Download Emerging East Asia and Japan`s New Trade Policy

Emerging East Asia and
Japan’s New Trade Policy
--- Domestic Structural Reform and Japan’s New Economic Diplomacy ---
Prof.Yorizumi WATANABE
Faculty of Policy Management,
Keio University, SFC
December 15, 2006
Table of Contents
Japanese Economy in Expansion: Renewed
Dynamism generated by Koizumi Reform
 Shift in Trade Policy reflecting Changes in
Trade Pattern and Investment Flow
 Reshaping Japan’s Economic Partnership with
Major Partners
 Beyond Bilateral FTAs ? Asian “Noodle Bowl”
or Stepping Stone to Global Liberalization

Y.WATANABE
2
Basic Facts on Japan Today
The second-largest economy after the US:
GDP of Japan = $4.6 trillion
( $11.7
trillion for US, $2.7 trillion for Germany, $12.8
trillion for EU, 2004)
 GDP per capita of Japan = $36,574 ( $39,934
for US, $32,695 for Germany, 2004)
 Sources of economic strength: ①Advanced
Technology, ②Household Wealth, ③Social
Stability

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3
The Japanese Economy is Recovering
Real GDP Growth Rate
(at annual rate, %)
8
5.9
6
3.0
4
6.0
5.5
5.4
3.5
2.2
2
1.4
0.8
0
-2
-0.7
-0.9
-1.3
-4
I
II
III
IV
I
03
II
III IV
I
04
II
III
IV
05
Source: Cabinet Office
The real GDP growth rates have been positive
for four consecutive quarters.
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4
In an Expansion Phase since 2002
Projection
（％）
3.0
2.5
Real GDP
growth rate
2.7
2.3
Net exports
1.9
2.0
1.7
1.5
1.0
1.1
0.5
0.0
▲ 0.5
Others
Private
Consumption
2005
2006
▲ 1.0
Business
Investment
2002
2003
2004
Source: Cabinet Office
Note 1: The components in the bar graphs are the contribution to GDP growth.
2: Public demand, private inventory and residential investment are included in "Others."
Y.WATANABE
（FY）
5
The Key to Recovery:
Structural Reform
Koizumi’s “No Growth without Reform”
Policy
 Priority to private sector initiatives: smaller
government and less dependence on fiscal
stimuli
 Japanese version of “Subsidiarity” : leave to
the localities what they can do

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6
Successful Structural Reform
Progre ss of NPLs Di sposal
(Major Ban k s)
(t rillion yen)
60
50
40
ratio of NPLs
(right scale)
8.4 8.1
7.2
am ount of NPLs
(left scale)
(%)
10
8
6.5
5.2
6
4.7
26.8
30
23.9
20.2
2.9
17.5
4
20
13.612.1
7.4 6.1 2.4
2
10
0
0
02.3
03.3
04.3
05.3
（year.mont h）
Source: Financial Services Agency
Y.WATANABE
7
Structural Reforms:
Unfinished Business




