Part III Overview
OVERVIEW
Establishment of Disciplines
on Formation of Economic Partnerships
Reasons for Discussing Economic Partnership
Agreements in this Report
Recently, the number of Free Trade Agreements (“FTAs”) and Economic Partnership
Agreements (“EPAs”) entered into force has been rapidly increasing. The number of
notifications to the WTO regarding FTAs/EPAs that were in force sharply increased from 27
in 1990 to 474 in 2010 (7/31). 1 It is also believed that there are many FTAs/EPAs that are not
notified to the WTO. We presume that such increase in the number of FTAs/EPAs goes
beyond the intentions of the drafters of GATT, which considered FTAs and customs unions as
exceptions.
Such rapid increase in FTAs/EPAs can be attributed to several factors. It is likely that
the establishment of the EU and its expansion inspired the establishment of NAFTA and
AFTA (the ASEAN Free Trade Area). The establishment of a customs union or an FTA/EPA
gives non-member countries that are disadvantaged thereby an incentive to enter into a
regional trade agreement with such customs union or FTA/EPA. With respect to countries
such as Singapore, Mexico, or Chile, which have entered into FTAs/EPAs with relatively
many countries, the extent of the disadvantage in competition to non-member countries
becomes large; and therefore, the incentive for non-member countries to enter into regional
trade agreements is likely to be greater. Thus, the FTA/EPA network expands through a
snowball effect. It is attractive for countries to enter into a regional trade agreement with an
FTA/EPA which consists of a large economic area (i.e., AFTA, which came into effect in
1993). East Asia is experiencing a trend of economic partnership, where, in addition to
China-ASEAN, which already is in effect (Agreement on Trade in Goods came into effect in
2005), Korea-ASEAN, which is already signed (Agreement on Trade in Goods signed in
2007), and Japan-ASEAN (which came into effect in January 2008), India-ASEAN
(Agreement on Trade in Goods) and Australia-New Zealand-ASEAN came into effect in
January 2010 (See the next section “Global Trends of Economic Partnership” for global
trends in FTAs/EPAs.) Thus, taking a global view, the trend of developing regional trade
1
http://www.wto.org/english/tratop_e/region_e/regfac_e.htm
711
Part III Overview
agreements in the big three trade areas (centering on the United States, EU, and Asia), and the
trend of regional cooperation advancing in the Asia Pacific region with APEC as an axis, are
expected to complement the WTO framework for multilateral trade liberalization and
ultimately contribute to the liberalization of trade and investment throughout the world.
As indicated above, the efforts toward multilateral trade policies in the WTO and the
efforts for bilateral agreements in EPAs are complementary. However, subject to
international economic rules, under the WTO framework (which sets forth most-favored
nation treatment as the primary principle), EPAs (which provide for special agreements for
certain areas) are persistently positioned as an exception. In addition, GATT and GATS
provide requirements relating to establishing FTAs for goods and for the purpose of
preventing FTAs from eroding the WTO’s multilateral trade framework. (See Part II, Chapter
15 “Regional Trade Agreements”.)
Japan has been aggressively attempting to enter into EPAs since the Japan-Singapore
EPA, which came into effect in 2002. If FTAs are strictly understood to eliminate import
duties on goods or liberalize trade in services within the region, the EPA concept may more
widely include improvement of the investment environment, reinforcement of intellectual
property protection, technical cooperation, and the like. Furthermore, Bilateral Investment
Treaties (BITs), which are part of EPAs and provide for protection of investment,
liberalization of remittance, rules for foreign investor, and so forth, have been increasing
globally. Japan has accelerated its efforts to conclude BITs in recent years.
With regard to BIT, Japan has signed 15 BIT. Also, in many cases, Japan’s FTA/EPA
has Investment Chapter.
While Parts I and II of this Report assess trade policies of major countries from the
viewpoint of rights and obligations under the WTO Agreements, it is important to focus also
on securing national governments' compliance with rules provided by the rapidly increasing
number of FTAs/EPAs and BITs and ensuring their consistency with the WTO Agreements.
Part III explains the contents of the disciplines for international economic rules and examines
relevant measures taken in each country, regarding FTAs/EPAs and BITs that Japan has
concluded. It also introduces recent examples of FTAs/BTAs and BITs signed between thirdparty countries. (Throughout Part III, the latest information as of February 2011 is described.
For example, since the Japan-Peru EPA was still not signed, information that was published
as of February 2011 is given. However, some information from March 2011 is also given.)
Global Trends of Economic Partnership
(as of February 2010)
(1)
Global Trends
Since the 1990s, regional integration has accelerated, and the number of regional trade
agreements (including free trade agreements (“FTAs”)) notified to the World Trade
Organization (“WTO”) that were in force reached 261 as of September 30, 2009, rising from
27 in 1990. Since the Seattle WTO Ministerial Conference, new trends have emerged with
regard to FTAs and EPAs.
712
Part III Overview
Following the collapse of the non-western cold war regimes, and with the pursuit of a
new international economic system, western countries began accelerating regional integration.
With the establishment of a single market through the intra-regional market integration plan
within the European Economic Community (“EEC”) (1992) and the inauguration of the North
America Free Trade Agreement (“NAFTA”) (1994), European and North American countries
actively promoted efforts aimed at: (i) increased corporate income through market expansion
and productivity improvements;, and (ii) economic structural reforms through high-level trade
and investment liberalization and facilitation with those neighboring regions with which they
had close economic relationships.
The breakdown of the Seattle WTO Ministerial Conference (1999) revealed the
difficulties of promoting multilateral free trade within the WTO, and further accelerated the
trend of pursuing bilateral or regional FTAs and EPAs. Since the meeting, new trends have
emerged with regard to FTAs and EPAs.
First, there were more agreements involving, not only the elimination of tariff and
non-tariff barriers to trade, but also the establishment of rules in new areas (such as
investment, competition, environment, economic cooperation and the movement of natural
persons). (One such example is the fact that Japan has concluded wide-ranging EPAs
covering matters such as the elimination of border controls and domestic restrictions and the
reconciliation of various economic frameworks to further liberalize and facilitate the
movement of goods, services, persons, and capital.) An advantage of FTAs/EPAs over WTO
multilateral negotiations is that, under FTAs/EPAs, it is possible to establish international
economic rules promptly and flexibly while taking into consideration actual economic
conditions among the contracting parties with respect to the rules of various areas that are not
covered by WTO agreements.
A second feature of recent FTAs/EPAs is that they are likely to be among countries
and regions that are not neighbors for example, the EU-Mexico FTA, EFTA-Mexico FTA,
Korea-Chile FTA and EU-South Africa FTA. We presume that the motivations underlying
such FTAs/EPAs between non-neighboring countries are to: (i) function as a trade “hub” by
obtaining favorable conditions in connection with access to economically important
countries/regions; (ii) increase employment by enhancing the attractiveness of a member
country as a target for investment; and (iii) remove disadvantages that would exist in the
absence of an FTA/EPA.
A third feature is that “regional integration”-type FTAs/EPAs have increased. Certain
trends in “regional integration” type FTAs/EPAs can also be seen. Remarkable progress has
been made in the Americas after the breakdown of the Cancun WTO Ministerial Conference
(September 2003). In November 2003, 34 countries in the Americas agreed on a framework
to establish the Free Trade Area of the Americas (“FTAA”) (negotiation thereof is currently
suspended). In December 2003, the Southern Cone Common Market and the Andean
Community (the “MERCOSUR/MERCOSUL”) signed a framework agreement aiming to
establish free trade areas (currently in the process of being ratified). The FTA between the
United States and five Central American countries and the Dominican Republic (“CAFTADR,”) was signed in August 2004 and has since come into effect.
In East Asia, where efforts had previously stalled, regional integration is rapidly
progressing. This is especially true for the Association of Southeast Asian Nations
(“ASEAN”). With regard to ASEAN intra-regional trade, promotion of the “ASEAN Free
Trade Area” was agreed upon in 1992 and tariff reduction commenced the following year.
There are plans to establish an economic community among member countries of the ASEAN
713
Part III Overview
by 2015. Moreover, the “ASEAN Charter” came into effect in December 2008. With the
charter maintaining the principles of “consensus” and “non-intervention” and the ASEAN
countries agreeing on the establishment of the “ASEAN Human Rights Organization,” it can
be said that regional integration in East Asia has entered a new phase of sharing the same
values. In February 2009, the “ASEAN Trade in Goods Agreement (ATIGA)” was signed,
replacing the CEPT Agreement (See 3) (a) below), as was the “ASEAN Comprehensive
Investment Agreement (ACIA),” which integrated and revised the ASEAN Agreement on the
Promotion and Protection of Investments (IGA).” The “ASEAN investment region framework
agreement,” was also signed. On January 1, 2010, six ASEAN countries (Brunei, Thailand,
Malaysia, Indonesia, Singapore, and the Philippines) totally eliminated intra-regional tariffs.
ASEAN countries have also actively promoted efforts with non-ASEAN member countries
and regions. ASEAN and China began to reduce tariffs in July 2005 based on the “Agreement
on Trade in Goods,” and, as of January 2010, eliminated tariffs on 90% of ASEAN goods
covered by the agreement. In July 2007, “Agreement on Trade in Services” came into effect,
and in August 2009 the “ASEAN-China Investment Agreement” was signed. ASEAN and the
Republic of Korea began to reduce tariffs in June 2007 based on the “Agreement on Trade in
Goods,” which was signed in August 2006. In November 2007, ASEAN countries (with the
exception of Thailand) signed an “Agreement on Trade in Services” with the Republic of
Korea and the agreement came into effect in May 2009. Thailand and the Republic of Korea
signed protocols for agreements on trade in goods and agreements on trade in services in
February 2009. In June, a Korea-ASEAN investment agreement was signed. Furthermore, an
agreement on trade in goods with India and an FTA with Australia and New Zealand
(Australia New Zealand Free Trade Agreement (CER Agreement)) came into effect.
Japan’s EPA with ASEAN came into effect in December 2008. Japan also focuses on
bilateral EPAs with ASEAN countries; EPAs with Singapore, Malaysia, Thailand, Brunei,
Indonesia, the Philippines and Vietnam are already in force. (See “3. Efforts in Japan.”)
In East Asia, various efforts to establish broad regional economic partnerships are
being made in a multi-layered manner through the following frameworks: ASEAN+1 (as
mentioned earlier), ASEAN+3 (ASEAN plus Japan, China and the Republic of Korea), and
ASEAN+6 (ASEAN+3 plus India, Australia and New Zealand). (See ➂ (d), (i) (ii) below)
In the Asia-Pacific region, a comprehensive quadripartite agreement among New
Zealand, Singapore, Brunei and Chile (Trans-Pacific Strategic Economic Partnership (TPP))
came into effect in November 2006.
Because of the progress of efforts regarding regional integration in the regions of the
American States, East Asia, Oceania, and so on, the Best Practices for FTAs was adopted at
the APEC Ministerial Meeting held in November 2004. FTAs entered into by the APEC
member countries are expected to be consistent with both APEC’s principles and the WTO
Agreements (featuring comprehensiveness, transparency, trade facilitation, and the like). In
addition, in November 2006, a plan to establish a free trade area in the Asia-Pacific region
(FTAAP) was proposed at the APEC Economic Leaders Meeting, stimulating discussions on
regional economic integration in the area. In 2007, methods for promoting regional economic
integration were reported to the APEC leaders and they agreed to examine existing bilateral
and multilateral FTAs in the Asia-Pacific region. In the following year, a progress report was
submitted to the APEC summit in 2008.
Regarding the TPP, the United States announced in September 2008 that it would
expand the scope of negotiations to all fields, and Australia and Peru announced their
intention to take part in negotiations at a meeting of APEC leaders held in Peru in November.
714
Part III Overview
Later, Vietnam expressed its intention to participate in the negotiations in the future. In
March 2010, the first round of negotiations was held at a meeting in Melbourne, Australia; the
second round was held in June in San Francisco, USA; the third was held in October in
Brunei; and the fourth was held in December in New Zealand. Starting with the 2010 Brunei
negotiations, Malaysia was added to the negotiating countries and Vietnam became an official
negotiating country in December 2010.
