2008-E-8
Japan’s Competitive FTA Strategy:
Commercial Opportunities versus Political Rivalry
Mireya Solis
Associate Professor at the School of International Service
American University
June 2008

Paper presented at the International Symposium “Competitive Regionalism,” Ibuka
International Conference Hall, Waseda University, Tokyo, Japan. May 30 to 31, 2008.

Introduction

In little over a decade, Japan’s trade policy has experienced a dramatictransformation: from a critic of regionalism to an avid preferential trader eager to build anever expanding FTA network. Japan’s decision to join the FTA frenzy is best explained
as an instance of policy diffusion whereby the prior actions of other FTA nations createdstrong pressure for Japan to reverse its half century of exclusive support for themultilateral system. The literature on policy diffusion has identified two major forces forthe spread of economic policies (in this case preferential trade accords): ideational
dissemination (emulation) whereby new policy paradigms become predominant, orcompetition whereby the search for relative advantage induces governments to embracepolicies likely to yield economic, political, or rule-making benefits.
In this chapter, I argue that competitive dynamics explain best Japan’s FTA
policy shift. Japan has used its FTAs to meet three main challenges: 1) to restore oradvance the competitive advantage of internationally-oriented business sectors in selected
overseas markets; 2) to disseminate a distinct Japanese approach to preferential economic
integration different both from the American and Chinese FTAs; and 3) to hone its
regional leadership credentials vis-à-vis China by reaching out to Southeast Asian
nations, and inviting extra-regional partners to integration talks in order to balance
China’s influence. However, the need to respond to multiple competitive pressures has
taxed heavily Japanese FTA policy. The Japanese government has confronted a major
dilemma: whether to meet the demands of the business sector to negotiate a bilateral FTA
with China that maximizes economic returns, or whether to heed the calls frompoliticians that see in China an emerging rival and in economic integration an importantvenue to stake Japan’s claim to regional leadership.
Moreover, while the origins of Japan’s FTA policy cannot be found in isolated
domestic pressures, it is undeniable that national policymaking patterns influence heavily
how Japan articulates its FTA strategy. The traditional bottom-up policy making style
gives interest groups (e.g. from business and agriculture) influence over the direction of1

Japanese trade policy. However, two recent developments are likely to influence Japan’sability to meet competitive pressures through FTA policy: the attempts to centralize
policymaking in order to decrease the power of the farm subgovernment (and to explore
intra-agricultural divisions), and the growing politicization of foreign economic policy
with the weakening of the traditional division of economics and politics and the pursuit of
security driven FTAs.
This paper is organized as follows. Section one provides a brief overview ofJapanese FTA policy highlighting the main characteristics of Japanese free trade
agreements. Section two focuses on the FTA policy shift in the late 1990s in order toassess the competing hypotheses on FTA dissemination: emulation versus competition (inaddition to the null hypothesis of independent decision-making). Section three highlights
the ever expanding economic objectives in Japanese FTA policy. Section four looks at
Japan’s new legalism through the FTA venue. Section five focuses on the impact of SinoJapanese competition on patterns of East Asian integration. The last section concludes
with a reflection of the impact of these multiple competitive pressures on Japan’s FTA
policy.

I. Overview of Japan’s FTA initiatives
For most of the postwar period, the Japanese government regarded the multilateral
trading system as the vehicle to secure market access abroad for Japanese enterprises,
criticized trade regionalism as harmful to the GATT’s principle of non-discrimination,and played a passive role in the definition of trade governance rules in the multilateral
forum (Searight, 1999). In the past decade, however, all these core understandings inJapanese trade policy have been thoroughly revised as the Japanese government now
regards FTAs as supportive of the multilateral system and capable of producing deeper
liberalization; is bent on fleshing out a multi-track trade policy with concurrent
negotiations at the bilateral, regional, and multilateral levels; and has used proactively the
WTO’s dispute settlement mechanisms and is eager to partake in the dissemination of
new trade and investment rules (Pekkanen, 2008).
The adoption of an FTA track in Japan’s trade policy was particularly striking.
Roughly a decade after first entertaining the possibility of negotiating preferential trade2

accords, Japan has rapidly built an FTA network: as of April 2008, Japan had five FTAs
in effect (Singapore, Mexico, Malaysia, Chile and Thailand); had signed preferential
trade deals with Philippines, Indonesia, Brunei, and ASEAN; and was in active
negotiations with GCC nations, Australia, Switzerland, India and Vietnam (see Table 1).
It is clear from this table that bilateral FTAs gained traction first since Japan more nimbly
lined up trade agreements with individual Southeast Asian nations and Mexico and Chile;
while negotiations with ASEAN as a whole proceeded slowly, and the initiative to launch
an East Asian FTA (comprised by ASEAN+6 members) has not yet materialized, given
disagreements with China over the core membership of the EAS integration project. On
the other hand, the volume of trade and investment flows comprised by these bilateral
FTAs is rather modest –never exceeding the 4% ceiling (with the exception of the FTA
with Korea which is deadlocked), while the ASEAN wide FTA promises to yield more
economic benefits.
Another noteworthy characteristic of Japanese FTAs is their broad issue scope.
The Japanese government has attempted to include multiple WTO plus commitments inareas such as intellectual property, government procurement, temporary entry of businesspeople, and customs facilitation. But the trademark issue of Japan’s trade agreements isthe economic cooperation chapter (covering areas such as science and technology, small
enterprises, human resource development, and improvement of the business climate), somuch so that the Japanese government has coined a different term to refer to its
preferential trade deals: Economic Partnership Agreements (EPAs). Despite the attempt
to negotiate encompassing FTAs, Table 1 shows that the implementation of this Japanese
formula has not been completely homogeneous. Reflecting the high priority the
Malaysian government attaches to its bumiputra policy (of giving priority to ethnic
Malays on government contracts and hiring practices), the Japan-Malaysia FTA does notinclude WTO plus provisions on the elimination of performance requirements andexcludes government procurement.1 The trade agreement with Chile includes provisions
1

Underscoring the interconnectedness of FTA negotiations, Malaysia’s uncompromising position vis-à-vis
Japan reflected also its concern that any concession to Japan would become the de facto starting point in
subsequent negotiations with the United States and India. For that reason, Japanese officials are waiting tosee if the United States pries open Malaysia’s government procurement market through its FTA talks, topress for a similar concession during the scheduled five year renegotiation of the Japan-Malaysia FTA.
Interview with METI official, Tokyo, May 2006.

