Japan Fears FTA Gives S.Korea Jump on Trade with EU
Seoul's tentative agreement with the European Union on Tuesday to scrap tariffs on goods traded between them has raised fears in Tokyo that sales of Japanese goods will suffer in that vast market.
The deal has also shown how far Japan lags behind its regional rival in forging free trade agreements (FTAs) with key trading partners.
Japan, whose fortunes depend on international trade, has not even been able to start negotiating a similar agreement with the EU.
Under the FTA, the EU is expected to abolish import tariffs on South Korean vehicles and home appliances within five years.
The current rates on vehicle and TV imports are more than 10 percent.
"It would put us at a disadvantage in our rivalry with South Korea," said an official of a major Japanese electronics manufacturer.
Flat-panel TVs and other appliances that are directly exported from Japan to the EU market could be hit hard by a loss of price competitiveness.
Some Japanese firms with manufacturing ties with South Korean companies have reacted to the news more calmly.
Sony Corp., which in Europe assembles TV panels procured from South Korea's Samsung Electronics Co., for example, does not expect the deal to "be extremely disadvantageous."
The latest deal will nevertheless have a major impact, given the fact that the EU, comprising 27 member countries, is even larger than the U.S. market.
The EU is South Korea's second-largest trading partner after China. In 2008, South Korea chalked up a trade surplus of $18.4 billion (1.8 trillion yen) with the EU, far larger than the surplus of $14.5 billion it posted with China.
The bilateral FTA would boost South Korea's gross domestic product by about 3 percent over the long term, according to an estimate released in 2006 by the Korea Institute for International Economic Policy.
"The FTA would open the (EU) market on an unprecedented scale, so its effects should be great," a senior South Korean official said.
"We are, of course, aware that it will strengthen (South Korean) competitiveness against Japanese businesses."
Well aware its domestic demand is limited in scale, South Korea has actively pursued free trade deals with major markets abroad.
Although the FTA signed with the United States in 2007 has yet to be ratified by either country, South Korea has already completed free trade negotiations with India.
Earlier this month, Seoul agreed with Australia and New Zealand to start FTA negotiations. It has also flagged its intentions to accelerate talks with nations across Asia.
Japanese trade officials have a growing sense of crisis over Seoul's progress.
Japan's failure to secure a free trade deal with the EU was not simply a result of Tokyo sitting idly.
From 2007 to 2008, business circles from both sides conducted a joint study. Their report revealed, however, that there was a big gap in their respective stances on tariffs, a key to FTA negotiations.
To the EU, an FTA with Japan would not have particular benefits because Japan's tariff rates on industrial products are already low and its agriculture market offers little prospect of being opened much wider.
Even if Japan called for talks, "the EU side wasn't interested," according to a senior Foreign Ministry official.
Japan has signed FTAs or economic partnership agreements (EPAs) with 11 nations and regions, including ASEAN (Association of Southeast Asian Nations), of which nine have taken effect.
But South Korea has forged further ahead, clinching deals with the United States, Europe and India, whose markets represent a huge slice of the global economy.
Japan has instead counted on the Doha multilateral trade liberalization talks under the World Trade Organization.
Adding to Japan's woes is the fact that the Doha round has stalled over a tug-of-war between the United States and emerging economies, with no successful conclusion likely by year-end.(IHT/Asahi: March 26,2009)
The deal has also shown how far Japan lags behind its regional rival in forging free trade agreements (FTAs) with key trading partners.
Japan, whose fortunes depend on international trade, has not even been able to start negotiating a similar agreement with the EU.
Under the FTA, the EU is expected to abolish import tariffs on South Korean vehicles and home appliances within five years.
The current rates on vehicle and TV imports are more than 10 percent.
"It would put us at a disadvantage in our rivalry with South Korea," said an official of a major Japanese electronics manufacturer.
Flat-panel TVs and other appliances that are directly exported from Japan to the EU market could be hit hard by a loss of price competitiveness.
Some Japanese firms with manufacturing ties with South Korean companies have reacted to the news more calmly.
Sony Corp., which in Europe assembles TV panels procured from South Korea's Samsung Electronics Co., for example, does not expect the deal to "be extremely disadvantageous."
The latest deal will nevertheless have a major impact, given the fact that the EU, comprising 27 member countries, is even larger than the U.S. market.
The EU is South Korea's second-largest trading partner after China. In 2008, South Korea chalked up a trade surplus of $18.4 billion (1.8 trillion yen) with the EU, far larger than the surplus of $14.5 billion it posted with China.
The bilateral FTA would boost South Korea's gross domestic product by about 3 percent over the long term, according to an estimate released in 2006 by the Korea Institute for International Economic Policy.
"The FTA would open the (EU) market on an unprecedented scale, so its effects should be great," a senior South Korean official said.
"We are, of course, aware that it will strengthen (South Korean) competitiveness against Japanese businesses."
Well aware its domestic demand is limited in scale, South Korea has actively pursued free trade deals with major markets abroad.
Although the FTA signed with the United States in 2007 has yet to be ratified by either country, South Korea has already completed free trade negotiations with India.
Earlier this month, Seoul agreed with Australia and New Zealand to start FTA negotiations. It has also flagged its intentions to accelerate talks with nations across Asia.
Japanese trade officials have a growing sense of crisis over Seoul's progress.
Japan's failure to secure a free trade deal with the EU was not simply a result of Tokyo sitting idly.
From 2007 to 2008, business circles from both sides conducted a joint study. Their report revealed, however, that there was a big gap in their respective stances on tariffs, a key to FTA negotiations.
To the EU, an FTA with Japan would not have particular benefits because Japan's tariff rates on industrial products are already low and its agriculture market offers little prospect of being opened much wider.
Even if Japan called for talks, "the EU side wasn't interested," according to a senior Foreign Ministry official.
Japan has signed FTAs or economic partnership agreements (EPAs) with 11 nations and regions, including ASEAN (Association of Southeast Asian Nations), of which nine have taken effect.
But South Korea has forged further ahead, clinching deals with the United States, Europe and India, whose markets represent a huge slice of the global economy.
Japan has instead counted on the Doha multilateral trade liberalization talks under the World Trade Organization.
Adding to Japan's woes is the fact that the Doha round has stalled over a tug-of-war between the United States and emerging economies, with no successful conclusion likely by year-end.(IHT/Asahi: March 26,2009)
quoted from: Asahi Shimbun