In Japan, The “Basic Policy on Comprehensive Economic Partnerships” (hereinafter
“Basic Policy”) decided by the Cabinet in November 2010 states concerning the TPP that “it
is necessary to act through gathering further information, and Japan, while moving
expeditiously to improve domestic environment, will commence consultations with the TPP
member countries.”
TPP, CEPEA (ASEAN+6) and EAFTA (ASEAN+3) are wide area economic
partnerships which could lead to FTAAP. However, TPP is the only one of these frameworks
on which negotiations have started. Japan will also proceed with improvements in the
domestic environment, hold discussions with related countries, and finally take a decision.
(2)
Summary of Major Regional Integration and Trends in Individual
Countries
1)
The Americas
(a)
Overview of the North American Free Trade Agreement (“NAFTA”)
NAFTA, the regional FTA between Canada, the United States and Mexico), was
signed in December 1992 and came into effect in January 1994. This agreement provides for
the regulation of commerce in goods and services (including the elimination of intra-regional
tariffs and quantitative restrictions, and the unification of rules of origin), and rules in respect
of investment, intellectual property, and competition policies. NAFTA has been reinforcing
relationships with Latin American countries. All three NAFTA member countries have
entered into FTAs with Chile. Since NAFTA takes selective safeguard measures against local
content and regional countries, it actually discriminates against countries outside the region,
in terms of trade and investment.
(b)
Overview of the Free Trade Area of the Americas (FTAA)
The idea behind the FTAA is to establish a free trade area among the 34
countries in the Americas (excluding Cuba). These countries negotiated with the aim of
concluding an agreement by December 2005. Negotiations progressed slowly because Brazil
opposed the treatment of investment, intellectual property rights, labor, the environment, and
other areas supported by the United States, and because the United States opposed the
elimination of agricultural subsidies, which MERCOSUR/MERCOSUL demanded, claiming
that this should be dealt with under the WTO framework. At the Miami Ministerial
Conference in November 2003, the FTAA participant countries agreed to aim for the
conclusion of FTAA Light, which was to provide for minimal obligations to be applied
commonly to all the agreeing countries, and required individual negotiation between countries
for liberalization beyond such requirements. However, the discussions regarding the
negotiation method for FTAA Light reached a deadlock at the 17th Trade Negotiations
715
Part III Overview
Committee in February 2004, and were suspended. No substantial negotiations have been
conducted thereafter.
At the Summit Implementation Review Group (SIRG) of the Summit of the Americas
(34 American countries excluding Cuba) held in Mar del Plata in November 2005,
MERCOSUR/MERCOSUL opposed promotion of the FTAA stating that there were
differences in economic strength within the Americas, and therefore the conditions necessary
for a fair FTAA did not exist. Venezuela also rejected the idea of an FTAA and insisted that a
program different from the FTAA should be pursued. Consequently, FTAA negotiations have
ceased, and it is unknown if or when they will restart.
(c)
Overview of the Southern Cone Common Market
(MERCOSUR/MERCOSUL: Mercado Comun del Sur/Mercado Comun du Sul)
MERCOSUR/MERCOSUL, which came into effect in January 1995, is a customs
union of five countries - Brazil, Argentina, Uruguay, Paraguay, and Venezuela. Venezuela
was required to adopt the common external tariff and to eliminate its intra-regional tariffs. It
entered into the “Acuerdos de Complementación Económica” (Economic Complementarity
Agreements) with Chile and Bolivia in 1996, with Peru in 2003, and with Colombia and
Ecuador in 2004, each such country being an associate member of
MERCOSUR/MERCOSUL. There is currently an initiative to include Mexico as an associate
member of MERCOSUR/MERCOSUL.
With respect to the integration of MERCOSUR/MERCOSUL, Uruguay and Paraguay
have expressed dissatisfaction with the imbalance within the region, stating that they have not
been able to enjoy the benefits of MERCOSUR/MERCOSUL. Uruguay is independently
seeking FTAs with the United States, China, India, and others. Furthermore, taking into
account Venezuela’s entry into MERCOSUR/MERCOSUL, which appears primarily
politically motivated, MERCOSUR/MERCOSUL is now facing questions of how it should
maintain, expand, and cultivate integration.
FTA negotiations between MERCOSUR/MERCOSUL and the EU reached a deadlock
with respect to the treatment of agricultural products, but at the EU-Mercosur Ministerial
meeting of September 2005 it was agreed that the negotiations would continue, and in
November 2006 negotiations were agreed to at a working-level. While the EU is seeking
greater concessions for investment and services, MERCOSUR/MERCOSUL wants further
opening of agricultural product and food markets.
MERCOSUR/MERCOSUL and the Andean Community entered into an FTA in
December 2003, and at the MERCOSUR/MERCOSUL summit meeting in June 2005, it was
confirmed that members of each agreement would treat the members of the other agreement
as associate member countries, reinforcing the South American common market. In addition,
an FTA negotiation between MERCOSUR/MERCOSUL and Israel has been underway since
December 2007, and efforts for possible future FTA negotiations are being made through
Preferential Trade Agreements (PTAs) negotiations and cooperative research with China, the
Republic of Korea, India, Pakistan, the Gulf Cooperation Council (“GCC,” the members of
which are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates), Egypt,
Morocco, Canada, Mexico, Panama, Cuba, the Commonwealth of Dominica, the Central
American Integration System (“SICA” - Sistema de la Integración Centroamericana;
comprised of Guatemala, El Salvador, Costa Rica, Nicaragua, Honduras, Panama, and
716
Part III Overview
Belize), and the Caribbean Community (“CARICOM”; comprised of 14 Caribbean countries
and one region).
With respect to MERCOSUR/MERCOSUL’s member countries’ relationships with
Japan, at its 11th meeting in May 2005, the Japan-Brazil Economic Cooperation Committee
released a Joint Communiqué regarding the establishment of a joint workshop for a JapanBrazil EPA. The economic organizations of both countries (Nippon Keidanren (Japan
Business Federation) and Brazilian National Confederation of Industry) agreed to make
efforts to execute a Japan-Brazil EPA. The Japan-Argentina FTA workshop of the Japan
Chamber of Commerce and Industry in Argentina and the Japanese Commission of the JapanArgentina Economic Commission submitted a request for early execution of the JapanMERCOSUR/MERCOSUL FTA to the Japanese government in March 2004.
(d)
Overview of the Andean Community (“CAN” - Comunidad Andina)
The Andean Community, established in 1996 by a reorganization of the Andean
Subregional Integration Agreement (which came into effect in 1969), is a customs union
consisting of: Colombia, Peru, Bolivia and Ecuador. Venezuela announced its withdrawal in
April 2006, but the commerce-related system has remained in force and continues to apply to
Venezuela for five years from the date of its withdrawal. MERCOSUR countries (Argentina,
Brazil, Paraguay and Uruguay) joined the CAN as associate members in July 2005. Chile
joined the CAN as an associate member in September 2006.
Colombia, Bolivia and Ecuador eliminated intra-regional tariffs by 1993. Peru
commenced reductions of tariffs in 1997 and achieved complete elimination thereof at the end
of December 2005. The free trade area started in January 2006.
Under CAN, a new common external tariff with four levels was planned to be applied
by 2004, but the discussion temporarily stalled due to conflicting interests among the member
countries, and due to Colombia, Peru, and Ecuador conducting FTA negotiations with the
United States. Agreement was reached to suspend the implementation of common external
tariffs until January 31, 2008.
In June 2006 at their summit, the four member countries of CAN signed a letter
addressed to the head of EU, requesting the commencement of negotiations for an EPA; and
they have been conducting negotiations for conclusion of an FTA since September 2007. In
November of 2006, Colombia signed FTAs with the United States and in February 2009 the
Peru-U.S. FTA came into force. From the end of June to the beginning of July, 2010, the first
round of negotiations were held after it was decided to restart negotiations with the EU.
However, Ecuador’s negotiations with the United were suspended due to the cancellation of a
concession agreement with a United States petroleum company, which occurred in May 2006.
(e)
Major Movements of Countries Regarding Regional Integration
(i)
United States
Prior to the establishment of the Trade Act of 2002 (which included Trade Promotion
Authority (TPA)), the U.S. had entered into only two FTAs (Israel in 1995; and Jordan in
2000) and the North America Free Trade Agreement (NAFTA). Since then, the U.S. has
signed FTAs with Chile, Singapore, Australia, Morocco and Bahrain. This trend has been
717
Part III Overview
accelerating following the failure to reach an interim agreement on the Doha Development
Agenda at the Cancun WTO Ministerial Conference in September 2003. The United States
does not consider FTAs merely from the economic viewpoint of trade liberalization, but also
as tools to establish political alliances both to support countries emerging from poverty and to
conduct economic reform and implement security and anti-terrorism measures. The United
States has shown its intention to enter into FTAs on a global scale, covering areas such as
Latin America, Asia/Oceania, the Middle East and Africa.
The United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala,
Honduras and Nicaragua signed the CAFTA-DR in August 2004. FTAs with the six
countries are now in force as the FTA with Costa Rica came into effect in January 2009.
Negotiations were completed with respect to an FTA with Oman in January 2009．
With respect to FTAs with the Andean countries, the FTA with Peru was signed on April,
2006; and the FTA with Colombia was signed in November 2006. Negotiations with Ecuador
were suspended in May 2006.
The U.S. completed negotiations for FTA’s with Panama and the Republic of Korea in
2007. As of February 2011, both were pending Congressional approval.
The FTA with Republic of Korea as originally negotiated did not have the prospect of
ratification by the U.S. Congress. However, negotiations between both countries resumed in
December 2010, when agreement was reached on a revised agreement. As of February 2011,
FTAs with Singapore, Chile (both in January 2004), Australia (January 2005), Morocco
(January 2006) and Bahrain (January 2006) came in force.
The following FTAs are under negotiation: the FTAA (the 34 countries of the
Americas, excluding Cuba); the Southern African Custom Union (Botswana, Lesotho,
Namibia, South Africa, and Swaziland); and FTAs with Thailand, Malaysia and the United
Arab Emirates. In November 2006, the United States proposed the establishment of a free
trade area in the Asia Pacific region (FTAAP), and in September 2008 the country announced
that it would launch negotiations to participate in the Trans-Pacific Strategic Economic
Partnership (TPP: Singapore, New Zealand, Brunei, Chile) in all fields(See 3) (d), (iii) for
FTAAP trends). President Barack Obama announced his involvement in the TPP in
November 2009, and notified the Congress of the start of negotiations in December. The first
negotiation meeting was held in March 2010, and by February 2011 five rounds of meetings
had been held.
(ii)
Mexico
In addition to the Japan-Mexico EPA, which came into effect in April 2005, Mexico
has entered into FTAs with the United States, Canada, the EU (see the section referring to the
EU), EFTA, Israel, and some Latin American countries. Mexico also agreed with the
Republic of Korea to complete a “Strategic Economic Complementation Agreement” in
September 2005. The two countries began negotiations in February 2006 but failed to make
progress in three rounds of negotiations that ended in June 2006, as the Republic of Korea
was focusing on its FTA negotiations with the United States. However, after the inauguration
of the new government led by President Felipe Calderon in December 2006, Mexican trade
policy has become more open and in August 2007 Mexico and the Korea announced that they
have agreed to upgrade the “Strategic Economic Complementation Agreement” and to
commence negotiations for conclusion of an FTA.
718
Part III Overview
(iii)
Chile
Chile has FTAs in effect with Canada, Mexico, Costa Rica, El Salvador, the EU, the
United States, the Republic of Korea, EFTA, China, Panama, Peru and Colombia, Australia;
an economic framework agreement with the EU and the P4 (Singapore, New Zealand and
Brunei), and Economic Complementarity Agreements or partial tariff agreements with other
Latin American countries and India. Chile signed an FTA with Turkey in July 2009 and has
also commenced negotiations with Malaysia and Vietnam.
Negotiation for entering into an EPA with Japan commenced in February 2006 and an
agreement in such respect was signed by Chile and Japan in March 2007 and came into effect
in September the same year.