3

on the improvement of the business climate, but does not incorporate a full-fleshedchapter on economic cooperation. More importantly, the Japan-ASEAN FTA does notinclude new and binding obligations on investment and services, but only the vague
proviso to establish a committee to explore these issues after the enactment of theagreement.
Finally, a very important trait of Japanese FTAs is the asymmetry in liberalizationcommitments. Market opening is very high (as evaluated by the percentage of tariff lines
to be eliminated or reduced) in industrial goods, but markedly less in agriculturalcommodities due to longer calendars for liberalization and outright exceptions for
agricultural commodities. As Table 2 shows, the percentage of Japanese agricultural tariff
lines excluded from liberalization in Japanese FTAs is very elevated: 61% with
Singapore, 41% with Mexico and 55% with Malaysia. These are high numbers whencompared with agreements inked by the United States and the European Union, as
Cheong and Cho (2006) have demonstrated.2
Summing up, there is no question that FTAs have become a major component ofJapanese trade policy with 15 different such negotiations initiated in the last decade (andwith exploration of more ambitious FTAs as discussed later). Why then has Japanembraced an FTA strategy? Is the new trade policy a response to isolated domesticpressures (independent decision-making), or on the contrary is it best understood as an
instance of policy diffusion (interdependent policy-making)? Are Japan’s FTA outcomes(selection of partners, sectoral coverage, and issue scope) better explained by emulationor competition dynamics? The remainder of this chapter explores these issues.

II. Japan joins the FTA frenzy: dissemination dynamics
Two main actors (trade bureaucrats housed in the Ministry of International Tradeand Industry or MITI and big business as represented by its peak association Keidanren)
pushed for a redirection of Japanese trade policy to experiment for the first time withpreferential trade accords. The actions of these actors were fundamentally oriented by the2

The data on agricultural liberalization in Table 2 comes mostly from Cheong and Cho (2006), but it
expands on their findings by applying their methodology to estimate agricultural liberalization in the JapanMalaysia FTA, and by calculating industrial liberalization in all of the FTAs listed on the table.

4need to respond to the prior FTAs of other nations deemed to put Japanese companies at a
disadvantage in overseas markets. NAFTA, in particular, provided the first vivid exampleof the pinch of trade and investment diversion that Japanese firms and the government
expected would magnify with the non-stop proliferation of free trade agreements in theworld economy. Competitive pressures, therefore, provided the essential stimulus for
FTA diffusion in Japan.
Japanese trade bureaucrats first began discussing the possibility of joining the
new wave of FTAs in the summer of 1998 when they were first approached by Mexico to
explore a bilateral trade deal.3 The Japanese business community was supportive of thisinitiative as it feared the trade diversion effects of NAFTA, and so MITI launched a study
to assess the feasibility and merits of embarking on a completely new path forinternational trade negotiations (Hatakeyama, 2002). MITI’s internal report noted theimportance of developing additional trade policy options –especially in a context of
rapidly proliferating FTAs and stagnation in the WTO front- and identified in FTAs as
well a good opportunity to pursue structural reform. A main concern for trade officials
was that Japan was lagging behind as other countries were developing multi-track trade
policies (multilateral, regional, bilateral) to advance their economic interests. Acquiring
the same policy tools as their counterparts enjoyed was, consequently, a main motivation
to launch an FTA policy.
Although MITI’s internal deliberation on the merits of an FTA policy shift had
been triggered by the Mexican overture, the Ministry selected Korea as the first priority
in FTA negotiations. MITI’s actions reflected political pragmatism since it consideredeasier to garner the support of politicians and the public in favor of the new FTA policy if
it negotiated first with a neighboring Asian country, and not with a much more distantLatin American nation.4 Negotiations with Korea bogged down, however, due toconcerns in the feasibility studies about a major expansion in Korea’s trade deficit withJapan. In the end, Singapore was selected as Japan’s first FTA partner largely due toSingapore’s offer to exclude agriculture from the talks (Terada, 2006: 1).
3

Although in the past MITI officials had informally discussed the possibility of signing a bilateral tradeaccord with the United States, no initiative materialized from those discussions (Munakata, 2006, Krauss,2000).
4
Author interview with former senior METI official, Tokyo, May 2006

5

Undeterred by the opposition of the agricultural lobby, Keidanren continued todemand an FTA with Mexico (Keidanren, 1999, 2000). 5 Japanese firms complained thatthe absence of a bilateral Japan-Mexico FTA placed them at a disadvantage vis-à-vis
their American rivals (and later on European companies as Mexico signed an FTA with
Europe in 2000) given the relatively high Mexican tariffs (on average 16%) anddiscretionary changes in Mexico’s economic policy that frequently applied only to nonFTA firms. But beyond these general concerns, Japanese firms in the automobiles,
electronics, and government procurement industries considered NAFTA a serious
competitive threat to their operations in North America.
The automobile industry complained that NAFTA’s strict rules of origin and thecontinued imposition by the Mexican government of performance requirements(requiring local production for a limited quota of duty-free vehicle imports) made itdifficult to compete with American car makers with more developed regional production
networks and to benefit from the expansion of Mexican auto imports in the late 1990s
and early 2000s (Nakahata, 2005). Japanese electronic firms, which had flocked to the
Mexican export platform program (maquiladora) in the late 1980s to create a major
supply base of consumer electronic goods (most notably color TVs) for the US market,
were deeply worried by the NAFTA-mandated elimination of duty drawback benefits.
And Japanese general trading companies and plant exporters were finally squeezed out of
the Mexican government procurement market, when Mexico announced in May 2003 that
only FTA firms could tender bids. MITI was now ready to push for a more ambitious
FTA and widely circulated a report quantifying the economic losses for Japan from
NAFTA’s trade diversion (in the order of $3.2 billion dollars with 31,824 jobs lost) (Solís
and Katada, 2007: 289).
The successful negotiation of the FTA with Mexico (enacted in April 2005) did inmany ways open the door for a more active FTA policy since it represented the firstoccasion in which Japan made WTO plus concessions in agriculture -with Singapore
Japan merely bound the zero percent tariffs that were de facto in effect (Lincoln, 2004).
This was a major advance considering the strong clout that the agricultural lobby (the5For a discussion of Keidanren’s role in promoting the FTA policy shift and its position regarding talks
with Singapore, Korea, and Mexico see Yoshimatsu (2005).