Over 1000 regulatory reform items have been
implemented, and more than 500 Special Zones for
Structural Reform had been created by Spring 2005
“Invest Japan” Campaign: to double the cumulative
stock of FDI in Japan since 2003
Privatization of Japan Post (the bills passed in
October 2005, to be privatized in October 2007)
136 out of 163 public corporations were abolished,
privatized or underwent other reorganization
measures
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Employment is also Improving
Em pl oym e n t S i tu ati on
(%)
6.0
(rat io)
1.00(05/12)
1.2
5.5
1.0
5.0
0.8
4.5
0.6
4.0
0.4
4.4%（05/12）
3.5
0.2
02
03
04
05
(year)
Unem ploy m ent Rate
Effective Job Offers-to-Applicants Ratio
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9
Japan’s Trade with Major Trading Partners（2004, $billion）
China
76.3
143.9
73.9
34.7
60.5
113.1
Japan
53.7
54.4
89.3
E U
128.6
172.9
USA
289.0
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source：IMF Direction of Trade, MOFA
FDI net-flow with Major Partners（2005, Y100million）
China
13
7,258
Japan
-80
8,637
2,173
13,492
E U
USA
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＊“net-flow” includes capital withdrawals and return on investment.（Source: Bank of Japan、MOFA)
Japanese Companies in Europe
ＥＵ Member States
（since 2004.5）
__
<country>
Number of Japanese companies（manufacturers）
Ireland
48(21)
Netherlands
373(54)
Denmark
29(8)
Norway
18(1)
Switzerland
62(2)
Portugal
32(18)
Non-EU countries
Manufacture ：989
West Europe：814
Central&East:160
Turkey
：15
Sweden
66(15)
Germany
633(103)
United Kingdom
839(248)
Belgium
149(41)
Luxembourg
17(2)
future members/candidate
Finland
21(6)
Poland
63(36)
Ukraine
2(0)
Czech Rep.
63(62)
Estonia
3(0)
Slovakia
16(9)
Latvia
1(0)
Hungary
59(42)
Lithuania
1(1)
Romania
10(9)
Croatia
1(0)
France
384(146)
Austria
48(10)
Italy
192(67)
Spain
157(68)
Source: JETRO, Toyokeizai( 2004), MOFA
Greece
11(4)
Y.WATANABE
Serbia Montenegro
2(1)
Slovenia
4(0)
Bulgaria
2(0)
Turkey
28(15) 12
Intra-regional Trade (%)
East Asia
EU(15)
NAFTA
1980年
33.9
61.0
33.6
2003年
50.5
61.4
55.4
1980年
34.8
56.9
32.6
2003年
59.7
63.5
39.9
Export
Import
Source：Japan Economic Journal （5/11/2004）
Y.WATANABE
13
Japanese Car Industry:
Optimal Supply System in Asia
Japan：high-value added
Engine parts and
components
Indonesia：Gasoline Engine、
Horn
Tariff Rates：5-15%
Thailand：Diesel Engine、
Air Conditioning、
Tariff Rates：40-60%
Malaysia：Engine Parts、
Condenser、
Tariff Rates：5-80%
Y.WATANABE
Philippines：Transmission、
Combination Meter
Tariff Rates：3%
14
Guideline for EPAs
(Ministerial Council’s Decision, Dec.21 2004)





EPA to complement the multilateral trading system
embodied in WTO
EPA to develop further Japan’s external economic
relations and ensure its economic benefits
EPA to enhance domestic structural reform
EPA as a diplomatic device to create sound
international environment, notably in East Asia
EPAs to be concluded expeditiously by the
Government in its totality
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Criteria to Specify Partner
Countries and/or Regions



Whether it contributes to create beneficial
international surroundings for Japan (East Asian
economic community, diplomatic agenda, WTO
negotiations, etc)
Whether it contributes to enhance Japan’s economic
welfare
Feasibility and accommodation of sectoral difficulties
of either side, impact on third countries, domestic
system for implementation, etc.
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Economic Partnership Agreement
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Japan-Singapore New-Age
Economic Partnership Agreement
Japan’s first FTA in force since Nov.2002
 Comprehensive coverage; goods, services,
investment, movement of natural persons,
information and communication technology,
human resources
 Over 98% of tariffs eliminated
 Liberalization in trade in services beyond
WTO commitments (134 /102 sectors for
Japan, 139/62 sectors for Singapore)

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Japan-Mexico EPA
Japan’s first FTA to involve agricultural sectors
substantially
 Japan’s second FTA to redress disadvantages in
the absence of FTA
 Gateway to Americas for Japan,
Gateway to Asia for Mexico
 Bilateral cooperation
 Entered into force as of April 1st 2005

Y.WATANABE
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Strong business demand for FTA






Disadvantageous conditions in tariff rates (average: 16%)
Decline of Japan-Mexico Trade
Unfavorable condition in government procurement
Access to 10th economy
Possible gateway to North/South America
Better business environment for Japanese companies
Y.WATANABE
20
Japan’s FTA/EPA
Achievement so far