2)
Europe
(a)
Overview of the European Union (EU)
The EEC, which was established in January 1958 by the Treaty of Rome, aimed to
establish a common market, and led to a customs union and common agricultural policy by
1968. Following the elimination of intra-regional barriers to trade and liberalization of the
movement of “goods, persons, services and capital,” the Treaty of Maastricht (which
promotes economic/currency integration as well as integration in political phases) came into
effect in November 1993, and the European Union (“EU”) (consisting of 12 countries) was
born. In January 1995, Austria, Finland, and Sweden joined the EU and the number of
member states became 15. In addition, the Treaty of Amsterdam and the Treaty of Nice,
which were amendments to the Treaty of Maastricht, came into effect in May 1995 and
February 2003, respectively. Ten countries, mainly from Central and Eastern Europe (Poland,
Hungary, Czech, Slovakia, Slovenia, Estonia, Lithuania, Latvia, Cyprus, and Malta), joined
the EU and became official member states thereof in May 2004. Negotiations for the
membership of Croatia and Turkey commenced in October 2005. Romania and Bulgaria
joined the EU and became member states thereof in January 2007, bringing the EU to a 27
country regime.
As part of the steadily expanding EU, the Treaty Establishing the Constitution for
Europe was adopted in 2004 with the purpose of maintaining forward momentum and
deepening integration. In October of the same year, that Treaty was signed by all EU member
states. Each member state was then to ratify the Treaty, subject to its domestic laws, but
referendums in France and the Netherlands rejected ratification of the Treaty. Accordingly, in
June 2007, member states agreed to draft a Reform Treaty which basically maintains the
content of the Constitution of Europe while excluding elements peculiar to a “Constitution”.
At the informal European Summit in June 2007 the Reform Treaty was adopted. The Treaty
came into effect on December 1, 2009 after going through the process of ratification by all
member countries.
(b)
Trends of the EU Regarding New FTAs
The EU has actively promoted FTAs with neighboring countries. In January 1994, the
EU established the European Economic Area (“EEA”) with the EFTA Member States
(Norway, Iceland and Liechtenstein, excluding Switzerland), and then non-member states of
the EU Sweden, Finland, and Austria, with the intention of “reinforcing and expanding
719
Part III Overview
cooperation in the areas of free movement of persons, goods, capital, and services; research
and development; environment; and so forth.” This was broader in scope than a free trade
area.
The EU is increasing its efforts to reinforce economic relationships with the
Mediterranean countries. To replace the agreements entered into in the 1970s, the EU is
advancing negotiations for new FTAs with the Mediterranean countries. These agreements
will provide for trade liberalization, and liberalization of investment and services. The EU is
aiming to establish a free trade area with the Mediterranean countries by 2010. Currently, by
deepening this further, the EU is aiming for a free trade area including services, investment,
government procurement and regulated fields.
There is also a trend to establish regional cooperation relationships in wide areas with
member countries other than neighboring Member countries.
The EU and the 77 countries of the African, Caribbean and Pacific states (the ACP
states) entered into the Cotonou Agreement in June 2000. It replaced the Lomé Convention,
through which the EU had maintained economic assistance relationships with the ACP states
since 1975. The purpose of the Cotonou Agreement, which consists of an FTA and a
Generalized System of Preferences (GSP), was to form a new cooperative relationship
between the EU and the ACP states. Pursuant to this agreement, negotiations between the EU
and the regional integration groups within the ACP states (four regions in Africa, the
Caribbean region, and the Pacific countries region); commenced in September 2002. There
are plans to maintain and reinforce several regional integrations within the ACP, to enter into
EPAs with integrated regions by the end of 2007．
With respect to Latin American countries, the EU-Mexico FTA, which also includes
political cooperation, came into effect in July 2000. This is a comprehensive agreement
including intellectual property rights, governmental procurement, competition, and
investment. In the area of market access, non-agricultural products are fully liberalized, and
services are mostly liberalized (except for audiovisual services, air transport services, and
marine transport services). However, the liberalization schedule varies depending on the
sensitive nature of the domestic industry. The schedule also reflects the divergent level of
economic development of the EU and Mexico. Since Mexico is a member country of
NAFTA, the Mexico-EU FTA allowed the EU to gain a foothold, not only in Latin America,
but also in NAFTA. On the other hand, Mexico can now reduce excessive dependence on the
United States, as well as expect further expansion of trade and investment, serving as a trade
hub, by entering into FTAs with two large markets (the United States and the EU). An
economic framework cooperation agreement between Mexico and Chile, including an FTA,
came into effect in November 2002.
The EU and MERCOSUR/MERCOSUL signed the Inter-regional Framework
Cooperation Agreement, with a view to preparing for an EU-MERCOSUR FTA, which aims
at comprehensive political and economic partnership including improvement of the legal
environment for promoting both technical cooperation and investment. The agreement came
into effect in December 1995. Because of a significant difference in opinion regarding
opening the agricultural products market, negotiations came to a temporary deadlock. At the
EU-Mercosur Ministerial meeting of September 2005, the two sides agreed to continue
negotiations. While the EU requests MERCOSUR/MERCOSUL to make larger concessions
on investment and services, MERCOSUR/MERCOSUL requests the EU to further open the
markets for agricultural and food products.
720
Part III Overview
The EU and the GCC commenced FTA negotiations in 1990. At the EU-GCC
Ministerial meeting in 2005, it was agreed to accelerate negotiations by: (i) focusing on the
areas of trade in services, import duties on industrial goods and public procurement; and (ii)
conducting negotiations in a “Single Undertaking method,” which requires agreement in all
areas for settlement.
As for Asian countries, the EU put high priority on FTA negotiations with Korea,
ASEAN and India in the “Global EUROPE competing in the world,” which mentioned
foreign strategy of European Committee in October 2006. It is tentatively scheduled to come
into effect in July 2011. With respect to India, at the EU-India Summit held on October,
2006, the EU endorsed commencing negotiations for a comprehensive trade and investment
agreement. With respect to ASEAN, the EU commenced negotiations in May 2007 but
suspended them in March 2009 and instead shifted to bilateral negotiations with individual
countries, starting with Singapore in December 2009. (See “3. Efforts in Japan” for JapanEU trends).
With Canada, the EU commenced negotiations in October 2009, following an
agreement on the start of negotiations at an EU-Canada summit meeting in May 2009. The
aim was to reach agreement at the end of 2011.
The European Commission published a new trade policy for the EU (“Trade, Growth
and World Affairs”) in November 2010. This refers to (1) ambitious FTA conclusion with
major trade partners such as India and MERCOSUR/MERCOSUL which are currently in
FTA negotiations, (2) deepening of trade relations with strategic partner countries such as the
U.S., China, Russia and Japan, and (3) the start of negotiations on comprehensive investment
provisions with important trade partners such as China, Russia, India, Canada and Singapore.
(For actions between Japan and the EU, refer to section 3, Efforts in Japan)
3)
Asia
(a)
Overview of the ASEAN Free Trade Area (AFTA)
AFTA, a free trade area covering the 10 member countries of the ASEAN, has now
been virtually established. It was agreed upon at the ASEAN Summit of January 1992. Tariff
reduction commenced in January 1993. Pursuant to the Common Effective Preferential Tariff
(CEPT) framework, the plan was to gradually reduce the intra-regional tariff, from 0-5% over
the next 10 years, and eliminate quantitative restrictions for CEPT products, both by 2003.
However, at the ASEAN Summit in December 1998, it was agreed to expand the scope of
CEPT products and to accelerate the reduction of intra-regional tariffs on CEPT products by
one year (from 2003 to 2002). Subsequently, at the AFTA Council in September 2002, the
target to reduce the intra-regional tariff for the Philippines, Thailand, Malaysia, Singapore,
Brunei and Indonesia (the ASEAN-6) was achieved on January , 2002.
The ASEAN Industrial Cooperation (AICO) scheme came into effect in November
1996, preceding the CEPT. Under this system, 0-5% preferential tariff rates were mutually
applied to trade between two or more countries within the region with respect to products
which the member countries authorized as AICO Products that met certain conditions
721
Part III Overview
(including a minimum 30% national equity requirement (for manufacturers) and a minimum
40% ASEAN country local content requirement). At the ASEAN Economic Ministerial
Meeting in 2002, Brunei, Cambodia, Indonesia, Malaysia, and Singapore agreed to reduce the
AICO tariff rate to 0% by January 2003. In April 2004 at the ASEAN Economic Ministerial
Meeting, a protocol was signed and the process for implementation is currently underway in
each member country of the ASEAN.
Additionally, at the ASEAN Summit and the ASEAN Economic Ministerial Meeting
held in 1999, the following were declared for the first time: targets to eliminate intra-regional
tariffs among the ASEAN-6 by 2010, and to eliminate them among the remaining four
countries of the ASEAN (Cambodia, Laos, Myanmar and Vietnam) by 2015. At the ASEAN
Summit held in November 2004, with a view to establishing the ASEAN Economic
Community (AEC), it was agreed that out of 11 priority sectors (wood-based products,
automotive, rubber-based products, textiles and apparel, agro-based products, fisheries,
electronics, IT, healthcare, air travel and tourism), intra-regional tariffs for the nine
manufacturing business sectors (i.e., those other than air travel and tourism) would be
eliminated by 2007 for the original member countries of the ASEAN, and by 2012 for the
new member countries. This accelerated the original plan by three years. Furthermore, at the
ASEAN Economic Ministerial Meeting held in September 2005, it was agreed to complete
liberalization by 2015 in all service areas.
With respect to the ASEAN economic integration, it was agreed in 2003 to establish
the ASEAN Economic Community by 2020. At the ASEAN Summit in January 2007, it was
agreed to accelerate the establishment of an “ASEAN Community,” including an economic
community, by changing the deadline to 2015. The legally binding “ASEAN Charter” was
signed at a meeting of ASEAN leaders in November 2007 and it came into effect in
December 2008. While maintaining the principle of “consensus,” which so far has resulted in
the characterization of ASEAN as a loose association, the EU and ASEAN agreed to take
flexible approaches with respect to economy-related issues. In February 2009, the ASEAN
Trade in Goods Agreement (ATIGA) was signed, replacing CEPT agreements.” The ASEAN
Comprehensive Investment Agreement (ACIA), which integrated and revised the ASEAN
Agreement on the Promotion and Protection of Investments (IGA) and the ASEAN
Investment Region Framework Agreement, was also signed in February 2009.” In 2010, intraregional tariffs among six ASEAN countries were totally eliminated.
(b)
Recent Events Related to the ASEAN (Efforts of “ASEAN+1”)
Recently, in addition to the United States, the EU and Japan, China, the Republic of
Korea, India, and Australia and New Zealand (ANZ-CER) are also actively working to enter
into FTAs/EPAs with the ASEAN in order to revitalize their respective economies by
benefiting from the ASEAN’s growing economic power.
(i)
China-ASEAN FTA
At the summit between China and the ASEAN countries’ leaders held in November
2000, Premier Zhu Rongji proposed a China-ASEAN FTA. At a subsequent meeting in
November 2001, it was agreed to: 1) build an “economic cooperation framework” between
China and the ASEAN, and establish a “China-ASEAN Free Trade Area (FTA)” within 10
years; and 2) conduct consultations to determine the items in respect of which liberalization
722
Part III Overview
measures would be accelerated (“early harvest” measures). Working-level meetings
commenced in January 2002, and in June of the same year discussions were held by the Trade
Negotiation Committee. In November 2002, the “Framework Agreement on Comprehensive
Economic Co-operation” was signed. It included the establishment of a China-ASEAN FTA
within 10 years. The framework agreement became effective in July, 2003. In November
2004 China and the ASEAN, signed an agreement on the liberalization of the trade in goods
provided for in the “Framework Agreement on Comprehensive Economic Co-operation.”
Tariff reduction commenced in July 2005. In January 2010, 90% of the tariffs on goods of
the 6 ASEAN countries were eliminated. In June 2007, the China-ASEAN FTA on Trade in
Service signed in January 2007 came into effect. China also signed China-ASEAN
Investment Agreement in August 2009.