6

iron triangle of agricultural cooperatives, ruling party politicians, and farm bureaucrats)
has had over trade policy. The extreme bureaucratic sectionalism and the informal normof unanimity has given the agricultural lobby veto power over Japan’s international
negotiations involving agricultural liberalization (Fukui, 1978, Searight, 1999). In fact, it
took an unprecedented top-down intervention by then Prime Minister Koizumi to breakthe deadlock over meager agricultural concessions in talks with Mexico. Undoubtedly,
some structural changes also facilitated this breakthrough: such as the contraction of the
farming population, intra-agricultural rifts,6 and changes in the electoral system deemed
to weaken the influence of the farm vote (e.g. redistricting to correct rural overrepresentation, and shift to single member districts to encourage issue-based electoralcompetition and not pork-barrel).
But far from representing the defeat of Japanese agricultural protectionism, FTA
policy reflects a political compromise whereby the agricultural lobby does not veto thepreferential trade agreements but makes sure that its primordial interests are protected.
For instance, in all Japanese FTAs key primary commodities (rice, sugar, wheat,plywood) are off limits, and even in the case of Mexico, tariff-rate quotas (TRQs) were
implemented for the most sensitive products (pork, beef, chicken, oranges, and orange
juice) and no preferential tariff for chicken was established by the signing of theagreement, lest Thai trade officials use that preferential tariff in their own FTA
negotiations with Japan.7 The recent launch of FTA talks with Australia could indeed
represent a turning point since it is the first time Japan is negotiating with a major
supplier of agricultural goods in the Japanese market (representing 10% of all Japanese
agricultural imports). However, the use of “exclusions” and “renegotiations” is likely tocontinue as Australian trade officials have acknowledged that the sensitivities of Japan’s
agricultural products ought to be factored in the negotiations (Joint study, 2006: 10).86

For instance, a government strategy has been to foster competitive Japanese agricultural exports in nichemarkets to weaken the opposition to FTAs. Naoi and Krauss (manuscript) emphasize the importance of
these intra-sectoral divisions.
7Interview with officials from Mexico’s Secretaría de Economía, Mexico City, May 2005.
8

Labor mobility is another controversial issue in Japan’s FTAs with Philippines and Thailand. The
opposition of the Ministry of Labor and the Nurse Association has for instance resulted in strict Japanesecertification requirements that will make it unlikely to have a large number of applicants (Pempel and
Urata, 2006: 88).

7

This analysis of Japan’s FTA policy shift underscores the importance ofcompetitive pressures (in particular the perceived need to cope with trade and investment
diversion effects from proliferating FTAs), and the central role that internationalizedbusiness sectors and trade bureaucrats played in championing the new policy. It also
underscores how international diffusion pressures must be channeled through domestic
policy-making channels, which in the case of Japan, meant the cooptation of the
agricultural lobby into the new FTA policy by sheltering the most sensitive commodities
from liberalization. Japan’s ability to meet international competitive pressures throughFTA policy is very much influenced by these domestic political constraints. And theseinternal political battles are likely to intensify as the degree of ambition in Japanese FTA
policy has grown quickly: from the original defensive goals to encompass broader
economic, legal, and political objectives.

III. Japan’s FTA policy through the logic of economic competition
From defending to expanding market access abroad
Soon after the initial policy shift, Japanese companies became interested in using
FTAs to revamp their production networks in East Asia in order to achieve long-standing
goals of integrating and streamlining their regional production networks, and to forestall
the advances of rival MNCs in Southeast Asian countries, which in the aftermath of the
Asian financial crisis had courted more aggressively foreign direct investment and export
production to increase foreign exchange earnings (Manger, 2005).9 FTAs would facilitate
local and regional supply of parts (to decrease reliance on expensive imported parts fromJapan) and would allow Japanese affiliates in the region to enjoy the benefits ofspecialization and economies of scale by serving larger regional markets. In this way,
FTAs were deemed essential to maintain the competitive presence of Japanesemultinationals in the region, especially in countries like Thailand were American firms
were awarded national treatment status through the Treaty of Amity and Economic
9

It is important to note that not all ASEAN nations responded to the economic crisis with liberalization of
their markets. Malaysia followed the opposite path by imposing greater restrictions on investment andcontinuing to promote the national car project (Shimokawa, 2004). While Japanese auto firms were notfacing the competition from incoming foreign multinationals in Malaysia, they still suffered fromdiscriminatory treatment in favor of the national industry and were eager to integrate their operations in
Malaysia to the regional production network. An FTA would help them accomplish these objectives.

8

Relations, and were Chinese exporters would soon enjoy preferential access as the ChinaASEAN negotiations continued to move forward (Keidanren, 2003).
Bilateral FTAs with the largest ASEAN nations (Thailand, Philippines, Malaysia)
were important vehicles to achieve both the proactive (rationalization of production
networks and development of regional export platforms) and defensive (keep up with thecompetition from Chinese products and Western multinationals) goals of Japanesecompanies. Yet, in one crucial area the demands of the business community have notbeen met: negotiating an FTA with China. Given the importance of China as a top
destination for Japanese FDI and as an export platform to service regional and global
markets, it is not surprising that in every survey of Japanese firms China is selected as the
top priority for FTA talks (JETRO, 2003, Kajita, 2004, JBIC, 2005). Among the concretereasons to negotiate a bilateral FTA with China, Japanese enterprises mention: tariffelimination, customs simplification, codification of investment rules, deregulation andadministrative transparency and intellectual property protection (JETRO, 2006: 11).
A much more expansive definition of competitive economic goals to be achieved
through FTAs has in fact taken place recently, as the Japanese business community has
begun to demand preferential trade negotiations with its largest trading partners: China,
the United States and Europe. In the latter two cases, a major concern of Japaneseenterprises is to keep up with competition from South Korea who has already signed anagreement with the United States, and is currently negotiating with the European Union.
Keidanren, therefore, noted that “if the U.S.-Korea FTA, currently under negotiation, is
concluded and brought into effect Japanese companies will be placed at a marked
competitive disadvantage relative to Korean companies when conducting business with
the U.S.” and “if South Korea, which is competing with Japan in automobiles, electronic
appliances, and other industrial sectors, signs a FTA with the EU, leaving Japan lagging
behind, it will cause huge damage” (Keidanren, 2006: 2 and 2007:6, emphasis mine).
Evidently, competition with its two neighbors in Northeast Asia has affected the
direction of Japanese FTA policy by increasing the premium of speeding up negotiations
with ASEAN, and embarking on FTA talks with the United States and Europe. Reflecting
these competitive pressures, METI announced in the spring of 2007 that concrete steps
will be taken to launch FTA feasibility studies with these industrialized nations.

9However, a fierce domestic political battle is to be expected between advocates anddetractors of FTA policy in Japan, given the large adjustment costs likely to ensue fromnegotiating with these large economies.10 Once more Japan is confronted with thedilemma of keeping up with international competition via FTAs while dealing withsizable domestic political constraints.

