Bridges Weekly Trade News Digest • Volume 6 • Number 1 • 16th January 2002
News From The Regions: Japan, Se Asia & S. Asia
Japan signs its first FTA ever; others in the pipeline
The Prime Ministers of Japan and Singapore on 13 January signed an historic bilateral free trade agreement (FTA) three months after the two countries reached a basic accord on its framework. The accord is called the ‘Japan-Singapore Economic Agreement for a New Age Partnership’. "What we have signed is not a conventional free trade agreement focusing only on the liberalisation of trade in goods and services, and investment," said Singaporean leader Goh Chok Tong during the signing ceremony. "I believe it will herald a new era of economic ties between our two countries."
Noting there are many areas where Japan and Singapore can cooperate "to ensure the prosperity and stability of the region," Japanese Prime Minister Junichiro Koizumi said the FTA "provides a model of economic relations between Japan and ASEAN (the Association of Southeast Asian Nations)." The FTA, the first-ever for Japan, is expected to take effect around the middle of the year, and will remove tariffs on 94 percent of Singapore’s exports to Japan, up from the current level of 84 percent and covering over 3,800 items. However, tariff reductions on politically sensitive agricultural and fishery products, as well as some petrochemical and petroleum goods, will be excluded from the FTA. For its part, Singapore will do away with all its remaining tariffs on goods imported from Japan, namely on four types of alcoholic drinks.
Tokyo was able to make the pact consistent with WTO rules while at the same time avoiding sensitive sectors by including in the FTA tariffs that have already been brought to zero under WTO rules. The WTO requires Members to remove "substantially all" tariffs when concluding an FTA. Observers point out that Tokyo’s insistence on maintaining tariffs on farm and fishery imports could act as a drag on Tokyo’s future FTA negotiations with countries such as Mexico and South Korea.
Koizumi was on a weeklong trip to five Southeast Asian countries in a bid to boost economic ties between Japan and the Association of Southeast Asian Nations. ASEAN comprises the Philippines, Malaysia, Indonesia, Brunei, Cambodia, Laos, Myanmar, Singapore, Thailand and Vietnam.
Japanese Minister of Economy, Trade and Industry Takeo Hiranuma said on 11 January that Asian and Pacific nations should consider creating a Pacific economic bloc to strengthen economic ties. "Establishing a broad economic partnership in a Pacific economic bloc would not be bad for Southeast Asia, East Asia as well as Oceania," Hiranuma told reporters. "I think it’s good to consider it broadly and with plenty of time — about, say, a 10-year span," he said.
In Thailand, Koizumi and his Thai counterpart, Thaksin Shinawatra, agreed in principle on 11 January to create a free trade area within one year, according to a Thai government spokesperson. The spokesperson said the cooperation, under the name ‘Closer Economic Partnership, would cover all areas of trade and investment between the two countries, and many goods would also enjoy lower tariffs and non-trade barriers.
Free trade area in South Asia planned
Leaders from the seven South Asian Association for Regional Cooperation (SAARC) countries pledged on 6 January to finalise a draft treaty for a a free trade area by the end of this year. A declaration signed by the leaders of Bhutan, Bangladesh, India, the Maldives, Nepal, Pakistan and Sri Lanka said that the countries "recognised the importance of achieving a free trade area and reaffirmed that the treaty regime for creating an FTA must incorporate binding timeframes." A previously signed South Asian Preferential Trading Agreement, which is a forerunner to a regional FTA, still has yet to be implemented. Trade within the regional grouping — which accounts for one fifth of the global population — is only four percent of the total volume of trade between the seven countries and the rest of the world.
"Japan, Singapore sign free trade agreement," KYODO NEWS, 13 January 2002; Japanese trade minister calls for Pacific economic bloc," AFP, 11 January 2002; "Thai-Japan Free Trade Pact To Take Shape Within 1 Year," ASSOCIATED PRESS, 11 January 2002; South Asian leaders pledge to establish free trade in the region," AFP, 6 January 2002.