(ii)
Korea-ASEAN FTA (references to “Korea” refer to the “Republic of
Korea”)
The Korea-ASEAN FTA Experts Group Meetings were held from March until August
of 2004. Later, at the Korea-ASEAN Summit in November 2004, it was agreed to commence
negotiations with a view to eliminate tariffs on 80% of all products by January 1, 2009
(separately set for Cambodia, Laos, Myanmar and Vietnam). Following eight rounds of
negotiations that began in February 2005, the “Framework Agreement on Comprehensive
Economic Cooperation” was signed at the Korea-ASEAN Summit in December 2005. Also,
the “Agreement on Dispute Settlement Mechanism” was signed at the Korea-ASEAN
Economic Ministerial Conference, which was held during the same period. Apart from this,
the ASEAN countries (excluding Thailand) and the Republic of Korea agreed on a tariff
reduction method for the FTA on goods and started reducing tariffs in June 2007. The
ASEAN countries (excluding Thailand) and the Republic of Korea also signed services trade
agreements in November 2007. Thailand and the Republic of Korea signed a protocol
concerning agreements on trade in goods in February 2009 and signed an investment
agreement in June.
(iii)
India-ASEAN FTA
In November 2002, at the first summit between the ASEAN and India, it was agreed to
reinforce economic cooperation and to set liberalization of trade and investment as a longterm objective. They established an intergovernmental task force, signed a Framework
Agreement in October 2003. Although negotiations over the number of products exempted
from liberalization by India deadlocked at one point, India and ASEAN reached an agreement
in August 2008 and signed the agreement in August 2009. The agreement came into effect in
January 2010. India and ASEAN are also conducting negotiations in the area of investment
and services.
(iv)
Australia-New Zealand (ANZ-CER)-ASEAN FTA
At the ASEAN-CER Economic Ministerial Meeting in September 2002, Australia-NZ
(CER) and ASEAN signed the “AFTA-CER CEP” Joint Ministerial Declaration. (The
agreement did not include an FTA between the parties.) Establishment of the framework to
promote trade, investment, and regional economic integration was agreed to by the ASEAN
and CER and it was agreed that by 2010, cooperate in each field with the purpose of doubling
the trade and investment between the ASEAN and CER. At the ASEAN-Australia and New
723
Part III Overview
Zealand Commemorative Summit held in November 2004, it was agreed to commence
negotiations for an FTA between the ASEAN and Australia-NZ. Negotiations commenced in
February 2005. In August 2008, ASEAN and Australia/New Zealand reached an agreement
on FTA including services, investment, and intellectual property, in addition to goods, and
signed the FTA in February 2009. The FTA came into effect in January 2010.
(c)
Major Movements of Countries Aiming for Regional Integration
(i)
Singapore
Singapore is aggressively pursuing the objective of entering into FTAs/EPAs. The
FTAs/EPAs it has entered into include New Zealand (January 2001), Japan (November 2002),
EFTA (January 2003), Australia (July 2003), the United States (January 2004), Jordan
(August 2005), India (August 2005), the Republic of Korea (March 2006), Panama (July
2006)、Peru（August 2009）、China（January 2010）. The country has also concluded a
Trans-Pacific Strategic Economic Partnership (TPP) with Brunei, New Zealand and Chile
(New Zealand in May 2006, Brunei in July 2006, and Chile in November 2006). It signed an
FTA with the Gulf Cooperation Council (GCC) in December 2008 and is conducting
negotiations with Pakistan, Canada, Ukraine and India. However, negotiations with Mexico
remain suspended. Singapore agreed to commence negotiations with Egypt and Cost Rica, but
has yet to do so.
(ii)
Thailand
Thailand has been active in reinforcing economic partnerships with many countries.
In July 2004, Thailand signed an agreement with Australia, which came into effect in January
2005. An agreement with New Zealand came into effect in July 2005 and with Japan came
into effect in November 2007. Thailand has entered into framework agreements with
Bahrain, Peru and India. However, the agreement with Bahrain was derailed as the GCC did
not allow Bahrain to conduct FTA negotiations singlehandedly. Negotiations with Peru are
underway (the Early Harvest (EH) portion has already been signed), and plenary negotiations
with India are underway (the Early Harvest (EH) has already been implemented). Thailand
also commenced negotiations with the United States (June 2004) and EFTA (October 2005).
(iii)
Malaysia
Following the commencement of EPA negotiations with Japan in January 2004,
Malaysia has been promoting efforts for EPA negotiations. The FTA/EPA with Japan came
into effect in July 2006, and that with Pakistan in January 2008. Malaysia commenced
negotiations with New Zealand in March 2005 and signed an agreement in October 2009
which came into effect in August 2009. The country also concluded negotiations (goods
only) with Chile in May 2010. In the beginning of 2011, it was agreed to resume negotiations
with Australia (commenced in May 2005) which had been suspended. The FTA with India
(commenced in August 2008) was signed in February 2011 and came into effect on July 1,
2011. Malaysia is also participating in TPP negotiations, and commenced negotiations with
the EU in 2010. Negotiations with Turkey have also commenced.
724
Part III Overview
(iv)
The Republic of Korea
In order to respond efficiently to the trend of FTA/EPA expanding worldwide, the
Republic of Korea established the “FTA Roadmap” in 2003 and confirmed its policy to
promote high-level FTAs covering comprehensive areas such as tariff elimination, service
investment, intellectual property rights and government procurement at the same time with
different countries. The Republic of Korea accelerated the execution of its FTAs/EPAs by
establishing an FTA Bureau under the Ministry of Foreign Affairs and Trade in December
2004 for the purpose of efficiently responding to the global proliferation of FTAs/EPAs.
Accordingly, from 2005, it was simultaneously negotiating FTAs/EPAs with numerous
countries and regions.
At present, the Republic of Korea has signed FTA/EPAs with three countries (Chile,
Singapore and India) and 2 regional agreements (EFTA, ASEAN) already have entered into
force. Korea signed FTA/EPA with the United States, concluded additional negotiations with
the United States, signed FTA/EPA with the EU and provisionally signed FTA/EPA with
Peru. Negotiations commenced with the United States in June 2006 and arrived at an
agreement in April 2007. Although the agreement was signed in June the same year, it has yet
to be ratified due to a difference of opinions within the United States. Thereafter, further
negotiations commenced in November 2011 and were concluded in December the same year.
The Republic of Korea commenced negotiations with the EU in May 2007 and signed the
agreement in October 2009. The agreement is expected to provisionally come into force in
July 2011.. Besides Japan, with which negotiations remain suspended, the Republic of Korea
has been conducting negotiations with Canada, Mexico, the GCC, Peru, Australia, New
Zealand and Colombia. The country has agreed on joint studies or agreed to start joint studies
with four countries (China, Turkey, Russia and Israel) and three regions (Japan-China-Korea,
MERCOSUR and SACU). Korea ended its industry-government-academia research with
China in May 2010 and the first round of intergovernmental discussions was held in
September 2010.
(v)
China
China aggressively promotes the reinforcement of economic partnerships with many
countries and regions. To date, China has concluded FTAs between Hong Kong (June 2003),
Macao (October 2003), ASEAN (November 2004), Chile (November 2005), Pakistan
(November 2006), New Zealand (April 2008), Singapore (October 2008) and Peru (April
2009) (dates in parenthesis reflect month of signature). In April 2008, China concluded an
FTA with New Zealand after 15 rounds of negotiations. It was the first FTA that China
concluded with an advanced country. China has been conducting negotiations with SACU
(the Southern African Customs Union), GCC (Gulf Cooperation Council), Australia, Iceland,
Costa Rica, and Norway. The country has completed joint studies regarding the possibility of
an FTA with India, and has been conducting intergovernmental studies and industrygovernment-academia joint research with the Republic of Korea and Switzerland. Japan,
China and the Republic of Korea have agreed to commence joint research. China also
commenced negotiations with Taiwan in January 2010 and reached a framework agreement in
June (Economic Cooperation Framework Agreement – ECFA).
725
Part III Overview
(vi)
India
India entered into the Framework Agreement on Comprehensive Economic
Cooperation with ASEAN, and commenced FTA negotiations in October 2003. India entered
into a similar agreement with Thailand, commenced FTA negotiations simultaneously, and
conducted an early harvest with respect to 82 specified products in September 2004. The
CECA between India and Singapore came into effect in August 2005.
The South Asian Association for Regional Cooperation (SAARC) Summit was held in
January 2004, and the seven member countries signed the South Asian Free Trade Area
(“SAFTA”) framework agreement. This agreement came into effect in January 2006. It
provides for establishing a South Asian Free Trade Area by 2016 (discussed later). India
concluded a comprehensive economic partnership agreement (CEPA) with Sri Lanka in July
2008. The country also concluded an FTA with the GCC; FTA framework agreements with
South Africa, SACU (South AFRICAN CUSTOMS Union), and BIMSTEC (discussed later);
and PTAs (preferential tariff agreements) with MERCOSUR/MERCOSUL, Afghanistan and
Chile. In addition, India held workshops for FTAs/EPAs with Australia and Russia, and
agreed to hold FTA/EPA workshops with Egypt. Joint studies with Australia were completed
in May 2010. In January 2008, India concluded a workshop with China. India began CEPA
negotiations with the Republic of Korea in March 2006, and signed an agreement in August
2009. The India-Korea CEPA came into effect in January 2010. India has been negotiating
with the EU since June 2007 and agreed to commence negotiations with New Zealand in
January 2010. India commenced EPA negotiations with Japan in January 2007 and reached a
broad agreement in September 2010. Negotiations were concluded at the Japan India Summit
in October 2010. In February 2011, the Minister of Commerce & Industry, Anand Sharma,
visited Japan and signed the EPA. (Refer to Section 3, Efforts in Japan)
India also commenced EPA negotiations with Japan in January 2007 (see the section,
“Efforts in Japan”).
(vii) Australia
Australia has been actively promoting FTA negotiations with other countries, and has so
far concluded and put into effect FTAs with New Zealand, Singapore, the United States,
Thailand, Chile and ASEAN-NZ. Currently, the country is in the process of negotiating with
Japan, China (negotiations started in May 2005), the Republic of Korea (negotiations started
in May 2009), and Malaysia (negotiations started in May 2005). Australia has implemented
joint study programs with India and Indonesia. Private sector joint study with India ended in
May 2010. Australia agreed to commence negotiations with Indonesia in November 2010. In
November 2008, Australia announced its participation in the Trans-Pacific Strategic
Economic Partnership (TPP) aimed at 100% elimination of tariffs by 2015.
(viii) New Zealand
New Zealand has so far signed FTAs with Australia, Singapore, Thailand, China and
ASEAN-Australia. The country also put into effect TPP with Singapore, Brunei and Chile.
New Zealand signed an FTA treaty with Malaysia in June 2009, and agreed to conduct
negotiations with the GCC in October 2009 and Hong Kong in November 2009. Currently,
New Zealand is continuing negotiations with India which commenced in April 2010, and with
726
Part III Overview
the Republic of Korea which commenced in June 2009. In November 2011, New Zealand
also agreed to commence negotiations with Russia-Belarus-Kazakhstan.
(ix)
SAFTA
In January 2004, the South Asian Association for Regional Cooperation (SAARC)
Summit was held, and the SAFTA Framework Agreement was signed by seven member states
(India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, and Maldives). This agreement came
into effect in January 2006. Under it, the Non-LDC states (India, Pakistan, and Sri Lanka),
were to reduce the maximum tariff rates to 20% by the end of 2007 except in respect of
certain exceptional items. The least developed countries (“LDC” states) similarly were to
reduce maximum tariff rates to 30%. The agreement states that the member states will
establish a South Asian free trade area by 2016, under which the maximum tariff rates will be
reduced to 0-5%.
(x)
BIMSTEC
BIMSTEC is comprised of seven countries: Bangladesh, India, Myanmar, Sri Lanka,
Thailand, Nepal, and Bhutan. In February 2004, the FTA Framework Agreement was entered
into by all member countries except Bangladesh, and in June of the same year was signed
again, with Bangladesh included. BIMSTEC planned to commence tariff reduction in July
2006．
(d)
Broad Regional Economic Partnerships in East Asia/Asia Pacific Region
In the Asia Pacific region (with East Asia being the center), various efforts to establish
broad regional economic partnerships are being made in a multi-layered manner through the
following frameworks: ASEAN+1 (as mentioned earlier), ASEAN+3 (Japan, China, the
Republic of Korea and ASEAN), ASEAN+6 (ASEAN+3, India, Australia and New Zealand),
and APEC (Asia-Pacific Economic Cooperation).
