Japan's trade policy has historically centered on multilateral negotiations and dispute resolution mechanisms. The rules of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) have provided Tokyo an ability to interact with its trade partners on an equal basis. Given its global trade interests, a contentious bilateral past with the United States, and historic legacy with Asian countries, particularly Korea and China, reliance on the multilateral system has helped promote Japan's trade interests. Over the past five years, Japan has shifted course somewhat by pursuing negotiations in the WTO but by also seeking free trade agreements (FTAs) and Economic Partnership Agreements (EPAs) with mostly Asian countries. An FTA is an agreement between two countries or regional groupings to eliminate tariffs and other trade barriers, while an EPA goes further by also attempting to facilitate the free movement of people and capital among the partners to an agreement. Non-members find their exports discriminated against. As a practical matter, officials at Japan's Ministry of Economy, Trade, and Industry (METI) acknowledge that there is little difference between an FTA and EPA. METI, however, prefers the EPA label based on the view that it does less to provoke domestic political opposition than the "free trade" moniker. The pursuit of FTAs is occurring worldwide with nearly 300 estimated to be currently in effect. The United States has an extensive FTA program and agenda, and has FTAs in effect with two Asian-Pacific countries—Singapore and Australia. Europe has been pursuing a similar course for years. China and six ASEAN states (Thailand, Malaysia, Indonesia, Philippines, Singapore, and Brunei) are in the process of establishing an FTA by 2010. Now Japan is trying to catch up. Economists still disagree about the merits of negotiating FTAs on the grounds that discrimination may undermine the multilateral trading system while others believe that FTAs promote multilateral deals in the long run. The concern is that FTAs could lead to a "spaghetti bowl" of overlapping conflicting trading partnerships each with its own set of rules at the expense of a more unified and non-discriminatory set of multilateral rules. But domestic support in Japan for an FTA program appears strong. Prime Minister Koizumi is firmly behind the approach, as well as the ruling LDP-Komeito coalition. While the Democratic Party, the major opposition party, supports the general thrust of the policy, some members maintain that the United States and China should be considered as prospective FTA partners. Given its own aggressive FTA program, the United States is hardly in a position to criticize Japan's new policy orientation. But it has considerable interest in whether Japan's policy evolves in a manner that is supportive of U.S. interests in Asia—which include promoting a stable balance of power and insuring that U.S. trade and investment interests are not discriminated against in the region. Japan's FTA program has been motivated by a combination of economic and political objectives. The most important entail avoidance of becoming isolated as other major trading countries actively pursue FTAs, energizing domestic economic activity, and promoting Japanese influence in Asia. Japan's concern about the possible emergence of economic blocs in the Americas and in Europe goes back to the early 1990s. In 1994 the United States entered into the North America Free Trade Agreement (NAFTA) and announced plans to create a Free Trade Area of the Americas. Europe at the same time was busy entering into preferential trade agreements and subsequently has come to conduct trade relations on a multilateral or non-discriminatory basis with only a handful of trading partners, including Japan and the United States. In 1999 the collapse of multilateral trade negotiations at the WTO Ministerial in Seattle shook Japanese confidence in the future of multilateralism. China's decision in 2001 to negotiate an FTA with ASEAN countries was also a seminal event, providing more ammunition for those in Japan that were advocating a change of policy course. The case for developing an FTA program was also driven by Asian economic trends and opportunities. METI officials see East Asia as the fastest growing region in the world and a region that is increasingly vital to Japan's economic future. FTAs and EPAs are viewed as one way to deepen economic ties with East Asia and facilitate a new division of labor and production sharing. The experience of the European Union has demonstrated that, as institutional integration develops, so too does intra-regional division of labor that leads to a more effective production network and to more efficient industrial structures. As a result, METI maintains that both individual parties to an FTA, as well as the region as a whole, can enjoy more robust economic growth powered by an expansion of exports and imports. Reform-minded METI officials also hope that an aggressive FTA-EPA program will serve as a force for promoting domestic