Mexico, knew very well that Japan's self-supporting ratio of food is only 40%, which means Japan must sell its industrial and other products to earn money to pay for the food, just to survive.

Alarmed by the failure of negotiation with Mexico, which would send a very negative signal to neighboring countries with which Japan would have to work hard to establish closer economic ties, the government and industry sectors set out to sell the notion of FTA to general public. A significant number of reports, commentaries, and opinions were published in the last couple of months of 2003, by government leaders, industry executives, and scholars of economy and politics. Even those involved in agriculture were employed to alleviate the skepticism and distrusts of farmers.

In the mean time, Mexico had its own reasons to wish for an early conclusion of a deal with Japan. President Fox, having hard time leading Mexico with a minority government, wished to show his leadership by cutting a deal with Japan, the world's third economic sector next to US and EU.

Although the agreement with Mexico is truly an accomplishment, it is premature to assume other FTA negotiations Japan has started recently, with Thailand, Malaysia and the Philippines, would go smoothly. It has been reported that in order to reach an agreement with Mexico, there have been significant behind the scene discussions among leaders of the government and agricultural sectors. Even though it is not appropriate to assume any secret understandings were reached among those influential people, considering the magnitude of effects an agreement with an Asian country would have compared to that of Mexico, it is probably unrealistic to expect the agriculture sector would just quietly observe the negotiations.

No need to be pessimistic, but perhaps it is better to keep a close eye on the developments.