Japan inks its first free trade deal with Singapore


	January 15, 2002	atimes.com

Japan

Japan inks its first free trade deal with Singapore

SINGAPORE - After two years of preparations, Japan signed a new free trade agreement (FTA) with Singapore after Japanese Prime Minister Koizumi's arrival on Sunday on the last leg of a regional tour to promote his new regional trade strategy. The Singapore-Japan FTA scraps import and export tariffs on nearly all goods traded between the two countries - the first such deal of its kind for Japan, and the first in what the country hopes will be a series of similar deals across Southeast Asia.

Although not a conventional free trade arrangement, the agreement aims to lower economic barriers between the two nations by encouraging increased exchanges of people, services, goods, capital and information. Under this new deal, Japanese goods will be free of tariffs going into Singapore, and 94 percent of Singaporean exports will be tariff-free into Japan.

Koizumi completes his trip to Singapore on Monday. The city-state of 4 million people is the last stop of a five-nation regional tour. He arrived from Indonesia after first visiting the Philippines, Malaysia and Thailand. During his trip, Koizumi pushed his proposal for a free trade zone, an economic cooperative "community" among the Association of South East Asian Nations (ASEAN) and Japan, China and South Korea. There is strong interest from both the Japanese public and private sectors in ASEAN. The forging of bilateral free trade augurs well as the ASEAN+Three (Japan, China and South Korea) proposal has not prospered at all.

Singaporean Prime Minister Goh Chok Tong said he hoped the new agreement would spur Japan and ASEAN to make concrete moves toward cooperation. "We hope that Japan will use it as a lead to forge an FTA with the whole of ASEAN," said Goh. Also hoping to convince his Japanese counterpart to establish FTAs with countries outside East Asia - for example, the European Union (EU) and the Free Trade Area of the Americas (FTAA) - he said, "What we fear most is that the world will be split into three economic blocs - FTAA, EU and East Asia - in the long term."

Another step in the direction of Japanese-ASEAN cooperation is a bilateral free trade zone that has been proposed between Japan and the Philippines to facilitate trade with the world's second largest economic power and the Philippines' second biggest trading partner. Department of Trade and Industry Secretary Manuel A Roxas II said the proposal would greatly benefit the domestic economy, particularly in the agriculture sector. "The ASEAN-Japan cooperation will lend more impetus towards calls by certain sectors for a bilateral Japan-Philippines Free Trade Area. On the face of it, it looks relatively benign in as much as in agriculture we won't be competing with them."

On the weekend, Koizumi also reiterated Japan's support of Indonesia's reform efforts and territorial integrity, including the maintenance of political stability. Japan is now Indonesia's largest aid donor and investor. Speaking in a joint press briefing with his Indonesian counterpart, President Megawati Sukarnoputri, Koizumi renewed his commitment to helping the nation, saying the country's prosperity and stability were very important for a stable Asia-Pacific region.

Skeptics have suggested that Japan is reaching out because it is concerned about China's growing economic and political power in Asia. Indeed, China has already agreed to create a free-trade zone with ASEAN in the next 10 years. "Koizumi's government is worried that this agreement may tie the Southeast Asia region more tightly to China and be to Tokyo's disadvantage in the longer term," said a senior Japanese government official who didn't want to be identified. "This is also partly the reason Koizumi is currently on his lightning visit to the key countries of the region."

Koizumi has already won support from Thailand and the Philippines for his vision, which centers on a comprehensive economic cooperation framework based on free trade agreements. However, Malaysia stopped short of giving its backing to the proposal, which could ultimately include Australia and New Zealand.

Instrumental in getting China to sign an agreement with ASEAN, Singapore is the wealthiest Southeast Asian nation per capita but has suffered a massive slump after the September 11 attacks. It relies on international trade and has been looking for free trade pacts with other nations. The imperative has been sharpened by what Singapore sees as the frustratingly slow pace of trade liberalization internationally despite the efforts of the World Trade Organization (WTO).

"Singapore's commitment to open economies and free trade is fundamental and the WTO is therefore critical to Singapore's national interest," said Tommy Koh, Singapore's ambassador at-large and the head of the government team negotiating an FTA with the United States. "We wish to go beyond the WTO ... This is the logic behind Singapore's seemingly promiscuous trade policy of negotiating FTAs with so many countries."

The city-state signed a similar deal with New Zealand and is negotiating free trade deals with not only the US but also Mexico, Canada and Australia. Singapore also hopes to pen an agreement next year with the European Free Trade Association - made up of Iceland, Lichtenstein, Norway and Switzerland, and overtures have also been made to the European Union and India.

"Those countries which, like Singapore, are committed to speedy trade liberalization, fear that the WTO with its growing membership is becoming too unwieldy," said Melina Nathan, a senior analyst at Singapore's Institute for Defense and Strategic Studies. "And Singapore doesn't want to be held back by other countries in the organization which might have concerns about the West's attempts to bring in linkages with labor rights and environmental protection."

But the trade minister for Hong Kong, which like Singapore has one of the world's most "open" economies, said countries seek free-trade deals with Singapore more for political than economic gain.

The Singapore-Japan trade agreement will come into effect later this year after both parliaments have ratified it.

(Asia Times Online/Asia Pulse)