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

1. Australian National UniversityANU/AJRC SeminarJapan’s Free Trade Agreements andAgricultural Protection Fukunari Kimura (Professor, Keio University; Visiting Research Fellow, ANU) F.K.

2. 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, …)? F.K.

3. Japan’s FTA/EPA negotiations (As of 01/11/2007) F.K.

4. The matrix of FTAs involving countries in East Asia (As of August 2007) ◎: 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). F.K.

5. Bilateral FTAs involving countries in Asia-Pacific (As of August 2007) Entered into force/ Signed Under negotiation/agreed to negotiate F.K. From Kimura, Itakura, and Kuno (2007).

6. 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. F.K.

7. 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 F.K.

8. 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). F.K.

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11. Direction of agricultural reform • MAFF=LDP • Focus has shifted from food security/multi-functionality to competitiveness (who will do it?; efficient land use…) • The opposition party • Direct income subsidy “without (!)” mentioning border barriers. Typical populist’s 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) F.K.

12. 4. The Australia-Japan FTA:how 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-based 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? F.K.

13. Japan’s Imports from Australia Source: World Trade Atlas, 2006 HS 2-digit level. From Kimura, Itakura, and Kuno (2007). F.K.

14. Australia as a Main Foods/Natural Resources Supplier Source:World Trade Atlas, 2006 From Kimura, Itakura, and Kuno (2007). F.K.

15. Other Natural Resources Imported from Australia • Uranium, zinc, bauxite, lead, titanium mineral, zircon, and rare metals F.K.

16. Japan’s Import Dependency on Australia for Coal and Iron Ores From Kimura, Itakura, and Kuno (2007). F.K. Source:World Trade Atlas

17. Australia’s Export Destination:to Japan and to China From Kimura, Itakura, and Kuno (2007). F.K. Source:World Trade Atlas

18. F.K. Source: Ando and Kimura (2007).

19. 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)) F.K.

20. JPN Imports from AUS and Tariffs (million US$, GTAP Data v6.0) From Kimura, Itakura, and Kuno (2007). F.K.

21. Estimated Benefits of JPN-AUS EPA From Kimura, Itakura, and Kuno (2007). F.K.

22. 6. Australia’s 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. F.K.

23. 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. • Australia’s position would be highly advantageous! F.K.

24. 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. F.K.

25. 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/data/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/data/DP2007-0202.pdf. (In Japanese) • Mulgan, Aurelia George. (2007) “Japan’s 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 Japan’s Foreign Policy Meets Auricultural Trade Policy: the Australia-Japan Free Trade Agreement (FTA).” Forthcoming in Japanese Studies, May 2008. F.K.