Export protectionism in Japan’s FTAs: rules of origin
Firms can use FTAs to out-compete their rivals by resorting to non-transparent
protection in the form of rules of origin. Interestingly, both Souminen and Esteveadordal(2004) and Cheong and Cho (2006) reach the conclusion that Japan has adopted stringent
rules of origin in its FTAs. A restrictiveness index for a sample of FTAs (which takes
into account the different rules to document substantial transformation such as change intariff classification, regional content, and specified processes, plus clauses on
accumulation and de minimis) places NAFTA at the top (0.67), followed by the EUMexico (0.60), Japan-Mexico (0.54), Japan-Singapore (0.49), Korea-Chile (0.47), andKorea-Singapore (0.44) (Cheong and Cho, 2006: 22). While these studies offer acomparative view on aggregate levels of restrictiveness, it is unclear from them in whichways certain Japanese industries have lobbied for tough rules of origin and for what
specific purposes.
Although only one example, the active lobbying campaign of the Japanese Textile
Federation in FTA talks with Southeast Asian nations does provide a window on the useof these devices to shelter domestic markets. The Japanese Textile Federation –concernedover an import surge of Chinese products through ASEAN nations- has endorsed a“fabric-forward” rule of origin in order to limit the duty-free import of garments; andengaged in private diplomacy to seek the understanding of counterpart textile
associations in the region. The Thai garment industry countered that with such rule oforigin it would not be possible to export clothing to Japan since Thailand does not havethe technological capability in weaving, dying, and finishing processes for cloth
manufacture, so it offered as a better alternative the U.S. formula which nominally was
10

Notably absent has been a similar initiative for an FTA with China. In addition to the opposition fromagricultural and labor intensive sectors (textiles), the bilateral FTA with China has been casualty to politicaltensions as discussed later.

10

more restrictive (“yarn-forward”), but in fact offered through the “short-supply list” thepossibility of counting certain imported cloth towards Thai origin (Japan Textile
Federation, 2006: 54). And in the opinion of a Thai textile company executive, the offer
to use a cumulative ROO for the ASEAN wide FTA was an empty promise since
Thailand does not import cloth from Philippines, Indonesia or Singapore. It would be“like watching a banquet that cannot be eaten” (Japan Textile Association, 2006: 61).
From the point of view of the Japanese Textile Federation, the strong oppositionof the Thai garment industry was due mostly to its desire to maintain its leverage vis-àvis the United States (Japan Textile Association, 2006: 47). This example once more
underscores the competitive nature of the FTA race through the phenomenon ofconcession linkages, whereby a government may adopt a hard line in one FTA front inorder to avoid losing leverage in concurrent FTA talks with different partners.

IV. Japan’s FTA policy through the logic of legal competition
Legalization in international trade governance has proceeded abreast as
governments rely on hard law obligations instrumentally (to obtain actionablecommitments on issues of interest) and strategically (to keep up with legalized tradetactics of competitors). Japan has been no exception to this broader pattern, and hasabandoned its previous insistence on a consensual approach for regional trade agreements(a la APEC) in favor of FTAs with well developed dispute settlement mechanisms.11
A major objective of Japan FTA policy has been the desire to gain leverage in thedefinition and dissemination of international rules on trade and investment across all
trade forums. Indeed, a key MITI official involved in the 1998 intra-ministry
deliberations on FTA policy noted that the countries lagging behind the FTA race where
precisely the passive countries in negotiations at Geneva. In his view, FTA policy offeredan opportunity to reenergize Japan’s trade policy and to adopt a much more proactive
position on trade and investment rule-making.12 In this endeavor, MITI bureaucrats
enjoyed full support from large business, as Keidanren early on pushed for FTAs in order

1112

For an analysis of Japan’s shift in favor of legalism at the multilateral level see Pekkanen (2003).
Interview with senior ex-MITI official, Tokyo, May 2006.

11

to propagate legal rules facilitating the operation of Japanese businesses overseas(Keidanren, 2000).
Japan’s competitive legal strategy through FTAs has aimed to amend WTO
provisions deemed harmful to Japanese corporate interests (anti-dumping), to spread newrules that can later on be incorporated at the WTO level (investment), and to elicit fromdeveloping countries preferential commitments that surpass their WTO obligations inareas such as government procurement or intellectual property protection, and in so doingcompete with China for the dissemination of a distinct Japanese FTA model that has amuch broader issue scope and a larger degree of legalization.
Regarding the reform of existing WTO rules, Japanese government and industry
have long been dissatisfied with the multilateral anti-dumping code as they deemed that
American and European anti-circumvention practices and dumping methodologies
resulted in discriminatory treatment of Japanese companies.13 Japanese business interests
identified in FTAs an opportunity to reform antidumping practices by incorporating inthese agreements clauses on the mutual non-application of antidumping duties, or byadopting new antidumping rules that could later on serve as a yardstick for reform at the
WTO level (Keidanren, 2000: 6). Interestingly, when the prospects for some reform of
the antidumping code appeared more promising in the Doha Round, the Japanesebusiness community dropped this negotiation objective in the FTA front.14 However,Keidanren continues to monitor closely the treatment of antidumping in other FTAs andis quite prepared to bring the issue back to the FTA front if favorable opportunities exist:“In the negotiations for the U.S.-Korea FTA currently under way it appears that the
Korean side aims to ensure that restrictions of some kind are imposed on the U.S. ability
to invoke antidumping measures, though the U.S. has never agreed to include such aprovision in the FTAs it has concluded so far. If a similar provision were to be included
in a Japan-U.S. EPA, that would be of great benefit to Japanese companies that have been
suffering from protectionist U.S. antidumping duties” (Keidanren, 2006: 6). These
examples illustrate the strategic use of alternative trade forums to advance newinternational rules on issues of interest.
13

Anti-circumvention refers to the imposition of anti-dumping duties to goods manufactured by target
companies in third countries.
14
Interview with Keidanren officials, Summer 2005.