(i)
East Asian Community (ASEAN+3 and ASEAN+6)
ASEAN+3
The trend of economic integration and political cooperation in East Asia was triggered
by the East Asia Economic Centre (“EAEC”) framework proposed by Malaysia in 1991. In
1997, the year of Asia’s financial crisis, the first ASEAN+3 Summit was held; thereafter it
was established as a standing summit. At the third ASEAN+3 Summit, the “Joint Statement
on East Asia Cooperation,” which provided for the basic policy for future cooperation in East
Asia, was issued. The East Asia Vision Group (“EAVG”) was formed to advise the
ASEAN+3 Summit with respect to institutionalization for the purpose of establishing an
integrated East Asian community. In 2002, the East Asia Study Group (“EASG”) advised on
specific measures, including 17 measures which should be achieved in the short term and 9
measures which should be achieved in the medium and long term. The EASG report
mentions the East Asia Free Trade Area (“EAFTA”) as a goal which should be achieved in
the medium to long term. In April 2005, a group of experts began studying the feasibility of
EAFTA. In July 2006, they completed a report stating that discussions between governments
should be launched in order to establish an FTA for the ASEAN+3. This was reported at the
727
Part III Overview
ASEAN+3 Economic Ministers’ Meeting held in August 2006, where many expressed the
view that discussions between governments were premature. At the Summit held in January
2007, it was decided to continue with Phase 2 research by experts. This study commenced in
May 2007, and the final report was submitted in August 2009 to the ASEAN+3 Economic
Ministers’ Meeting and in October 2009 to the Summit. Like the ASEAN+6 CEPEA, the
leaders welcomed the decision made at the Economic Ministers’ Meeting to start discussions
between governments on private study recommendations.
At the Economic Ministers’ Meeting in August 2010, China submitted a roadmap until
2015 for trade facilitation with respect to EAFTA, with the objective of reducing trade costs
in the ASEAN+3 regions at least by 5% up to 2015. This proposal was welcomed by the
leaders at the summit in October 2010.
ASEAN+6
In December 2005, pursuant to the agreement at the ASEAN+3 Summit of the
preceding year, the first East Asia Summit (“EAS”) was held with the ASEAN+6 as
participating countries. A joint declaration was issued at the summit confirming, that the EAS
would be convened regularly and that it would play a “significant role” in establishing a
community in this region. In August 2006, with firmer connections of the economic
conditions of ASEAN+6 and progress in the efforts of “Plus 1” FTA/EPA between ASEAN
and Japan, China, India, Australia and New Zealand, Japan proposed an expert study of the
regional economic partnership initiative called “Comprehensive Economic Partnership in East
Asia (CEPEA) for 16 countries.” In January 2007, the second EAS was held in Cebu,
Philippines, where the launch of the CEPEA private study was well received. As the first
cooperation in the EAS framework, Japan submitted a proposal for the energy sector. At the
third EAS held in Singapore in November 2007, it was formally agreed to establish the
Economic Research Institute for ASEAN and East Asia (ERIA).
With respect to study of CEPEA by experts, six rounds of meetings were held by June
2008, and their results were put into a report. At the ASEAN+6 Economic Ministers’
Meeting in August 2008, a private research group reported; agreed phase 2 research continued
and four meetings were held during the period from November 2008 to July 2009, and a final
report was compiled. At the ASEAN+6 Economic Ministers’ Meeting in August 2009 and the
fourth EAS, held in October 2009, leaders welcomed the decision to conduct intergovernmental discussions and studies on the results of private research, and confirmed their
intention to shift the inter-governmental discussions in line with the EAFTA vision.
As contribution to ASEAN+6, at the ASEAN+6 Economic Ministers’ Meeting in
August 2009, in keeping with the move towards the economic integration of East Asia, Japan
proposed holding workshops on rules of origin, and the ministers expressed their approval.
These workshops were held in February 2010 in Tokyo, which included issues and
improvements proposed by people invited from the business community. The second
workshop was held in Jakarta.
At the Meeting of ASEAN Economic Ministers and Related Meetings in August 2010,
Japan proposed “Initial Steps” that showed an interim and long term orientation with respect
to economic integration of ASEAN+6. This is a proposal to promote discussions in working
groups for 4 areas (rules of origin, tariff classification, customs procedures and economic
cooperation). The proposal’s comprehensive content aims at economic integration based on
both liberalization and development, and also shows the expectations of intellectual
contributions of ERIA. At the summit in October, along with the progress of review by
working groups, Japan’s “Initial Steps” proposal was well received.
728
Part III Overview
The ERIA was formally established in June 2008, and has built solid achievements.
The leaders of each country have made valued contributions to regional cooperation. The
East Asia Summit in October 2010 received a report compiled by ERIA on hard and soft
infrastructure development in the region, and the “Comprehensive Asian Development Plan”
which is a vision of industrial development.
In addition, the fifth round of EAS held in October 2010 welcomed the participation of
the U.S. and Russia. It was agreed to formally invite both countries starting the following
year.
ASEAN and East Asian EPA
ASEAN is making efforts at FTAs/EPAs with Japan,
China, Korea, India, and Australia and New Zealand.
ＣＥＰＥＡ
(iii)
APEC (Asia-Pacific Economic Cooperation)
APEC is a regional cooperation framework in Asia and the Pacific established in 1989
by countries led by Japan and Australia. At the Economic Leaders’ Meeting held in Bogor,
Indonesia in 1994, APEC set as a goal (“Bogor Goal”) free and open trade and investment
among the industrialized economies by 2010 (and by 2020 for developing economies). FTAs
are an effective measure to achieve the Bogor Goal. As a specific effort to improve the quality
of FTAs within the region, “model measures for FTAs” have been developed to serve as a
reference for FTA negotiations with regard to major areas of FTAs. (As of the end of 2009,
15 chapters had been completed.) Furthermore, at the Economic Leaders Meeting held in
November 2006, it was agreed to consider methods for promoting regional economic
integration (including an FTAAP) as a long-term objective. Since then, discussions
concerning regional economic integration in APEC have progressed rapidly. At the Economic
Leaders Meeting in 2007, a report on the results of the discussions was presented and the
leaders agreed to conduct research on existing bilateral and multilateral FTAs. At the
729
Part III Overview
Economic Leaders Meeting in 2008, a progress report on the research was presented and the
leaders agreed that work should continue. Japan, as the chair country of APEC, is scheduled
to host a series of meetings in 2010, ranging from APEC summit and ministerial meetings to
expert-level meetings..
The main agenda at the APEC 2010 was (1) Promotion of regional economic
integration, beginning with the study of the possible paths towards achieving the FTAAP
vision, (2) Creation of a new growth strategy for the Asia-Pacific Region including balanced
and sustainable growth everywhere, supported by innovation and knowledge-intensive
economy, and (3) Strengthening human security.
The “Yokohama Vision” was issued in the Leader’s Declaration in November 2010.
With respect to FTAAP, promoting the efforts of regional economic integration for achieving
the 2020 Bogor Goals and specific measures to achieve them were raised. It was decided to
pursue a comprehensive free trade agreement by further developing cooperation between
ASEAN+3, ASEAN+6 and the Tran-Pacific Partnership (TPP) on the basis of ongoing
regional efforts.
Stratified Framework in Asia
Pacific
(iv) Trans-Pacific Strategic Economic Partnership (TPP)
(iv) Trans-Pacific Partnership (TPP)
In 2005, Singapore, New Zealand, Chile and Brunei signed Trans-Pacific Strategic
Economic Partnership (TPP) agreement. The TPP is an FTA which is in principle designed to
eliminate 100% of tariffs by 2015. It covers wide-ranging provisions from services to
730
Part III Overview
intellectual property systems and cooperation. In March 2008, the United States took part in
negotiations for investment rules and financial services, areas that are not covered by the TPP
and, in September the same year, the country announced that it would expand the scope of its
negotiations to all fields. At a meeting of APEC leaders held in Peru in November, Australia
and Peru announced their intention to take part in the negotiations, and then Vietnam
announced its intention to be involved in the negotiations on condition of becoming a
negotiating member in the future. No formal negotiations were held for nearly one year after
the Vietnamese announcement. In November 2009, however, U.S. President Obama
announced that the United States would engage TPP member countries and in December the
President notified Congress of his intention to commence negotiations. The first round
meeting is scheduled to start in Australia in March 2010. In June 2010, the second round of
negotiations was held in San Francisco, USA; the third was held in October in Brunei and the
fourth was held in December in New Zealand. Malaysia was added to the negotiating
countries starting from the third round of negotiations, and Vietnam became an official
negotiating country in December 2010.
As the Cabinet of Japan decided “Basic Policy” on November 9, 2010, it is necessary
to act through gathering further information, and Japan, while moving expeditiously to
improve domestic environment, will commence consultations with the TPP member
countries.. The consultation with the TPP member countries began in December 2010.
TPP, CEPEA (ASEAN+6) and EAFTA (ASEAN+3) are regional economic
partnerships that could be linked to FTAAP. However, TPP is the only framework amongst
these in which negotiations have started. With respect to TPP, Japan will promote discussions
with concerned countries along with national environmental arrangements in future and will
make its final decision.
3. Efforts in Japan
Japan’s basic trade policy is to maintain and reinforce common international rules by:
(i) actively participating in relevant trade mechanisms (including the WTO Doha Round); and
(ii) maintaining a free and transparent environment for international economic activities.
However, in the WTO, efficient negotiations and expeditious agreements are becoming
difficult due to the increasing number of Member countries, diversification of negotiation
items, and other factors. At the same time, the environment surrounding Japan’s external
economic policy has recently been subject to remarkable changes (such as foreign countries
accelerating efforts to reinforce economic partnerships). Under such circumstances, it is
necessary for Japan’s external economic policy, while considering the WTO’s maintenance
and reinforcement of basic international trade rules and the WTO’s rules-based dispute
settlement procedures as the basic infrastructure, to develop multi-layered external economic
policies by strategically and flexibly utilizing inter-region or bilateral FTAs/EPAs as a
complement to its efforts in the WTO.
With respect to EPAs, Japan aims to expeditiously reach agreement on rules or
agreements with contracting party countries, properly reflecting their actual economic
conditions, and covering a wide range of areas, including not only the liberalization of trade
in goods and services, but also the establishment of investment rules, the facilitation of human
731
Part III Overview
exchange, and so forth. In choosing the countries and/or regions for negotiating economic
partnerships, it is important that they contribute to Japan's interests, while taking into
consideration all relevant circumstances (including Japan’s economic and diplomatic
interests) and conditions in the negotiating countries and/or regions. To deal with problems
which cannot be solved through only bilateral frameworks, efforts in regional frameworks are
also being promoted. By achieving high-level agreements, Japan is pursuing the goal of
establishing a more free and open business environment in the future.
Summarized below are the anticipated benefits Japan could receive by entering into
FTAs/EPAs:
i)
Increased competition among companies within the region and the best
allocation of management resources in the broader region, therefore helping to
improve the profitability of businesses and promoting reform of the domestic
economic structure. In addition, from Japan’s perspective, they may help to increase
the attractiveness of the other country or region as a direct investment site.
ii)
Secure preferential access to markets which Japan considers important through
tariff elimination and harmonization of domestic systems, thereby expanding trade and
investment opportunities and enabling enterprises to enjoy economies of scale.
iii)
By expeditiously working out trade rules between countries and/or regions
sharing the same basic ideas as Japan, such FTAs/EPAs will enable Japan to form a
framework agreement in areas where specific rules are not agreed to in the WTO
forum; and if that framework is adopted widely, it will be easier for Japan to take the
initiative in discussing these areas in the WTO.
