Australian National University ANU/AJRC Seminar Japan

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Australian National UniversityANU/AJRC
SeminarJapans Free Trade Agreements
andAgricultural Protection

• Fukunari Kimura
• (Professor, Keio University
• Visiting Research Fellow, ANU)

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1. FTA networking in Asia-Pacific

• De facto and de jure economic integration
• Bilateral/plurilateral FTAs within and beyond
  East Asia/Asia-Pacific
• Enhanced role of FTAs as a tool of economic
  diplomacy
• WTO-DDA delayed liberalization efforts, limited
  scope
• Speed, scope, and sequencing accommodating a
  variety of motivations and contents
• Heading for open regionalism with high-quality
  FTAs with all major trading partners (ASEAN,
  Korea, Australia, )?

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Japans FTA/EPA negotiations
(As of 01/11/2007)
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The matrix of FTAs involving countries in East
Asia
(As of August 2007)
Japan Korea China ASEAN India AUS NZ
Japan ? ? ?/? ? ?
Korea ? ? ? ? ? ?
China ? ? ? ? ? ?
ASEAN ?/? ? ? ? ? ?/? ?/?
India ? ? ? ?
Australia ? ? ? ?/? ?
NZ ? ? ?/? ?
? Entered into force or signed (Korea-Thailand
has not signed yet) ? Under negotiation or
agreed to negotiate ?/? Some bilateral FTAs are
? while plurilateral FTA is ? ? Under
consideration (G-G base) or feasible study
initiated
From Kimura, Itakura, and Kuno (2007).
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Bilateral FTAs involving countries in Asia-Pacific
(As of August 2007)
Entered into force/ Signed
Under negotiation/agreed to negotiate
From Kimura, Itakura, and Kuno (2007).
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2. Good aspects of Japanese FTAs

• In addition to tariff removals, they include
  various policy measures for the improvement of
  business environment, particularly for
  production/distribution networks in ASEAN/East
  Asia and Mexico.
• Trade/FDI facilitation
• Institutional building (investment rule, IPRs, )
• Business-governments dialogue for
  trouble-shooting
• Link with other policy modes (econ./tech. coop.
  for capacity building, infrastructure
  development, )
• These are largely non-discriminatory.

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• Preliminary post-evaluation of Japan-Singapore,
  Japan-Mexico (Ando (2007))
• Limited direct effects of tariff reduction
  (automobiles, some ag. products, Cf. flat TV)
• Business-Governments dialogue works (logistics,
  safety, overall business environment)
• Government procurement
• Effects of FTAs with ASEAN will surely be large,
  particularly on further activating
  production/distribution networks

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3. Problems in Japanese FTAs

• Minimal cooperation of so-called sensitive
  sectors (e.g., agriculture)
• Low coverage of liberalization for trade in goods
• Trade-value-based evaluation of trade
  liberalization (cf. tariff-line-based)
• De-centralized negotiation body without
  top-down leadership
• Vertical segmentation along sectoral lines
  (Mulgan (2007))
• Enhancing the liberalization coverage is
  essential to further strategic moves with
  Australia and beyond (e.g., US, EU, Asia-Pacific).

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• Direction of agricultural reform
• MAFFLDP
• Focus has shifted from food security/multi-functio
  nality to competitiveness (who will do it?
  efficient land use)
• The opposition party
• Direct income subsidy without (!) mentioning
  border barriers. Typical populists policy.
• Working Group on EPAs and Agriculture under
  Council on Economic and Fiscal Policy (CEFP)
  (http//www.keizai-shimon.go.jp/)
• Claiming the speed of reform to keep up with
  international commercial policies
• Ref. Mulgan (forthcoming)

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4. The Australia-Japan FTAhow can we motivate
Japan?

• Direct economic gains would be small need to
  emphasize political motivation, strategic
  alliance in Asia-Pacific,
• Natural resources
• Heavy dependency on imports of natural-resource-ba
  sed products from Australia
• Recent hike of resource prices, emergence of
  China as a big importer
• Can FTA do anything for stable supply of
  resources? (Tariffs are not the issue!)
• Trade and investment
• e.g., NAFTA Article 605, Japan-Indonesia FTA,
• Importance of Australia as food security should
  be an important agenda
• Services and others
• Any offensive agenda?