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The attempt to use FTAs as standard-setting devices to fill gaps in multilateralregulation has gained traction particularly in the area of investment. Japan, as many otherindustrialized nations, has been interested in adopting a more ambitious investment codethat goes beyond the WTO TRIMs chapter to encompass national treatment and MFN
status, investor-host state dispute settlement mechanisms, and further elimination of
performance requirements (including clauses on mandatory employment of local
nationals) (Keidanren, 2006). Initially, Japan had high hopes that such an agreement
could be incorporated into the WTO charter as one of the four Singapore issues. But once
investment was dropped from the Doha Round due to the opposition of developing
countries, FTAs and bilateral investment treaties became the venues to pursue theestablishment of international investment rules. Keidanren (2002) in fact was a forcefulchampion of FTAs to disseminate international investment rules in what could be labeled
a bottom-up approach to rule-making. Pekkanen (2008) notes a very strong correlation
between the model investment chapter in FTAs offered by Keidanren and the actual
provisions of Japan’s trade agreements with Singapore and Mexico in that they offer nondiscriminatory treatment for multinationals, protection and compensation from regulatory
expropriation, eliminate performance requirements, and provide state-state and stateinvestor dispute settlement mechanisms, among other elements.
Other areas where Japan is actively seeking WTO plus commitments from its
FTA counterparts are government procurement, services, and intellectual protection. FTA
negotiations with countries not partaking in the WTO’s plurilateral agreement on
government procurement are frequently the only way in which Japanese companies cangain a foothold on these markets and/or to be able to offer competitive bids. The Japanesebusiness community has also made national treatment a key priority in its service
negotiations in FTAs, and has called for a tightening of enforcement mechanisms against
counterfeiting in the intellectual property provisions of free trade agreements (Keidanren,2006).
Japan has succeeded in negotiating FTAs with multiple WTO plus provisions on
investment, intellectual property, services, and economic cooperation. However, as noted
before, Japan was unable to secure substantial commitments on government procurement,
services, and performance requirements in its FTAs with Malaysia and ASEAN.

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Moreover, it is important to note that Japanese FTAs reflect in fact a mix of legalism andvoluntarism, rather than an outright endorsement of pure hard law. Japan has been
unwilling to undertake binding and actionable commitments on competition policy,
customs procedures, financial services, and economic cooperation. This last chapter inparticular contains clauses on human resource development, promotion of small andmedium sized enterprises, and improvement of the business climate, which are of interest
to Japanese corporations in order to ensure the availability of high skilled labor andsupporting industries, and to gain direct access to host government officials to voice
specific grievances hindering the climate of operations. But all of these cooperation
clauses are non-binding, and there are no direct ties to ODA disbursements either.
Japan’s avoidance of hard obligations in the economic cooperation chapter is most likely
due to one-side nature of these commitments: as the industrialized partner in these FTAs
Japan is expected to make most contributions. The co-existence of legalism andvoluntarism in Japanese FTAs, therefore, corroborates Kahler’s depiction of legalization
strategies in East Asia as instrumental, in that legalization is a strategy that can be
activated or deactivated to suit the competitive interests of corporations and governments.
Japan’s legal competitive strategy has yielded an FTA approach different fromboth the NAFTA model and Chinese trade agreements. Compared to the United States,
Japan has shied away from binding obligations on financial liberalization, has not beeninterested in incorporating labor and environmental standards, and has emphasized an
explicit cooperation/development approach to trade negotiations. On the other hand,
Japan’s FTAs are more comprehensive in terms of issue scope and legalistic (in terms ofdefining precise obligations and establishing dispute settlement mechanisms) thanChinese FTAs, which have been characterized as brief, vague, and with an emphasis onconciliation rather than formal dispute settlement (Antkiewicz and Whalley, 2005). In
this way, China and Japan are offering different “models” of regional integration, and therace is on to see which one disseminates further and fastest. A common perception in
Japanese FTA policymaking circles is that China is prepared to negotiate narrower FTAs
(affecting mostly tariffs on goods), but that it skillfully lured East Asia by offering
agricultural concessions through the early harvest program. On the other hand, Japan isinterested not only in tariff elimination but rule-setting, and the spread of high-quality

14

FTAs is a key priority for government and business.15 Thus, the dissemination of a
distinct Japanese approach to preferential trading is a central concern in Japan’scompetitive FTA strategy, especially towards China, the other possible focal point forregional integration.

V. Japan’s FTA policy through the logic of political competition
Japan’s forays into trade regionalism are also influenced by broader political andsecurity considerations, especially two central concerns of its foreign policy: themaintenance of the U.S. alliance (even as Japan departs from past precedent and endorses
now regional integration bodies that do not include the United States), and the need torespond to China’s rising stature in the region (which could eclipse Japan in terms ofdefining the tempo, substance, and membership of the regional integration process).
The slowdown of trans-pacific cooperation forums (APEC and ARF) and theproliferation of Asian FTAs do represent a significance challenge for the United States toremain actively engaged in the region and for the United States and Japan to reiterate thecentrality of their bilateral bond. For these reasons, Armitage and Nye’s report (2007: 18)
on strengthening the US-Japan alliance singles out the negotiation of a comprehensive
bilateral FTA as one of the most effective economic means to achieve both objectives.
On the other hand, Sino-Japanese relations are in a moment of redefinition as bothcountries are confronted with the new realities of Chinese economic take-off and militarybuildup and rising nationalism in both Japan and China. Wan (2006: 334) notes thatJapan and China have moved away from the friendship framework to a situation oflimited rivalry in that they both have expanded their political, economic, and military
objectives and view each other as an obstacle towards their realization. As Mochizuki(2007: 761, 764) explains, fashioning an adequate response to China’s rise has generated
lively debate in Japan. The two predominant strategic options considered by Japaneseelites -cooperative or competitive engagement- include prescriptions for Japan’s regional
integration policy. According to the former, the East Asian Summit must provide avehicle to achieve a community where both countries renounce a bid for hegemony, and15Interviews with METI, MOFA, and JETRO officials and academics, Tokyo, Summer 2005. Obviously,
the quality of Japanese FTAs is compromised by the significant agricultural exclusions as noted in Table 2.

15

where the two tier structure (ASEAN+3 as backbone for integration, and the broader EAS
as a supportive forum) bridges the Sino-Japanese positions. The latter, however, viewsthe exclusion of the United States from the EAS negatively, signaling a preference fortrans-Pacific options.
Thus, as Japan fleshes out its FTA policy it must aim for a delicate politicalcompromise between shoring up its key security alliance with the United States,
displaying a commitment to the construction of Asian regional integration institutions,and striking the right balance between competition and cooperation in its dealings with
China. This uneasy mix of political and security pressures has influenced Japanese FTA
policy in at least three important dimensions: the selection of FTA partners, thecompetitive courting of Southeast Asian nations, and the competitive bid to influence the
EAS agenda.

