Japan and Mexico failed on Thursday to clinch a bilateral free trade agreement (FTA) despite last-ditch efforts to resolve differences over politically sensitive farm products.
Cabinet ministers held negotiations throughout the day in a bid to reach an agreement during a visit to Tokyo by Mexican President Vicente Fox, but "ran out of time," Japan's top government spokesman said.
"You can say that we ran out of time. We could not finalize a deal and will continue negotiations," Chief Cabinet Secretary Yasuo Fukuda told a news conference, adding that the two sides had not agreed on the timing of future talks.
Fox and Japanese Prime Minister Junichiro Koizumi had agreed earlier to try to conclude the pact by the end of Thursday.
The fate of the two-way trade deal, which would be the second of its kind for Japan following an FTA with Singapore, is being closely watched as a clue to future pacts Tokyo wants to reach with Asian neighbors.
Those deals are also likely to face rough going because of the political sensitivities of farm trade.
The main stumbling block in the talks has been Mexico's demand for a removal of tariffs on pork -- one of its main exports to Japan -- which Tokyo has rejected to protect its pig farmers.
Farmers' political clout outweighs their economic significance and the ruling party is wary of angering them ahead of a November 9 election for parliament's Lower House.
Japanese manufacturers, though, are eager to see the deal clinched to help them compete in exports to the US from their factories in Mexico.
Japanese media reported that Tokyo had offered to halve tariffs on Mexican pork as a compromise, but that Mexico, which wants tariffs replaced by import quotas, turned the offer down.
Pork accounts for over 10 percent of Japan's imports from Mexico, which also include oil and totalled nearly US$1.8 billion last year.
Japan had a trade surplus of around US$2 billion to Mexico last year, with exports, including machinery and car parts, amounting to around US$3.8 billion.
While the number of Japanese pig farmers has decreased in recent years, hit by cheap imports from China, they remain an influential constituency of the ruling Liberal Democratic Party (LDP) as part of the large farm vote.
The party, led by Koizumi, has been reluctant to give the go-ahead to a trade pact that might hurt its showing in the election.
Fox, whose country has built its trade strategy around bilateral pacts and has FTAs with over 30 countries, acknowledged that agricultural products -- including orange juice -- were the key obstacles in the talks with Japan.
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