To speed up the process of signing free-trade agreements (FTA), Japan's foreign ministry drafted proposals concerning various countries and regions. The plans were released on Oct. 13. The main themes are economic cooperation in East Asia and the making of FTA's with South Korea and Southeast Asian countries, followed by negotiations with China.
On the other hand, with regard to the study of a potential Japan-Taiwan free-trade agreement in the private sector, Japan's foreign ministry postponed its decision because the average tariff is already quite low, meaning any FTA is unlikely to have much of an impact on the two nation's economies. How should Taiwan view the trade issue addressed by Japan?
Many countries have been vigorously pursuing free-trade deals. National interest is a priority when two countries make an agreement. After much weighing and measuring, countries prioritize these interests. Once the choice of country with which to sign the agreement is selected, both sides proceed to the negotiating table and assess its possibility after bargaining. Therefore, when two countries are in the process of making an agreement, national interest is a key factor. But what's in a country's best interest may vary depending on the nation being dealt with.
For example, through an agreement with Mexico, Japan is looking to gain access to the market of North American Free Trade Agreement countries. Japan's free-trade pact with South Korea considers political factors as well as economic considerations.
As with the ASEAN countries, Japan's approach is greatly affected by interaction with China. When ASEAN countries first approached Japan and proposed a free-trade deal, Japan seemed reluctant because of the troubled agricultural industries in these countries. But as ASEAN countries changed course and started to negotiate with China, Japan suddenly changed its tune and began to negotiate with ASEAN countries to prevent being isolated.
Although Japan is fully aware that the Japan-Singapore Economic Agreement for a New Age Partnership is unlikely to produce substantial results with regard to industry, it is a stepping stone for Japan to pursue trade negotiations with other countries. The partnership therefore has long-term, indirect effects on Japan.
Is free trade between Japan and Taiwan advantageous to Japan? The national interest guiding Japan's economic development is defined by the Ministry of Economy, Trade and Industry (METI). Tariffs between the two countries are already relatively low. Even eliminating tariffs on some high-tariff items would only have a limited impact on Japan's economy.
When Japan seeks an FTA with Taiwan, the reduction of tariffs is not the only factor for consideration.
Taiwan is not only an important trade partner for Japan but also a country whose citizens have frequent dealings and contact with the Japanese people. Taiwan plays a significant role in the world's information-technology industry. More importantly, Taiwan plays a major role as a springboard to Southeast Asian markets.
Through an agreement, Japan's economic development will benefit from the mutual recognition of standards and authentication as well as the liberalization of rules concerning persons, commodities, services, finances and investment.
We could logically deduce that METI would consider a Japan-Taiwan FTA beneficial to Japan's national interest. According to a white paper released by METI in June, Taiwan is already listed as a country for review.
Japan's foreign ministry and its METI play a leading role in the decision-making process regarding trade negotiations, but these two ministries might hold different views on an free-trade deal with Taiwan. From the perspective of the foreign ministry, national interest refers to friendly diplomatic relations. Because this year is Japan's 30th anniversary of the re-establishment of diplomatic relations with China, improving tense relations with Beijing is a top priority.
If Japan continues to seek an FTA with Taiwan despite China's strong opposition, the Japanese foreign ministry would naturally view Beijing's stance as interfering with Japan's foreign relations.
If trade barriers are eliminated, the difference in GDP would be 0.05 percent in Japan and 0.95 percent in Taiwan, according to a recent media report.
But Japan's foreign ministry has downplayed the benefit of a free-trade deal.
"Tariffs are already low. [Potential] profit is minimal for both sides. Economic relations in specific domains should be adequately strengthened," the ministry said.
The foreign ministry although not directly denying an agreement with Taiwan, provides a passive statement. Unlike other statements issued by the Japanese foreign ministry on countries such as Russia and India, the word "review" is not mentioned when it comes to a potential pact with Taiwan. It is odd if no review is required for "strengthening economic relations in specific domains." The ministry seems to have stressed the already low tariff as a way to weaken resolve to strike an agreement with Taiwan.
No one can complain about the approach of MOFA, for national interest is the top priority when pursuing foreign trade relations. The ministry's statement suggests that Japan has determined not to push for an agreement with Taiwan at the moment due to various factors, despite the desire to settle such issues as intellectual property rights and mutual authentication for strengthening economic ties with Taiwan.
The media reported that Taiwan at the APEC summit attempted to canvass the 16 member economies for a free-trade deal. Trade agreements, however, cannot be pursued simply by soliciting support on the spot. They require a change in methods and viewpoints when dealing with different countries. Prudent, bilateral talks with an eye toward the future should be the foundation of any agreement. When negotiating with a country with which it has no diplomatic ties, Taiwan should diligently search and analyze relevant information in order to fully grasp the crux of the other country's reluctance and hesitation to move forward.
An FTA cannot be concluded within a short period of time. If relations between the US, China and Taiwan are to be transformed, the perspective of Japan's foreign ministry on national interest might change accordingly. No one is absolutely sure that the signing of a Japan-Taiwan FTA will not come in its own time.
Kazumi Sato is an assistant research fellow at the Taiwan Institute of Economic Research.
Translated by Grace Shaw
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