Political criteria in FTA partner selection
From the outset, political criteria have influenced the decision to select or bypass
certain countries as FTA partners. As mentioned before, MITI bureaucrats leaned in favorof South Korea as the first FTA counterpart, largely because they deemed this choice aneasier political sell among politicians and domestic audiences. In characterizing FTAs as
essentially “political coalitions” (Ogita, 2003: 241), MITI was hoping to consolidate the
new trade policy by pointing to the larger benefits for Japan’s regional diplomacy. The
Japan-Korea FTA was desirable precisely because it could “kick-off the new stage in
East Asian relations in that economic dynamism can make an opportunity to go beyond
bitterness (Fukagawa, 2000:7).16
The decision in the spring of 2007 to initiate FTA negotiations with Australia
after a protracted process of consultations and feasibility studies is also explained along
political lines. As Terada (2005: 16) shows, Prime Minister Koizumi decided to launch
an official FTA feasibility study in order to reciprocate for the dispatch of Australian
16

However, as these FTA talks reached deadlock in November 2004 due to disagreements over the level ofagricultural (and especially fishery) liberalization in Japan and concerns among the Korean small
enterprises with the trade adjustment burden, these expectations were not met. The further deterioration ofbilateral relations due to territorial disputes and the PM Koizumi visits to the Yasukuni Shrine made itdifficult for the political leaders of both countries to intervene and break the impasse over these market
access concerns (Katada and Solís, 2006).

16

soldiers to protect the activities of Japanese Self-Defense forces in Iraq (and also in
keeping with the larger strategic goals that have motivated Japan to insist on Australia
joining the EAS as discussed below). The security-economic connection was evident in
the joint announcement by both governments to launch FTA talks and sign a “JapanAustralia Joint Declaration on Security Cooperation.” This is a remarkable initiative forJapan since it had not established a close security partnership in the postwar period withany other country besides the United States. In fact, some agricultural watchers in Japan
have decried the security-economic link for sacrificing agriculture for the sake of
expanded security ties between Japan, Australia, and the United States (Ono, 2007).
But perhaps the single most important application of political criteria has resulted
in the bypassing -so far- of China in the negotiation of a bilateral FTA, despite
overwhelming business support for such an initiative. That the central preference of thebusiness community has been ignored is remarkable for a country whose foreign
economic policy is usually portrayed as supporting the overseas expansion of Japanese
exporters and MNCs (Arase, 1995). The deterioration of bilateral relations with China
has clearly limited the ability of Japanese business groups to lobby more actively for thisFTA. Indeed, Sino-Japanese frictions increased due to the Japanese Prime Minister
Koizumi’s visits to the Yasukuni Shrine, territorial disputes over the Senkaku/Daioyu
islands, and competition over gas deposits in the East China Sea; and they peaked in thespring of 2005 with massive anti-Japanese riots in several Chinese cities. However,broader domestic changes in the formulation of Japan’s China policy have also affected
the chances of the business community to find a sympathetic ear among Japanesepoliticians. For instance, Takamine (2002) notes a larger role for LDP politicians more
attuned to sagging public opinion of China at the expense of MOFA bureaucrats
concerned primarily with stable bilateral relations; and Katada (2007) highlights theimportant generational change as many old China hands in the LDP have retired or
passed, and they have been supplanted by younger politicians with more assertive views
vis-à-vis China.

Competitive courting of Southeast Asia

17

In addition to economic considerations, Southeast Asia is of great importance toJapan and China to achieve political and diplomatic goals. China is keen to cultivate
relations with Southeast Asian countries in order to mitigate containment policies of theUnited States, discredit the “China Threat” theory, and further isolate Taiwan (Yang,
2003: 315). For these reasons, since 1997 China is credited with pursuing a “charm
strategy” that has included refraining from devaluation during the Asian financial crisis,
negotiating an FTA with ASEAN, signing a code of conduct on territorial disputes in theSouth China Sea in 2002, and signing ASEAN’s Treaty of Amity and Cooperation (TAC)a year later (Teufel Dreyer, 2006: 545, De Santis, 2005: 26).
On the other hand, after the end of the Cold War Japan’s more activist diplomacy
in East Asia aimed to play a mediating role between antagonists (e.g. in Cambodia), bringstability to the region, and counter China’s growing influence (Peng, 2001: 120-121). In
this way, Japan has endeavored to expand its ties to the region beyond economic
diplomacy to promote cooperation in many more areas such as environmental protection
and political/security dialogues. Such was the spirit of the Hashimoto doctrine of January
1997 which proposed regular summits with ASEAN leaders to discuss a broad range ofissues. Later that year, Japan displayed activism through the Miyazawa initiative
disbursing $30 billion dollars to countries in the region undergoing financial crisis. In
2003 and marking the 50th anniversary of Japan-ASEAN relations, the Tokyo declaration
expressed the desire to work towards the realization of an East Asian Community (Yeo,
2006).
In this context of heightened attention to Southeast Asia, FTAs afford China andJapan the opportunity to emphasize the joint gains of economic cooperation with ASEAN
nations, in ways that allow them to advance important diplomatic goals (the acceptanceof China’s peaceful rise thesis, and the mitigation of regional distrust towards Japan’s
leadership initiatives) (Hoadley and Yang, 2007, Munakata, 2001). The competitive
dynamics at work are transparent in the series of moves and counter-moves that havecharacterized Japanese and Chinese FTA policies in the region: the Japan-Singapore FTA
increased the interest of the Chinese government on FTAs which resulted in its
November 2001 announcement to establish an FTA with ASEAN within ten years, andthe swift response of Japan in January 2002 with the proposal for a Japan-ASEAN

18

Comprehensive Economic Partnership, and then in 2004 its willingness to sign as well
the TAC.
Importantly, there is a widespread perception in the region that Japan lags behind
China in its ability to use FTAs to score diplomatic goals. This is evident in both the FTA
and TAC fronts (Terada, 2006a). After Koizumi’s high profile announcement in January
2002, the Japanese government decided to proceed first with bilateral trade agreementswith the larger ASEAN countries, according to Munakata (2006: 121) because it had toclear the more demanding requirements of the WTO’s Article 24 as opposed to theleeway China enjoyed through the enabling clause that applies to FTAs amongdeveloping countries.17 But even after negotiations with ASEAN as a whole got under
way in the spring of 2005, disagreements over negotiation modalities, rules of origin, andexclusion lists meant that a basic agreement was only reached in August 2007. Japan also
hesitated to sign the TAC in 2003 since it worried it would constrain its ability topromote democracy and human rights in the region and it could have negative
implications for its alliance with the United States (Terada, 2006a: 13-14). According toYeo, it is the “US first, Asia second” mentality which hinders Japan’s ability to lead in
the path towards East Asian regionalism (Yeo, 2006).
Undoubtedly, one of the most important consequences of the competitive courtingof Southeast Asia is the increased leverage of ASEAN nations. Fearing marginalization
by negotiating with much larger trade partners, ASEAN countries have deliberately
encouraged competition among the larger Northeast Asian countries.18 This strategy has
paid off in that ASEAN+3 has emerged as the nominal anchor for the region-wide
integration process, and ASEAN’s agenda has prevailed in defining the criteria to