Japan-Singapore EPA (in force since Nov.2002)
Japan-Mexico EPA (in force since April 2005)
Japan-Malaysia EPA (agreement in substance May, signed Dec. 2005, in
force since July 2006)
Japan-Philippines EPA (agreement in substance Nov.2004, signed in
September 2006)
Japan-Thailand EPA (agreement in substance Sept. 2005)
Japan-ASEAN EPA (negotiations started in April 2005)
Japan-Korea EPA (negotiations started in Dec.2003)
Japan-Indonesia EPA (agreed to start negotiations in June 2005, the first
round was held in July 2005, agreement in substance in November 2006)
Japan-Chile EPA (JSG’s 1st meeting in Jan.2005, negotiations started in
February 2006, agreement in substance in November 2006)
Preliminary talks: Vietnam, Brunei (early 2006)
Joint Study Group (JSG): India, Australia, Switzerland, GCC
Y.WATANABE
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Ｊａｐａｎ’ｓ ＥＰＡ Ｎｅｇｏｔｉａｔｉｏｎｓ
Overall
Picture
Iceland
Norway
Canada
Switzerland
Morocco
Mongolia
Israel
Egypt
Saudi Arabia
Korea
China
Hong-Kong
Taiwan
GCC
India
（Note）Regional Trade Agreements
reported to the WTO
6 in 1970
31 in 1990
168 in 2005
Vietnam
Laos
Myanmar
Cambodia
Thailand
Japan
Mexico
Philippines
Brunei
Malaysia
ASEAN
Indonesia
Brazil
Singapore
South Africa
Ｃｈｉｌｅ
Australia
Argentine
EPAs concluded or agreements in
principle reached
Negotiations ongoing or about to start
Preliminary discussions or governmentinvolved joint studies ongoing
MERCOSUR
Private-sector studies are ongoing with
these countries, or their
governments/business community have
indicated interest in EPA with Japan
Y.WATANABE
（Brazil, Argentine,
Uruguay, Paraguay）
22
Why with Chile?
Chile: A Pivotal Point in Latin
America






MERCOSUR: Since 1995
Chile: Associate member to MERCOSUR since
1996 through FTA
Santiago⇒Mendoza⇒Buenos Aires
⇒San Paulo
Potentiality of “Eje MERCOSUR-Chile”
Chile’s FTA network with 35 countries
Chile, the major source of minerals; e.g. copper
(50.6%), molybdenum (55.8%)
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23
Mexico, Chile, and Beyond?
Case for Brazil and Mercosur



Motorcycle: Moto Honda (since 1976) 896,000 units
in 2004 (market share 80%)
Passenger car: Toyota Mercosur 17,424 units (2002)
⇒ 37,747(2004, market share 40%), CKD parts
exported to Argentine
TV sets, Audio, DVD, PC: Toshiba with SEMP
(Sociedade Eletro Mercantil Paulista) TV sets 1.7
million units (2004, the size of the national market is
about 7million units)
Y.WATANABE
24
FTA schedule in East Asia
2002年
2005年
2003年
ASEAN
2004年11月
Joint
Declaration
2009年
FTA
（Excl.CLMV）
2015年
FTA
（Excl.CLMV）
ASEAN＋India
ASEAN
＋Australia
＋New Zeeland
FTA
（CLMV）
2012年
Framework
Agreement
2017年
FTA
（Excl.CLMV）
2003年10月
2011年
Framework
Agreement
ASEAN
Economic Community
2014年
FTA
（CLMV）
2003年10月
ASEAN＋Japan
2020年予定
AFTA（CLMV）
2010年
Framework
Agreement
2020年
2015年
AFTA（Excl.CLMV）
2002年
ASEAN＋China
2015年
2010年
AFTA
ASEAN＋Korea
2010年
2016年
ASEAN・India
（Excl.CLMV）
2004年11月
Framework
Agreement
FTA
（CLMV）
ASEAN・India
（CLMV）
2015年
FTA
（CLMV）
CLMV= Cambodia, Laos, Myanmar and Vietnam
Y.WATANABE
Source: MOFA and JETRO
25
East Asian Economic Community
AFTA: completed by2010(excl.CLMV)
 China + ASEAN: by 2010 (excl. CLMV)
 Korea + ASEAN: by 2009 (excl. CLMV)
 Japan +ASEAN: by 2012 (excl. CLMV)
 Australia +ASEAN: by 2007 (excl. CLMV)
 Japan-China-Korea FTA maybe forthcoming
after the Investment talks