Japan can enjoy these benefits of FTAs/EPAs by entering into them before other
countries. In contrast, if foreign countries enter into FTA/EPAs prior to Japan, then Japan,
and Japanese companies, would be at a disadvantage.
After the collapse of the cold war structure, Western countries aggressively promoted
FTAs throughout the 1990s, but Japan was far behind.
In recent years, among major countries such the U.S. and South Korea, the percentage
of total trade with FTA etc. partner countries (so-called “FTA percentage”), including FTAs
that are signed but have not come into effect, has reached nearly 40%. In contrast, Japan’s
FTA percentage is 17%, which is far behind. For example, if the Korea-USA FTA and
Korea-EU FTA come into effect, Japanese companies will be forced to conduct trade at
relatively unfavorable conditions as compared to Korean companies. There are concerns that
lagging EPA initiatives are reducing the international competitiveness of Japan’s export
industries.
In view of this situation, in November 2010, Japan’s Cabinet decided the Basic Policy
on Comprehensive Economic Partnerships, which states “It will take major steps forward
from its present posture and promote high-level economic partnerships with major trading
powers that will withstand comparison with the trend of other such relationships. At the same
time, it will first press ahead with fundamental domestic reforms in order to strengthen the
competitiveness it will need for economic partnerships of this kind.” In particular, “With
regard to EPAs or broader regional economic partnerships that are politically and
732
Part III Overview
economically important and will be of especially great benefit to Japan, the Government of
Japan, while taking into consideration the sensitivity of trade in certain products, will subject
all goods to negotiations for trade liberalization and, through such negotiations, pursue highlevel economic partnerships.” It specifically states (1) “Measures to be taken in the AsiaPacific region”: “Japan will increase its efforts to conclude the ongoing EPA negotiations
with Peru and Australia, and to resume the currently suspended Japan-Korea EPA
negotiations. At the same time, Japan will work towards the realization of regional economic
partnerships such as the China-Japan-Korea FTA, East Asian Free Trade Agreement
(EAFTA) and Comprehensive Economic Partnership in East Asia (CEPEA), which are being
studied at present, and commence EPA negotiations with Mongolia, with which it is now
undertaking a joint study, as soon as possible … Concerning the Trans-Pacific Partnership
(TPP) Agreement ... it is necessary to act through gathering further information, and Japan ...
will commence consultations with the TPP member countries.” (2) “Measures to be taken
with regard to major countries and regions outside the Asia-Pacific”: “…expedite
arrangements to enter into negotiations with the EU at an early date. For this purpose, the
Government will accelerate efforts to reform its domestic non-tariff measures.” (3) “Measures
to be taken with regard to other countries and regions”: “strengthen economic partnerships …
with other Asian countries, newly emerging powers, and resource-rich countries…”
Overview of Japan’s Efforts
① EPAs in effect
(a)
EPAs with the ASEAN
Japan is advancing bilateral efforts with both member countries of ASEAN and, in
parallel, with Japan-ASEAN (as a whole).
(i)
EPA with the ASEAN as a whole
In April 2005, Japan commenced negotiations with ASEAN for an ASEAN-Japan
comprehensive economic partnership (AJCEP), based on the November 2004 agreement of
the leaders of the involved countries. The AJCEP agreement came into force on December 1,
2008 after it was signed by the countries involved in April 2008 (as of February 2010, the
agreement is in effect in Japan, Singapore, Laos, Myanmar, Vietnam, Brunei, Malaysia,
Thailand and Cambodia).
An EPA between Japan and ASEAN as a whole would institute a free economic area
(Japan and ASEAN as one area) with a population of 700 million and an economic scale of
5.6 trillion US dollars. This would have a significant effect, stimulating the economies of
both Japan and the ASEAN. In the East Asia region, the ASEAN continues to provide the
deepest trade and investment relationship with Japan, and is therefore an important region.
An EPA with the ASEAN is also important from the viewpoint of effectively utilizing assets
in the ASEAN, which have accumulated due to large investments made to date.
Furthermore, an EPA with ASEAN as a whole would facilitate harmonization over a
wide region, which would be difficult to achieve through bilateral EPAs between Japan and
the ASEAN member countries, and would contribute to strengthen industrial competitiveness
733
Part III Overview
in a form fitting into the actual pattern of economic activities conducted broadly between
Japan and the ASEAN. For example, while bilateral EPAs might not necessarily be useful
where final products exported within the region are processed within ASEAN using high
value-added parts manufactured in Japan, the AJCEP offers opportunities to enjoy preferential
treatment, as cumulative rules of origin are applied in Japan and within ASEAN countries.
(ii)
EPA with Singapore
Japan’s EPA with Singapore was signed on January 13, 2002, and came into effect on
November 30 of the same year.
This agreement, Japan’s first Regional Trade Agreement (RTA), promotes a
comprehensive economic partnership between the two countries, whose partnership is to have
the effect of expanding trade and investment within the region and harmonizing systems in
such areas as paperless trade and mutual recognition. By liberalizing and facilitating trade
and investment and harmonizing economic systems, the EPA would have the further effect of
improving bilateral cooperation in the areas of information and communication technology
(“ICT”), and trade and investment.
In addition, the negotiation for review, which commenced in April 2006, reached
agreement in March 2007 and the agreement came into effect in September the same year.
Thus, further liberalization is being implemented. Since this agreement came into effect,
Japan’s trade in goods with Singapore has steadily increased. Exports to Singapore have
increased by 44.6%, while imports from Singapore have increased by 32.3%, resulting in a
27.2% increase in Japan’s trade surplus with Singapore. Japan’s service trade account with
Singapore got into the black, with receipts increasing 2.7-fold and payments increasing by
67.0%. The balance of Japan’s direct investment in Singapore increased by 59.8% and the
balance of Singapore’s direct investment in Japan increased 9.1 fold (comparison between
2002 and 2007).
(iii)
EPA with the Philippines
Negotiation of the EPA with the Philippines commenced in February 2004, and the
EPA was signed at the Japan-Philippines Summit Meeting held in September 2006 and came
into effect in December 2008.
This agreement is the first EPA entered into by the Philippines. It aims to advance a
comprehensive economic partnership between the countries, so as to a) promote the free
movement of goods, persons, services and capital, as well as the harmonization and
clarification of legal frameworks for intellectual property, competition policies and
maintaining the business environment, and the development of economic activity of both
countries; and b) improve bilateral cooperation in the areas of intellectual property,
competition policy, business environment maintenance, training of human resources, trade
and investment, information and communication technology, and small/medium-sized
companies. Based on the agreement, a total of 310 nurse and caregiver candidates came to
Japan from the Philippines in May 2009.
734
Part III Overview
(iv)
EPA with Malaysia
Negotiation commenced in January 2004, and in May 2005, both countries confirmed
an agreement in principle on major issues. The EPA was signed by the leaders of both
countries in December 2005, and came into effect in July 2006.
Many Japanese-owned companies have been established in Malaysia, indicating that
there is a strong economic relationship between the countries. The establishment of an
economic partnership between the countries has had the effect of facilitating procurement and
sales of parts and expanding trade and investment between the countries. It is noteworthy that
the agreed tariff elimination and reduction would have a large economic effect. In addition,
for many Japanese companies establishing entities in Malaysia, it is very important that a
subcommittee on the improvement of the business environment has been established, whereby
the governments and industries of both countries work on establishing investment rules,
liberalizing trade in services, and otherwise improving the business environment. The
subcommittee had held a total of four meetings by November 2009, starting in March 2007.
The subcommittee is highly valued in industrial circles, as it has discussed various problems
involving business and resolved some of them. In addition, Japan and Malaysia also
established subcommittees on issues concerning country of origin, services, and cooperation.
(v)
EPA with Thailand
Negotiation for the EPA with Thailand commenced in February 2004, and agreement
in principle on major issues was reached at the Japan-Thailand Summit Meeting in September
2005. The agreement was signed and came into effect in November 2007.
Under this agreement, Thailand will eliminate tariffs on almost all non-agricultural
products, excluding certain classes of automobiles, within 10 years while Japan will
implement comprehensive tariff elimination including many agricultural products. In the
investment area, Thailand will declare that it will not tighten restrictions on investment in the
manufacturing industry and services sectors, and will relax foreign investment restrictions on
some manufacturing industry-related services (such as repair and maintenance, and retail and
wholesale). In the area of movement of natural persons, Japan and Thailand are now
discussing the acceptance into Japan of spa therapists and healthcare workers from Thailand
and the relaxation of conditions related to visa and work permits for Japanese nationals in
Thailand. Japan has implemented industrial cooperation for automobiles, steel, and
agricultural cooperation.
Thailand ranks first among ASEAN countries as the destination of Japanese exports,
but most exports are subject to high tariff rates. The EPA will create the benefit of tariff
elimination. Also, Thailand is the core manufacturing base in ASEAN for Japanese
companies, with Japan being the largest investor in the country and many Japanese companies
operating there (as of 2009, the number of Japan Chamber of Commerce and Industry
member companies operating in Thailand being the largest among ASEAN countries). In
order to solve business problems faced by these Japanese companies, a “subcommittee
concerning the improvement of business environment” has been set up. The subcommittee
had held two meetings by 2009 and has produced some benefits. The EPA is also expected to
735
Part III Overview
produce good results also from the standpoint of improving business environment through the
establishment of investment rules and the liberalization of trade in services.
(vi)
EPA with Indonesia
Japan and Indonesia commenced negotiations for a bilateral EPA in July 2005 and
reached a broad agreement on major issues in November 2006. The agreement was signed at
the Japan-Indonesia Summit Meeting held in August 2007 and came into effect in July 2008.
In addition to reducing or dismantling trade barriers, the economic partnership
agreement between Indonesia and Japan is effective in harmonizing the existing legal systems
of the two countries, promoting the reasonable administration and transparency of each
administration system, and improving investment environment. Since Indonesia has rich
underground resources, such as natural gas and petroleum, the two countries have included a
chapter on energy and mineral resources in the EPA.
For Indonesia, Japan is the ninth largest trading partner (in 2008) and their economic
ties are deep. Indonesia has the largest population (228 million) within ASEAN. The
formation of the EPA will secure preferential access to this promising market for Japanese
companies. Since Japan and Indonesia have been implementing bilateral cooperation in the
field of manufacturing (27 projects in 14 fields), the economic relationship between the two
countries is expected to be further strengthened. Based on the EPA, a total of 208 nurse and
caregiver candidates came to Japan from Indonesia in August 2008, 362 in fiscal 2009, and
116 in fiscal 2010.
(vii)
EPA with Brunei
The negotiation of an EPA with Brunei started in June 2006 based on the decision to
start official negotiation made at a Foreign Ministers Meeting between Minister Aso and
Minister Mohamed. Both countries came to general agreement in December 2006 and signed
the EPA in June 2007; it came into effect at the end of July 2008.
Brunei is one of the important countries for Japan that supplies energy such as natural
gas. The Japan-Brunei EPA sets the first independent Energy Chapter among Japan’s EPAs.
The chapter includes provisions relating to contractual relationship in the application of
energy regulatory measures; implementation of written notice to and consultation with the
other Party; consideration for environment, cooperation and consultation mechanism through
a Sub-Committee. All will contribute to maintain and strengthen stable relationship
beneficial for both countries.
(viii) EPA with Vietnam
Japan and Vietnam commenced negotiations for an EPA in January 2007, following an
agreement at a summit meeting between the two countries in October 2006. The two countries
largely agreed on a bilateral EPA in September 2008, following 15 rounds of meetings. The
EPA was formally signed in December the same year and came into effect in October 2009. It
is the first bilateral EPA for Vietnam.
Recently, Vietnam has been attracting keen interest from Japanese companies,
736
Part III Overview
including automobile- and electronic-related manufacturers, and their investment in the
country has been increasing steadily. This is partly due to the effects of the Japan-Vietnam
Joint Initiative (started in 2003) and the Japan-Vietnam Investment Treaty (enacted in 2004)
that constitute frameworks for the establishment of a business environment. However, high
tariff rates on parts and materials, and underdeveloped supporting industries pose challenges
for the future. The Japan-Vietnam EPA is expected to contribute to dealing with such
problems and to further reinforcing bilateral political and economic relations as the third
economic pillar between the two countries. As a result of the conclusion of the EPA, Vietnam
is expected to reduce or eliminate tariffs mainly on parts and materials that are necessary for
local manufacturers. Vietnam has also promised to liberalize its high tariff rates, a point
which the country did not concede in the China-ASEAN FTA and the Korea-ASEAN FTA.