17

Other FTA watchers attribute Japan’s decision to pursue the bilaterals first to a bureaucratic split in thatMITI preferred the subregional FTA to avoid the deleterious effects of crisscrossing rules of origin, but
MOFA wanted the bilateral route in order to cement relations with target nations by framing this initiative
as a broad diplomatic effort. And according to other FTA experts, since the nature of economic
involvement in the region is very different for Japan and China (with substantial Japanese FDI in thesecountries) it made sense to proceed bilaterally to address more fully the market access concerns of Japanese
MNCs in each country. Author interviews with officials from MITI, MOFA, JETRO, and Japanese
academics, Tokyo, summer 2005. See also Solís (2006) for a report on these rounds of interviews.
18
Munakata (2006: 122) cites Singapore’s trade minister George Yeo: “On the question of East Asian FTA,
it will be 3+10 rather than 10+3. The economic size of the three is much larger than the ten. ASEAN will
be marginalized. Therefore, we prefer 10+1, in a position to deal with Japan, China and ROK separately.”19participate in the East Asia summit: be a dialogue partner of ASEAN, sign the TAC, andhave substantial relations with ASEAN.

Conflicting blueprints for East Asian trade integration
The East Asian summit has become the latest theater for Sino-Japanesecompetition. As preparations for the inaugural EAS to take place in Kuala Lumpur in
December 2005 got underway, China and Japan went on record regarding their clashingviews on the future institutional structure of East Asian integration. The old debate on
inclusive vs. exclusive regionalism which first emerged in 1990 with the ill-fated East
Asian Economic Grouping proposal by Malaysia’s Prime Minister Mahatir, is once moreat center stage. China has endorsed a more limited membership with ASEAN + 3 as thecore group in an East Asian regional entity. Japan, on the other hand, proposed a more
extensive membership through the inclusion of Australia, New Zealand and India.
The desire to dilute Chinese influence in a future East Asian FTA is a large
consideration behind Japan’s proposal. First of all, the three members that Japan sought
to incorporate into the East Asian regional integration process are all democracies, andthis reinforces the argument that in creating a community, members should share values
regarding democracy or human rights protection (Hatakeyama, 2006). In this way, Japan
seems to be pointing to the potential weaknesses of China as a regional leader on two
central areas: strong rule of law and democratic governance. Second, the inclusion ofAustralia reflects Japan’s desire to upgrade bilateral security relations, consolidate
trilateral defense talks including the United States, and counter a rising China (Terada,
2005: 12). Third, the incorporation of India, another large and booming emerging
economy, prevents China from becoming the sole spokesperson for developing countries
in the EAS.
While Japan succeeded in gaining admission to the EAS for Australia, New
Zealand, and India, the designation of ASEAN+3 as the main vehicle for community
building (with the EAS playing a supportive role) represents an endorsement of theChinese view to retain a more narrow East Asian focus in the integration process.19 It is

19

During the second EAS summit in January 2007, a decision was made to launch a feasibility study ofJapan’s ASEAN+6 FTA proposal.

20not clear yet whether the EAS will emerge as a forceful engine for integration capable ofgenerating substantial commitments from its members on a multitude of issues beyond
trade and investment liberalization. But what does seem certain is that Sino-Japanesecompetition to define the substance of East Asian integration will continue in theforeseeable future.

Conclusions
This paper has argued that the competitive diffusion mechanism explains best theoriginal policy shift and subsequent evolution of Japanese FTA strategy. Therefore, thisconcluding section identifies the most important competitive pressures and correlates
them to FTA outcomes; discusses how international diffusion pressures are processed
through domestic policy-making channels, and addresses the central dilemma forJapanese policymakers as economic and political competition seem to pull FTA policy indifferent directions.

Competition with whom over what?
In the economic realm, Japanese firms –especially in the automobile andelectronics industries- have felt strong competition from their American (and to lesser
extent European) rivals both in North American and Southeast Asian markets. As
American firms pushed in the NAFTA negotiations for tight rules of origin in
automobiles and the elimination of duty drawback in the maquiladora industry (where
many Japanese electronics firms had invested), and as American and European firms
benefited from the elimination of performance requirements (such as the Mexican Auto
Decree), Japanese firms saw their position in North America deteriorate. A few years
later, Japanese companies felt the pinch of competition with American firms closer tohome, as some East Asian countries liberalized their investment policies in the aftermathof the Asian financial crisis, and Western multinationals made great inroads (for instancethe Big Three Automakers in Thailand). In order to restore the level playing field,
Japanese firms strongly demanded FTAs that awarded similar market access benefits.

21

China’s and Korea’s FTA policies have also put strong competitive pressure on
Japanese enterprises. The China-ASEAN FTA created concerns of trade diversion inSoutheast Asian markets; while Japanese auto and electronic firms decried the serious
competitive challenge if Korean enterprises enjoy lower tariffs and less pressure from US
antidumping disciplines provided Korea successfully enacts trade agreements with theUnited States and the European Union.
The competitive nature of the FTA frenzy is also evident in the phenomenon of“concession linkages.” Examples of this dynamic abound in Japanese FTAs: the refusal
to fix the preferential tariff rate for chicken in the Japan-Mexico FTA until the agreement
went into force (due to concern with Japan’s negotiation with Thailand); the defensive
posture of the Thai textile industry vis-à-vis Japan since it did not want to lose its
leverage in on-going negotiations with the United States, and Japan’s intention to
upgrade its government procurement commitments with Malaysia if the United Statesachieves more concessions through its FTA. All these examples speak to one important
trend: the resistance to give concessions in one FTA front because of its perceived
negative effects on subsequent negotiations. Because through FTAs governments seek tosurpass the concessions already achieved by their rivals, commitments in prior FTAs
become de facto the negotiation floor in subsequent trade talks, making policymakers
more defensive in their earlier agreements as they calculate the impact of “escalating
concessions.”
In terms of rule-making, the United States and China have been the main targets
of competition. Towards the United States, the dissemination of alternative antidumping
rules has been an important concern, and Japan has consciously differentiated its brand of
FTAs by emphasizing the trade facilitation agenda and economic cooperation clauses.
Nowhere is the attempt to propagate a distinct model of economic integration more
prominent than in Japan’s competition with China to become the focal point of regional
integration. Japanese officials have emphasized the higher quality of their FTAs (broader
issue scope and binding obligations) as well as the ability of Japan as an industrialized
nation counterpart to facilitate the development of Southeast Asian countries. Strategiccompetition with China has also fueled an intense race to cultivate relations with

