Agricultural Reform Necessary for Japan's EPA with ASEAN

Toshihiko KINOSHITA (Professor, Waseda University)

While it is publicly reported that Japan will hold official meetings with ASEAN for an EPA (Economic Partnership Agreement) in April, it might be too optimistic to expect the conclusion of such an agreement with ASEAN this spring. Actually, Japan has been negotiating with ASEAN countries individually on the bilateral basis, and so far succeeded in concluding EPAs with eight ASEAN and other Pacific-rim countries. As a result, there is no pressing need for ASEAN countries as a whole to hasten to an EPA with Japan. At the same time, ASEAN countries wish to have a better deal with Japan in terms of agricultural trade, and also to treat Japan equally with China and South Korea so as to encourage more Japanese investment in the Southeast Asian region. So, it will probably take some time, say, one more year, to conclude an EPA between Japan and ASEAN.

On the Japan side, there seem to be mixed views on ASEAN. Some people say that Japan should be cautious in proceeding with the current EPA negotiations, because the percentage of Japan's trade with ASEAN is relatively small, only 12.7% for 2006, and thus Japan's gain from the EPA might not outweigh its loss, such as a possible damage to Japanese agriculture. But, given the fact that China and South Korea are ahead of Japan in concluding FTAs (Free Trade Agreements) with ASEAN as a whole, many business people are concerned that they would have to continue dealing with different arrangements for different ASEAN countries and, thus, their products would be placed in a more difficult position than Chinese and South Korean products within the Southeast Asian region, if the current negotiations with ASEAN should fail. Therefore, it may be reasonable to expect some agreement between Japan and ASEAN in about a year or so.

At any rate, agriculture is always a sticky problem in Japan's negotiations for EPAs not only with ASEAN but also with any other country such as Australia. The Japanese government seems to be trying hard to raise the self-sufficiency ratio of agriculture by various measures including consolidation of agricultural land. However, it is obvious that Japan cannot live by its own agriculture alone, because chemical fertilizers, pesticides and other essentials for agriculture would become unavailable if oil imports were somehow disrupted. If so, it is meaningless to stick to a high self-sufficiency ratio of food. In particular, tropical fruits such as mangos and sugar should be imported freely, and those farmers to be affected could be given subsidies in such a way to encourage them to transfer to other industries. Similarly, rice imports should also be liberalized to a certain extent, if not completely.

Agricultural reform is essential for Japan to have successful negotiations for EPAs or FTAs. But it is also important for Japan to take the initiative at the Doha round of WTO negotiations, which are to curb protectionism in the global economy. While the U.S. and the EU might be able to survive within their own regional blocks in the worst case, Japan could not possibly survive just within the Asian region, but need various resources and markets in the world economy. Thus, Japan must carry out fundamental reform in agriculture, services and other key sectors to succeed in international negotiations for its own sake.