Japan, for its part, eliminated tariffs on almost all industrial products and improved access to
the market for agriculture and fishery products. In the area of movement of natural persons,
Japan has promised to promote the movement of Vietnamese IT engineers within the scope of
the current immigration control system, and to continue consultations on the possibility of
accepting Vietnamese nurses and caregivers in the future, now that the EPA has come into
effect. The EPA also provides for cooperation to foster supporting industries and reinforce
food sanitation control and animal and plant quarantine systems.
Column: Relationship between Japan’s Bilateral EPA with Individual ASEAN
countries and the Japan-ASEAN EPA
Japan’s bilateral EPAs with individual ASEAN countries (Japan-Singapore, Japan-Malaysia,
Japan-Thailand, Japan-Brunei, Japan-India, Japan-Indonesia, Japan-Philippines, and JapanVietnam have already come into effect) and the Japan-ASEAN EPA (AJCEP) are completely
different agreements, having no legal binding force on each other. Since AJCEP is an
agreement with the 10 ASEAN countries, it covers Cambodia, Laos and Myanmar, with
which Japan does not have an EPA. In trade between Japan and an ASEAN country covered
by both AJCEP and a bilateral EPA, it is possible to apply a preferential tariff rate based on
either the AJCEP or the bilateral EPA. Which preferential rate can be applied basically
depends on which agreement the importer applies in submitting a certificate of origin.
Therefore, the importer can choose either AJCEP or the bilateral EPA after comparing them.
In the case where parts of a product are manufactured in Japan and exported to an ASEAN
county A and then exported to an ASEAN country B after being processed or without
modification, the ASEAN country B cannot apply the bilateral EPA with Japan but may be
able to apply AJCEP. Therefore, AJCEP is very important for Japanese companies, who
operate in complex production networks that connect Japan with ASEAN member countries.
(c)
EPA with Mexico
Japan and Mexico commenced negotiations for an EPA in November 2002, and in
March 2004, after almost two years of vigorous negotiation, the ministers of each country
reached an agreement in principle on major issues. Following completion of the technical
legal details, an agreement was formally signed by the leaders of the countries in September
2004. The agreement was ratified in November 2004, and came into effect on April 1, 2005.
737
Part III Overview
Under this agreement, a large portion of the average tariff rate (16%, based on annual
average effective tariff rate as of 2001) previously imposed on export products to Mexico are
to be eliminated within 10 years. In areas such as investment and services, and governmental
procurement, Japan enjoys a competitive environment similar to that enjoyed by Western
countries with Mexico. After the coming into effect of this agreement, the volume of exports
from Japan to Mexico in 2008 increased by approximately 1.6 times and the volume of
imports from Mexico to Japan increased 1.5 times compared to those in 2004 before
effectuation of the agreement. With regard to investment, there is a trend for automobilerelated industry to increase production and establish sales outlets. In addition, efforts to
strengthen economic partnership between both countries have been made by holding
committee meetings under the agreement, including the Sub-Committee on Improvement of
Business Environment where representatives of private sectors have participated (the fourth
committee has already been held).
(d)
EPA with Chile
At the meeting of the leaders of Japan and Chile in November 2004, the two countries
agreed to establish an industry-academia-government “Joint Study Group” to examine the
feasibility of an EPA between them. The Joint Study Group started at the end of January
2005 and four meetings were held thereafter. In November of the same year, based on the
report by the Joint Study Group, it was agreed to commence EPA negotiations. Negotiations
were held four times between February and September of 2006, and in September 2006,
agreement was reached in principle on major issues, focusing on market access. A fifth
negotiation was held in November, and at the summit meeting held in the same month,
agreement on the negotiations was confirmed. The Japan-Chile EPA was signed at the end of
March 2007 and came into effect in September the same year.
Similar to Japan, Chile is aggressively promoting an open economic policy as a
trading nation. Chile’s political and economic climates are stable, and Chile is an important
supplier of mineral resources to Japan. Chile has already entered into FTAs with
approximately 50 countries, including the United States, Canada, the EU, EFTA, the Republic
of Korea and China, and it was thus important for Japan to resolve the economic disadvantage
with Chile due to the non-existence of an FTA/EPA with it.
(e)
EPA with Switzerland
At the summit meeting in April 2005, Japan and Switzerland agreed to establish a joint
governmental study, which would include an analysis of the pros and cons of an FTA/EPA
between the two countries, and an analysis of the methods of economic partnership
reinforcement for developed countries. Joint study meetings were held five times between
October 2005 and November 2006. Following the final report thereof, in January 2007, it was
agreed by the leaders of both countries to commence EPA negotiations. After eight rounds of
negotiations, the two countries reached an interim agreement in principle in September 2008
and signed an EPA in February 2009. The EPA came into effect on September 1 the same
year. The Japan-Switzerland EPA is the first EPA signed by Japan with a developed western
country. The EPA is rich in content and is expected to serve as a model for EPAs with other
western countries. Specifically, it allows for high-level liberalization of trade in goods
738
Part III Overview
(elimination of tariffs on more than 99% of two-way trade within 10 years after the EPA came
into effect, including the immediate elimination of tariffs on major industrial products);
introduced a system of self-certification by approved exporters with regard to certificates of
origin, the first such system in Japan’s EPA; and created a chapter on electronic commerce
systems, also the first such system in Japan’s EPA. Moreover, the EPA has achieved highlevel results with regard to investment, services, and intellectual property.
 EPAs Signed and Negotiations Completed
(a) EPA with India
In November 2004, at a meeting of the leaders of Japan and India, agreement was
reached to establish a Joint Study Group to comprehensively discuss ways to reinforce the
economic partnership between the two countries. The Joint Study Group met four times
between July 2005 and June 2006. Based on the report by the Joint Study Group, at the
Japan-India Summit Meeting held in July 2006, direction was given to start working level
preparations for negotiations. At the Japan-India Summit Meeting in December 2006, it was
agreed to commence the negotiations in January 2007 with the aim of completing substantial
negotiations as soon as possible within about two years. At the Japan-India Summit Meeting
in December 2009, the two countries agreed to accelerate the negotiations to reach an
agreement at an early date, and in the 14th round of negotiations in September 2010, both
countries broadly agreed. The negotiations concluded at the Japan-India Summit Meeting in
December 2010. In February 2011, the Minister of Commerce, Anand Sharma, visited Japan
and signed the EPA.
India imposes high tariffs on most exports from Japan. Tariff elimination would
promote exports from Japan and further enable Japanese companies, mostly in the
manufacturing industry, to establish entities in India to conduct duty-free procurement
activities. In the areas of investment and services, it is important for Japan and India to work
out rules which are liberal, transparent, and stable and to improve the business environment.
In 2010, the major tariff items and their tariff rates among the exports to India include
automotive parts (7.5% to 12.5%), steel products ( 5%) and machine tools (7.5%).
(e) EPA with Peru
At the Japan-Peru Summit Meeting in November 2008, it was agreed to commence
negotiations for a Japan-Peru EPA, a step that the Peruvian side in particular embraced with
great enthusiasm. The two countries held three rounds of private-level study meetings
between January and March of 2009. Based on the report by the study group, the two
countries agreed at the Summit Meeting held in April 2009 to commence negotiations for a
Japan-Peru EPA. From May 2009 to November 2010, seven rounds of formal and interim
meetings were held, and negotiations concluded in November 2010. Japan and Peru are
working towards signing the EPA in the first half of 2011. The major tariff items and their
tariff rates among the exports to Peru (as of 2010) include automobiles (9%), motorcycles
(9%) and TVs (9%). However, as a result of the negotiations, tariff will be eliminated within
10 years from now for automobiles, within nine years for motorcycles and immediately for
TVs. Tariffs on more than 99% of the items to and from Japan will be eliminated within ten
years after the agreement comes in effect.
739
Part III Overview
 EPAs under negotiations
(a) EPA with the Republic of Korea
Efforts to resume the EPA negotiation with the Republic of Korea, which commenced
in December 2003 but have remained suspended since November 2004, have picked up
momentum since 2008. At a summit meeting between Japan and the Republic of Korea,
which was held in February 2008, shortly after the inauguration of President Lee Myung-Bak,
the two countries agreed to consider resuming negotiations for a bilateral EPA. At another
summit meeting held in April 2008, the two countries agreed to hold “working-level talks to
consider and to create a favorable environment for the resumption of EPA negotiations.”
Based on the agreement, the two countries held division chief-level and working-level
meetings in June and December 2008. At the Japan-Korea summit in January 2009, the two
countries agreed to upgrade the working-level negotiations to vice ministerial-level talks, and
based on the agreement held vice ministerial-level talks in July and December 2009. At the
Japan-Korea summit in May 2010, it was agreed to conduct high-level prior discussions for
resuming negotiations, and in September 2010, director-general level prior discussions for
resuming negotiations were held in Tokyo.
Japan and the Republic of Korea have a relatively similar industrial structure and the
two countries share an international, horizontal division of labor. Although negotiations have
not yet resumed due to the trade deficit with Japan, executing an EPA with the Republic of
Korea is important to both countries because the market integration resulting from an EPA
would be expected to stimulate transnational competition and cooperation between Japanese
and Korean companies, as well as facilitate economic structure reform and spur the
development of reciprocal investments. This would improve both productivity and efficiency
for both countries. In addition, there is a high tariff on most of the industrial goods imported
by Korea, so there are great expectations of benefits from reducing tariffs in an EPA. This
EPA would also provide both countries the opportunity to realize the true potential of their
economic relationship, symbolizing the “new Japan-Korea era” which was agreed upon at the
summit meeting of the two countries in February 2008. Japan and the Republic of Korea are
now the sole set of neighboring developed countries which have not entered into an EPA.
56.6% of Japan’s exports to the Republic of Korea now are subject to tariffs, while
only 24.0% of exports from the Republic of Korea to Japan are subject to tariffs, The major
tariff items and their tariff rates among the exports to the Republic of Korea (as of 2008)
include automobiles (complete vehicles (8~10%) and auto parts (8%)), plastic products
(4~8%), general machinery (3~13%), and general machinery\electrical machinery (3~16%).
On the average, the tariff rate on industrial products is 6~8% in the Republic of Korea.).
(b)
FTA with the GCC
In March 2006, Japan and the GCC composed of Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia and the United Arab Emirates agreed to commence negotiations on an FTA with
respect to goods and services. In April 2006, in a Joint Statement, former Prime Minister
Junichiro Koizumi and His Royal Highness Prince Sultan Bin Abdul-Aziz Al-Saud, The
Crown Prince of the Kingdom of Saudi Arabia, announced the commencement of
negotiations. The first negotiating session was held in September 2006.
740
Part III Overview
The GCC region accounts for over 70% (2008) of Japan’s raw petroleum imports, and
the aggregate value of exports from Japan is over 2.8 trillion yen (2008). It is important to
form and maintain a friendly relationship (including an economic relationship) between the
countries from the viewpoint of Japan’s energy security and expansion of trade.
For areas that would not be covered by the FTA between Japan and the GCC, Japan
established and strengthened bilateral frameworks between Saudi Arabia, Qatar, UAE and
Kuwait. Japan has resumed negotiations on an investment agreement with Saudi Arabia (the
first negotiation was held in October 2006). The seventh negotiation was held in May 2008
and both parties came to substantial agreement. As for relations with Qatar, Japan established
the Japan-Qatar Joint Economic Committee to discuss both the area of energy and Japan’s
investment and business environment with Qatar. The joint committee held four meetings
between November 2006 and November 2009 and the two countries agreed to strive for an
early conclusion of an investment treaty. Japan also established a joint economic committee
with the United Arab Emirates and it met for the first time in December 2007. In July 2008,
Japan agreed to establish a joint committee with Kuwait.