Y.WATANABE
26
Issues to be considered




WTO consistency: “substantially all the trade”,
“within a reasonable period of time (= 10 years)”, “not
to raise barriers to third countries”
Relationship with two other mega-regions, i.e. EU
and Americas (NAFTA, FTAA)
APEC & ASEM: inter-regional cooperation
Multilateral liberalization through WTO/DDA
Y.WATANABE
27
Regional Trade Arrangements
ﾌﾗﾝｽ、ﾄﾞｲﾂ、ｲﾀﾘｱ、ﾍﾞﾙｷﾞｰ、ｲｷﾞﾘｽ、
ｵﾗﾝﾀﾞ、ﾙｸｾﾝﾌﾞﾙｸﾞ、ｽﾍﾟｲﾝ、
ﾎﾟﾙﾄｶﾞﾙ、ｷﾞﾘｼｬ、ｱｲﾙﾗﾝﾄﾞ、ｵｰｽﾄﾘｱ、
ｽｳｪｰﾃﾞﾝ、ﾌｨﾝﾗﾝﾄﾞ、ﾃﾞﾝﾏｰｸ
EU
15カ国
EU-US
NAFTA
３カ国
米、加、墨
パートナーシップ
東方へ拡大
EU-メキシコ
ＦＴＡ合意
ロメ協定
アフリカ、カリブ海
等の旧植民地諸国
約７０ヶ国
ラ米へ拡大
FTAA
（２００５年目標）
MERCOSUR
４カ国
ｱﾙｾﾞﾝﾁﾝ、ﾌﾞﾗｼﾞﾙ、
ﾊﾟﾗｸﾞｱｲ、ｳﾙｸﾞｱｲ
AFTA
ＡＳＥＡＮ10カ国
ｲﾝﾄﾞﾈｼｱ、ﾏﾚｲｼｱ、ﾌｨﾘﾋﾟﾝ、
ｼﾝｶﾞﾎﾟｰﾙ、ﾀｲ、ﾌﾞﾙﾈｲ、
ｳﾞｪﾄﾅﾑ、ﾗｵｽ、ﾐｬﾝﾏｰ、ｶﾝﾎﾞｼﾞｱ
SAPTA
ｲﾝﾄﾞ、ﾊﾟｷｽﾀﾝ、ﾊﾞﾝｸﾞﾗﾃﾞｼｭ、
ｽﾘﾗﾝｶ、ﾈﾊﾟｰﾙ、ﾌﾞｰﾀﾝ、ﾓﾙﾃﾞｨｳﾞ
ＡＦＴＡ－ＣＥＲ
（ＦＴＡ検討開始）
CER
豪、NZ
（最近動きなし）
Y.WATANABE
28
Three Mega-Regions
WTO
Y.WATANABE
29
Conclusions :Japan’s New Approach





FTA/EPA as complementary device to multilateral
trade liberalization
East Asia: providing legal frameworks to secure defacto business-driven integration：Japan-China FTA
is crucial
World-wide: from “defensive FTA” to “strategic FTA”
(Chile, CH, GCC, Australia, India)
Further commitment in WTO, APEC, ASEM
Closer cooperation with US and EU in trade and
investment through Regulatory Reform Talks
Y.WATANABE
30
Thank you for your kind attention!
Freer trade for the better future
Y.WATANABE
31