agricultural reforms. By entering into negotiations with trading partners that continue to demand liberalization of Japan's protected agricultural sector, it is hoped that domestic support for programs that might aid farmers transition to a less protected environment would be proposed and implemented. Finally, many decision makers see FTAs providing Japan with varied political and diplomatic advantages. These range from increasing Japan's bargaining power in WTO negotiations to helping Japan better compete with China for influence in Asia. Under the view that FTAs symbolize special relationships based on political trust, Japan hopes to bolster its diplomatic influence on a range of political and security issues. Three regions—Asia, North America, and Europe—account for 80% of Japan's total trade. Given that the simple average tariff rates imposed by the United States and the European Union are low (3.6% for the U.S. and 4.1% for the EU) compared to East Asia (10% for China, 14.5% for Malaysia, 16.1% for South Korea, 25.5% for the Philippines, and 37.5% for Indonesia), the Government of Japan (GOJ) placed priority on negotiating FTAs with countries in East Asia. Not only do East Asian countries impose the highest trade barriers against Japanese exports, they also account for the highest and most dynamic share of Japan's trade, thereby providing the greatest additional opportunities for expanding Japan's economy via cuts in both foreign and domestic trade barriers. As shown in Table 1 , 11 East Asian countries (China, South Korea, Taiwan, Hong Kong, Thailand, Singapore, Malaysia, Australia, the Philippines, Indonesia, and Vietnam) purchased nearly 50% of Japan's total exports in 2004, up from 33% in 1998. Similarly, Japan is sourcing a growing share of its imports from these 11 countries as well. As shown in Table 2 , these countries supplied Japan with 47.86% of its imports in 2004, up from 39.59% in 1998. Accordingly, in developing its FTA strategy, the GOJ placed the highest priority on negotiating FTAs with the Republic of Korea and the four largest ASEAN member states (Thailand, the Philippines, Malaysia, and Indonesia). An FTA with Mexico, now in effect, was also made a priority due to the relatively high tariffs Japanese companies face compared to those companies from the United States, Canada, and European Union. The latter enjoy duty free treatment for the most part due to NAFTA (1994) and the EU-Mexican FTA (2000). After achieving FTAs with priority countries, the GOJ views China and Australia as the next most promising candidate partners. Consideration is also being given to countries outside East Asia, including Chile and Switzerland. Since Japan launched its first FTA negotiation with Singapore in 2000, progress has been hampered by a defensive agricultural position. While some liberalization has been achieved, the amount so far has been greatly constrained by an inability to offer major reductions in its most protected crops—beef, rice, starches, wheat, and dairy—and to open up its borders to foreign labor. Some critics have argued that Japan, following a course of least resistance, could end up with numerous watered-down FTAs that neither harm nor energize the Japanese economy. According to this view, the FTAs with the largest benefits for Japan, such as Australia, China, and South Korea, are also the most politically challenging and the most likely to fail. A short synopsis of the main features and significance of Japan's FTA program follows. The negotiations are divided into four categories: (1) those already entered into force; (2) those agreed to in principle; (3) those under negotiation; and (4) those that are in the pipeline or under consideration. The Japan-Singapore Economic Partnership Agreement (JSEPA), Japan's first EPA/FTA, was entered into force in November 2002. Tariffs were eliminated on 98% of the merchandise trade between the two countries, and further liberalization took place in services and investment. Given that there is virtually no agricultural trade between the two countries, and tariffs were already very low, it reportedly was a very easy FTA to conclude. According to one report, other than some increase in imports of Japanese beer, Singapore has experienced no major changes from the FTA. The minimal impact may be due to the fact that tariffs were low to begin with and some chemical products in which Singapore companies have a competitive edge, were excluded from the agreement. From Japan's perspective, the significance of this initial FTA seems to be good learning experience for its negotiators in how to negotiate an FTA. Japan and Mexico signed an FTA/EPA in September 2004 and it went into effect in April 2005. Under the agreement (formally called an EPA), tariffs on 90% of goods that account for 96% in total trade value will be phased out by 2015, making 98% of exports from Japan and 87% of imports from Mexico duty free. Previously, only 16% of Japanese exports received duty-free treatment from Mexico, whereas 70% of Mexican exports entered duty free.