22

ASEAN, and motivated Japan to invite extra-regional partners (such as Australia, New
Zealand, and India) to integration talks in order to balance China’s rising influence.
Japan’s FTA outcomes reflect these multi-faceted competitive pressures. Japanese
FTAs are selective in that the choice of partners, timing of negotiations, and market
access commitments reflect the attempt to restore and/or advance competitive advantage.
For instance, the FTA talks with Mexico and Thailand aimed to level the playing field forJapanese companies; the timing of the ASEAN-Japan FTA is explained by the desire toneutralize the political gains China made by initiating talks with ASEAN first; and theASEAN + 6 initiative reflects the strong desire to influence the membership and nature of
regional integration in East Asia. Japan’s FTA policy is indeed heterogeneous in thatJapan is pushing for an FTA approach different both from the NAFTA model and themore informal Chinese FTAs.
However, Japan’s FTA formula (meager agricultural concessions and multiple
WTO plus commitments) may be a hard sell in East Asia. Japanese FTA policy isundercut by the Chinese FTA approach that does not comprise binding new rules on tradeand investment, and may be more attuned to the traditional ASEAN way. But the otherdisadvantage (agricultural protectionism) is self-inflicted, and points to the need to factor
in how domestic politics influence a country’s response to international FTA diffusionpressures.

International diffusion pressures, domestic policymaking processes
Japan continues to exhibit a bottom-up policy-making pattern, whereby strong
policy sub-governments and weak bureaucratic coordination give clout to interest groups
and generates a cumbersome negotiation strategy as the conflicting interests ofinternationalized business sectors and agriculture must be reconciled. These domestic
political constraints, therefore, have delayed Japan’s FTAs with larger trading partners
and/or have generated significant acrimony as smaller FTA counterparts must accept
promises of economic assistance instead of market access concessions.
But the domestic politics of Japanese trade policy are in flux with attempts tocentralize policymaking and growing divisions among the members of the peakassociations for agriculture and business –Nôkyô and Keidanren respectively (see Solís23

2008). One of the most important changes, however, is the growing politicization of trade
policy with the more active intervention of politicians attuned to public opinion trends.
Consequently, the traditional separation of politics and economics vis-à-vis China has
been harder to maintain and the most consistent demand of the Japanese business
community –an FTA with China- has gone unheeded. But the Japanese agricultural lobby
also suffered a serious blow as Japan decided to pursue a security-motivated FTA with
Australia that will impose much larger adjustment costs on Japanese farming that
previous trade deals.
Commercial opportunity versus political rivalry
As the examples above show, the pull and tug of contradictory competitive
pressures has presented Japanese policy-makers with a central dilemma: whether topursue economic opportunity by signing a bilateral FTA with China (that could become
the centerpiece for a more cohesive regional integration project) or to respond to political
rivalry by developing a competing and overlapping FTA network. This decision willloom large on the nature of regional integration in East Asia.

24

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29

Partners
Singapore
MexicoMalaysia
Chile
ThailandPhilippines
Indonesia
Brunei
ASEAN
Korea
GCC
Switzerland
Australia
India
Vietnam
ASEAN + 6

StatusIn force (Nov. 2002)
In force (April 2005)
In force (July 2006)
In force (Sept. 2007)
In force (Nov. 2007)
Signed (Sept. 2006)
Signed (August 2007)
Signed (June 2007)
Signed (April 2008)
Negotiation suspended
Negotiation (Sept. 2006)
Negotiation (April 2007)
Negotiation (April 2007)
Negotiation (January 2007)
Negotiation (January 2007)
Initiative only (May 2006)

Table 1. Japan's FTA Network
FDI
Export Share*
Share
Issue Scope**
3.6%
1.8% Investment, Services, Economic Cooperation
1.0%
0.7% Investment, Services, Economic Cooperation
2.6%
0.6% Investment, Services, Economic Cooperation***0.1%
0.1% Investment, Services
3.1%
2.1% Investment, Services, Economic Cooperation
2.0%
1.1% Investment, Services, Economic Cooperation
1.5%
1.4% Investment, Services, Economic Cooperation
Investment, Services, Economic Cooperation
13.3%
5.7% Economic Cooperation****6.7%
1.6% Not available
Not available
0.4%
0.2% Not available
2.0%
2.5% Not available
0.5%
0.4% Not available
0.5%
0.2% Not available
Not available

Notes:* Trade and FDI shares of overall trade and investment flows represent averages for the years 1999-2004**None of the Japanese FTAs include labor and environmental clauses*** The Japan-Malaysia FTA does not provide WTO plus concessions on elimination of performance requirements or on government
procurement**** The Japan-ASEAN FTA does not provide new and binding obligations on investment and services, but a committee to explore these issues
is to be formed one year after enactment.
Sources: Japan Ministry of Foreign Affairs website, Trade data from JETRO, 2005 and MOF's trade statistics(http://www.customs.go.jp/toukei/suii/html/time_e.htm),
FDI data from MOF's website (http://www.mof.go.jp/english/e1c008.htm).

Table 2
Assymmetrical Liberalization: Japan's FTAs in Comparative Perspective(percentage of tariff lines liberalized)
NAFTA (US-Mexico)
10 years
After 10
Exceptions
years
Industrial tariffs
97%
3%
0%
Agricultural tariffs
97%
3%
0%
EU- Mexico
Industrial tariff
100%
0%
0%
Agricultural tariff
59%
0%
41%
US-Australia
Industrial tariff
100%
0%
0%
Agricultural tariff
59%
8%
33%
Japan- Singapore
Industrial tariff
100%
0%
0%
Agricultural tariff
39.4%
0
61%
Japan- Mexico
Industrial tariff
94%
0%
6%
Agricultural tariff
52%
8%
41%
Japan-Malaysia
Industrial tariff
81%
10%
9%
Agricultural tariff
28%
17%
55%
Note: Percentages may not add to 100% due to rounding.
Sources: Annex 1 from respective trade agreements, Cheong Inko and Jungran Cho (2006)
Market Access in FTAs: RIETI Working Paper Series, and Jae Lee Chang, Jeong HyungGonet al. (2006) "From East Asian FTAs to EAFTA," KIEP policy report.

GIARI Working Paper Vol. 2008-E-8,
June.30 2008
Published by Waseda University Global COE Program
Global Institute for Asian Regional Integration (GIARI),
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