(c)
EPA with Australia
Based on the “Australia-Japan Trade and Economic Framework” signed at the summit
meeting held in July 2003, a governmental joint study concerning the costs and benefits of the
liberalization of trade and investment, cooperation on measures, etc. to facilitate trade and
investment between Australia and Japan was conducted. This joint study was completed in
April 2005. Subsequently, at their meeting held in April of the same year, the leaders of
Japan and Australia, while mutually recognizing the difficult issues in respect of agriculture,
agreed to jointly conduct a study on the methods for reinforcing economic relationships (that
are tailored for the relationship between developed countries) between them, including with
respect to the pros and cons of an FTA/EPA. Joint study meetings were held five times from
November 2005 to September 2006. Following the final report thereof, in December 2006,
Prime Minister Shinzo Abe of Japan and Prime Minister of Australia John Howard agreed to
commence negotiations for an EPA starting in 2007. The first negotiation was held in April
2007 and there have been twelve negotiations as of today. The discussions aim to bridge the
gap between the two countries’ positions, but agreement has still not been reached (as of
February 2011). The benefits Japan can expect from a Japan-Australia EPA are many:
expanded trade due to tariff elimination (price competitiveness against other countries will be
improved) and further reinforcement of economic relations between the two countries, such
as ensuring stable supply of energy, mineral resources (Japan is heavily dependent on
Australia for such minerals as iron ore and coal), and food.
The major tariff items and their tariff rates among the exports to Australia (as of 2008)
include passenger cars (complete vehicles (5%)), commercial cars (complete vehicles (5%)),
auto parts (passenger cars) (5%), shovel loaders (5%), video camera (5%) and color
televisions (5%). Tariff rates on completed vehicles and auto parts (Chapter 87) were
reduced to 5% in January 2010.
741
Part III Overview
③ Efforts for wide-region economic partnership
Between Japan and East Asian countries, a deep economic relationship of mutual
dependence has already been established, as reflected by actual conditions including the
spread of outlets of Japanese companies. Moreover, Japanese share of total imports and
exports have increased respectively from 44% and 39% in 1999 to 47% and 52% in 2008, as
well as an increase of Japan’s direct investment to East Asia from 18.1% in 1999 to 23.3% in
2008. This shows that the mutual dependent relationship between Japan and East Asia had
rapidly deepened. For the Japanese economy, whose growth is expected to slow down with
respect to both the ability of domestic production and domestic demand as the birthrate
declines and the population ages, the further strengthening of economic partnership with East
Asia where rapid growth is expected to be continued is indispensable. This will occur
through multiple channels such as capital transactions including goods trade and direct
investment and exchange of highly-skilled personnel. In order to strengthen economic
partnerships, EPAs that have an impact as that set out above can be an extremely effective
means.
The effects of EPA with East Asia includes following:
(i)
As explained above, although the importance of East Asia has been growing both in
trade and investment, tariff rates in East Asia are generally high compared those in
other developing countries. Besides, there are some countries where there are
restrictions on investment including foreign investment restrictions, business related
regulations and unclear implementation of systems. By concluding EPAs, expanded
trade and investment are expected through elimination or reduction of restrictions on
trade and investment, leading Japan to maintain markets and East Asia to further
economic growth owing to the increase of investment.
(ii)
At present, division of labor and intra-industry trade have been expanded within East
Asia. Elimination or reduction of restrictions on trade and investment, improvement of
systems within the region and economic cooperation policy through EPAs reduce the
transaction costs and contribute to strengthen competitiveness of industry, a pillar of
such production and distribution network.
(iii)
In addition, EPAs with East Asia are important in order not to weaken the
competitiveness of Japanese companies due to the lack of EPAs while other countries
are actively concluding EPAs.
In this way, EPAs with East Asia are significant not only for Japan but also for the
other East Asian countries in that an EPA is expected to produce virtuous circles as it can
bring various benefits like the increase of regional division of labors and transactions by
eliminating restrictions among the region, further economic growth through promotion of
investment, and stability of politics and economy based on these effects, which allow
economic development by calling for further investment. Such a process can ultimately bring
stability and prosperity to East Asia as a whole. For the future goal of creating a free and
mature economic zone in the whole of East Asia where goods, services, persons and capital
can freely move, Japan at first is undertaking efforts to conclude bilateral EPAs with ASEAN,
742
Part III Overview
the Republic of Korea and India or regional EPAs with all of ASEAN, while it also works on
research on future regional economic partnership in East Asia as a whole. Concretely, at the
Trilateral Economic and Trade Ministers’ Meeting, Japan, China and the Republic of Korea
agreed to hold joint study about a trilateral FTA among government officials, business and
economic participants in May 2010 and agreed to put together a report before the Summit in
2012. The second round of joint study was held in September, and the third in December.
Furthermore, in response to the expansion of production networks in East Asia and
development of economic partnerships with ASEAN and the surrounding countries in recent
years, Japan proposed to launch expert study of a Comprehensive Economic Partnership in
East Asia (CEPEA) in the “ASEAN+6” framework (consisting of Japan, China, the Republic
of Korea, India, Australia and New Zealand in addition to ASEAN) and the final report of the
study group was submitted to leaders. Leaders agreed to start inter-governmental discussions,
and in August 2010, Japan published the “Initial Steps” which indicated the interim and long
term outlook.
It is noteworthy that TPP, mentioned earlier, is one of the initiatives for expanding the
Asia-Pacific region, and has emerged as part of the new regional partnership framework.
Although arguments for and against TPP have been raised, strengthening relations with the
U.S., benefits of promoting EPAs with the EU and China, and participation in rule making
could be considered significant. Discussions on trade and investment liberalization and
creating rules and norms are indeed progressive today. Any future trade and investment rule
will largely depend on the discussions and execution hereafter. TPP is expected to become a
part of creating such new rules and norms.
Japan is conducting discussions with nine countries that are currently participating in
negotiations for TPP, for which it continues to collect information vigorously (as of February
2011).
It is important that promotion of high-level economic partnerships coexists with
agricultural and rural promotion, fostering strong and sustainable agriculture, etc. Together
with the government, the “Headquarters for Revival of Food, Agriculture, Forestry and
Fisheries” was established headed by the Prime Minister, and discussions are being held with
experts and at the cabinet level. Through various initiatives, it is necessary for all citizens to
think of mechanisms to support agriculture. The Ministry of Economy, Trade and Industry
also launched the “Industrialization of Agriculture Working Group,” which will contribute to
the overall efforts of the government.
(Reference: Basic Policy on Comprehensive Economic Partnerships - Excerpt)
2. Specific efforts towards strengthening comprehensive economic partnerships
Considering the international and regional environment faced by Japan, the following
specific initiatives are carried out in order to strengthen the comprehensive economic
partnerships with key trading partner countries and regions for Japan. Especially with
respect to politically and economically important EPAs and regional economic partnerships
that greatly benefit Japan, all items will be included in liberalization negotiations and
negotiations seeking high level economic partnerships will be carried out, with
consideration given to sensitive items.
743
Part III Overview
Column: Cross-cutting Rule Making Attempts in TPP
TPP negotiations will incorporate a unique working group on “cross cutting
issues” (no such working group was established in previous FTA/EPA negotiations).
Specifically, regulatory coherence and competitiveness (including supply chain
connectivity), and support for small and medium companies are being discussed. This is
because companies that actually develop business activities directly invest in foreign
countries. TPP is an attempt to construct a free trade and investment environment by
reducing as much as possible the differences encountered in the regulations of each
country, and the various obstacles in supply chains, when supplying products and
services in the Asia-Pacific region. A feature of TPP is its cross-cutting investigation of
individual areas such as origin, investment, services, TBT, SPS and intellectual property.
The concern that manufacturing industries of some of the developed countries have
hollowed out due to trade liberalization and employment is being drained out of the
country also is being looked at. (Compared to the ratio of the size of each country’s
industry and employment, small and medium sized businesses cannot fully enjoy the
benefits of free trade agreement). Simplification of trade procedures and the methods of
various policy support are important issues being reviewed, to create an environment
favorable for international expansion of business and exports, for more evenly distributed
benefits of trade liberalization. TPP should be a “living agreement,” which means that
TPP agreement is not only limited to the countries involved in initial negotiations but is
open to new additions; with respect to some areas of negotiations of regulatory
coherence, after initially creating provisions that can be agreed on in principle by all,
contents are updated and evolved. TPP runs through a bilateral FTA at multiple levels,
and has huge potential of showing new rule-making methods for the Asia-Pacific region
that has complex rules governing industrial activities.
Such a vision is largely at the request of industries expanding their operations
globally. A parent organization promoting cross-industry TPP negotiations called “U.S.
Business Coalition for TPP” has been formed in the U.S.; it consists of more than 100
industry groups and individual firms. Global enterprises such as Boeing, Cargill,
Citibank, FedEx, GE, IBM, Pfizer and Wal-Mart are eagerly backing up the USTR
negotiation team. In September 2010, the U.S. Business Coalition for TPP published 15
basic rules for seeking TPP, given below.
TPP Principles
1. A Comprehensive Agreement
2. A Commercially Meaningful Agreement
3. A Final Agreement Completed in 2011
4. An agreement that simplifies trade and enhances competitiveness
5. An agreement that facilitates trade and strengthens production and supply chains
6. An agreement that enhances regulatory coherence
7. An agreement that adopts the highest standards of intellectual-property protection
8. An agreement that promotes and protects inbound and outbound investment
9. An agreement that improves transparency and reduces corruption
10. An agreement that promotes open and equal procurement opportunities
11. An agreement that promotes fair competition and a level playing field
12. An agreement that lowers prices, expands consumer choices, and enhances
competitiveness
744
Part III Overview
13. An agreement that prohibits roll-backs of market access
14. A ”living” agreement that welcomes additional parties and evolves to address
new trade and investment issues as they arise
15. An agreement that promotes the rule of law and the protection of the environment
and workers in each of the TPP countries
④ Provisions for Countries with a Large Domestic Market
The Republic of Korea formally signed an FTA with the United States in June 2007
and a provisional FTA with the EU in October -2010 (scheduled to come into effect
provisionally in July 2011). These developments have created a sense of crisis among
Japanese companies that, in terms of the competitive environment , the Republic of Korea is
ahead of Japan in initiatives with countries with large domestic markets.
Against this background, at the Japan-EU Summit Meeting in May 2009, it was agreed
to focus on “several specific non-tariff cases” that were expected to produce results in the
short term for strengthening Japan-EU economic integration. In November 2009, Nippon
Keidanren (Japan Business Federation) published a third proposal calling for the start of
Japan-EU EIA negotiations as soon as possible.
In April 2010, both Co-Chairmen of the Japan EU Business Round Table presented a
proposal to the leaders of Japan and EU to commence balanced and mutually beneficial
bilateral negotiations immediately after both governments have agreed that appropriate
conditions are met. The demands from industries for concluding a Japan-EU EIA have been
increasing. At the Japan-EU Summit Meeting in April 2010, a “joint High-level Group” was
established, and it was agreed to commence a joint study for the strengthening and integration
of comprehensive Japan-EU economic relations. The joint High-level Group conducted
discussions on issues of concern to both parties, including tariff and non-tariff areas. In
December 2010, for “several specific non-tariff cases,” Japan agreed to provide, in English,
integrated procurement information of government affiliated organizations, including that of
local governments. It was also agreed to work on concrete efforts to be taken by Japan with
respect to advanced safety automobile technology guidelines, lumber standards for
construction use, and medical equipment; and by the EU with respect to credit rating
agencies, auditing, and transfer of people (intra-company transfers). The next steps will be
decided at the 2011 spring Japan-EU Summit Meeting. In addition, in the European Council
of March 2011, with the condition that Japan is prepared to tackle issues such as non-tariff
barriers and restrictions on public procurement, the EU adopted a conclusion document that
the forthcoming Japan-EU Summit should be used to move forward with common issues,
including the possibility of commencing negotiations on a free trade agreement, and for
strengthening Japan-EU relations.
With respect to a Japan-U.S. FTA, still in the research stage, Japan plans to steadily
continue the research, while giving due consideration to raising Japan’s food self-sufficiency
ratio and promoting farming villages.
745