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Japans Imports from Australia
Source World Trade Atlas, 2006 HS 2-digit level.
From Kimura, Itakura, and Kuno (2007).
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Australia as a Main Foods/Natural Resources
Supplier
Share of Australian Products in Japanese Market Ranking
Mineral fuel (HS27) 8.7 No. 4
Ores, slag and ash (HS26) 26.8 No. 1
Meat and edible meat (HS02) 30.5 No. 1
Aluminum and articles thereof (HS76) 4.8 No. 2

Source World Trade Atlas, 2006
From Kimura, Itakura, and Kuno (2007).
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Other Natural Resources Imported from Australia

• Uranium, zinc, bauxite, lead, titanium mineral,
  zircon, and rare metals

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Japans Import Dependency on Australia for Coal
and Iron Ores
From Kimura, Itakura, and Kuno (2007).
Source World Trade Atlas
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Australias Export Destinationto Japan and to
China
From Kimura, Itakura, and Kuno (2007).
Source World Trade Atlas
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Source Ando and Kimura (2007).
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5. Economic effects of A-J FTA

• Simulation by CGE-GTAP model
• Effects of the removal of bilateral tariffs and
  export subsidies between Australia and Japan
• Not included effects of service/investment
  liberalization, trade facilitation, and others
• Quantified simulation has been an issue in
  Japan. (cf. MAFF, Hokkaido Government criticism
  in Kimura, Itakura, and Kuno (2007))

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JPN Imports from AUS and Tariffs (million US,
GTAP Data v6.0)
From Kimura, Itakura, and Kuno (2007).
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Estimated Benefits of JPN-AUS EPA
Japan Australia
GDP (yen) 1.94 trillion 780 billion
() 16.2 billion 6.5 billion
() 0.4 1.8
Exports 3.2 3.1
Imports 2.7 9.4
Investment 0.0 (very small) 4.7
From Kimura, Itakura, and Kuno (2007).
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6. Australias positioning

• Unilateralism?
• Understand the political economy of protection!
• WTO?
• Important, but have problems in its speed and
  scope
• FTAs!
• Little direct economic effects?
• Maybe for Australia, but not necessarily for
  counterparts.
• Dirty? Discrimination? Spaghetti bowl?
• Not necessarily. Clean FTAs with all major
  trading partners would be equivalent to
  open-regionalism.
• Opposing to WTO?
• No. FTAs can accelerate MFN-based trade
  liberalization. FTAs can cover various policy
  modes such as trade facilitation, investment,
  competition, government procurement, IPR,
  development, and others.

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• New open-regionalism in Asia-Pacific would lead
  economic diplomacy after DDA.
• WTO is not likely to launch a new round and
  regain initiatives.
• Large policy demand for WTO.
• To avoid micro-protectionism, countries will need
  some liberalization agenda.
• FTA networking is accompanied with strong domino
  effects.
• Australias position would be highly advantageous!

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7. Conclusion

• To extend its FTA strategies beyond ASEAN, Japan
  has to clean up domestic resistance and enhance
  the coverage of trade liberalization.
• Australia-Japan FTA is important for both
  political implication and economic effects a
  must in East Asia/Asia-Pacific.
• Australia can encourage Japan to accelerate its
  domestic reform by taking care of concerns on
  food/resource security.

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References

• Ando, Mitsuyo. (2007) Impacts of Japanese
  FTAs/EPAs Post Evaluation from the Initial
  Data. RIETI Discussion Paper Series 07-E-041.
  http//www.rieti.go.jp/jp/publications/act_dp.html
  .
• Ando, Mitsuyo and Kimura, Fukunari. (2007)
  Japanese FTA/EPA Strategies and Agricultural
  Protection. http//www.coe-econbus/keio.ac.jp/da
  ta/DP2006-024.pdf.
• Kimura, Fukunari Itakura, Ken and Kuno, Arata.
  (2007) Strengthening the Strategic Partnership
  through a Japan-Australia EPA. A report
  commissioned by the Japan Australia Business
  Co-operation Committee (translated in the
  courtesy of the Australian Embassy in Japan).
  http//www.tokyo-cci.or.jp/support_m/kokusai/kaigi
  /epa_report0711e.pdf.
• Kuno, Arata and Kimura, Fukunari. (2007) The
  Evaluation of Trade Liberalization in Japanese
  EPAs the Methodological Issues and the Sectoral
  Evaluation. http//www.coe-econbus/keio.ac.jp/dat
  a/DP2007-0202.pdf. (In Japanese)
• Mulgan, Aurelia George. (2007) Japans FTA
  Politics and the Problem of Agricultural Trade
  Liberalization. Presented at the ANU Symposium
  Australia and Free Trade Agreements on 1-2
  November 2007.
• Mulgan, Aurelia George. (forthcoming) Where
  Japans Foreign Policy Meets Auricultural Trade
  Policy the Australia-Japan Free Trade Agreement
  (FTA). Forthcoming in Japanese Studies, May
  2008.