FOCUS: Regulatory talks may hold clues to feasibility of Japan-EU FTA

TOKYO, Jan. 31 Kyodo -
The Japanese government goes into biannual regulatory reform talks with the
European Union this week, with some participants expecting to make headway on
bilateral free trade.
But others believe hurdles remain, saying the form of economic partnership that
the 27-member European economic bloc wants, based on wide-ranging
standardization, does not necessarily match what Tokyo seeks, which is a
conventional free-trade agreement centered on tariff cuts.
Through the Japan-EU Regulatory Reform Dialogue, launched in 1994, both sides
have exchanged lists of proposals for regulatory reform and reviewed the
proposals in a series of high-level meetings, which in many cases have revealed
serious gaps between their positions.
The lackluster results, however, may become a thing of the past as the Japanese
government under Prime Minister Yukio Hatoyama has never hidden its strong
desire to launch free-trade talks with the European Union.
Tokyo's sense of urgency comes as a result of the signing last year by the
European Union and South Korea of their FTA, which, if enforced, would
gradually eliminate EU tariffs on imports from South Korea.
Japanese businesses have expressed concerns that Japanese products, especially
cars and home appliances such as flat-panel televisions, could lose their
competitive edge against South Korean products in the European market.
The shockwave helped prompt the Japanese government to set up a new committee
for relevant ministers to discuss national strategies for trade liberalization
talks. The panel is intended to ''feed political will'' and soften the
country's rigid stance in the talks, a Japanese official said.
Foreign Minister Katsuya Okada, who heads the committee, has shown persistence
in concluding with the European Union an ''Economic Partnership Agreement,'' or
EPA. This involves cooperation in such areas as investments, government
procurement and movement of persons in addition to market access for goods and
services and is part of Japan's strategy for securing an FTA.
Japan has concluded similar accords with economies such as Chile, Mexico and
the 10-member Association of Southeast Asian Nations and held talks with some
others.
But dialogue with the European Union on an FTA is still in the early stages. A
Japanese private-sector group led by the Japan Business Federation, a powerful
business lobby, is studying the feasibility of a Japan-EU EPA. The group is
discussing it with its European counterpart, which refers to the accord likely
to emerge as an ''Economic Integration Agreement,'' or EIA.
Yorizumi Watanabe, a professor of international political economy at Keio
University and also a member of the Japanese study group, said the EIA does not
involve tariff cuts, an important factor for Japan, and that there is almost no
chance for the early conclusion of a Japan-EU EPA.
European industries are pressing EU officials not to conclude any accord with
Japan that would entail cuts in tariffs, especially those on cars and home
appliances, Watanabe said.
Japan has already abolished its tariffs on all auto and appliance imports in a
sign of its confidence in the competitiveness of its own products against those
made by other countries.
''There would be no merit for the EU in concluding an EPA with Japan'' that
would result in the influx of high-quality Japanese products and trigger woes
among domestic producers, the professor said.
The European Union acknowledges its interest is not in tariff cuts. ''EU
interest...is mainly (in lowering) non-tariff'' barriers in Japan, said
Nikolaos Zaimis, trade section chief at the EU delegation in Japan.
Any successful result from the dialogue could amount to a good ''starting
point'' for likely Japan-EU free-trade talks, Zaimis also said.
The Japan-EU regulatory reform dialogue will be held Thursday in Tokyo, and
this time it will revolve around EU proposals, which include requests for
greater access by EU firms to public procurement in Japan and lifting of the
continued Japanese ban on EU beef imports over fears about mad cow disease.
The dialogue, which also covers regulation on financial services and safety
standards for such products as automobiles and medical devices, is not focused
on tariff issues.
Junichi Sugawara, an analyst at the Mizuho Research Institute, said the
European Union is using the regulatory talks to seek to apply in Japan the
various regulations and standards that its member countries accept.
Accepting the European Union's wish and sharing common standards could be
beneficial to Japan, Sugawara said. ''With its own high-level environment and
energy-efficient technologies, Japan could possibly make its standards the
global standard.''
But he also said, ''It is better to use tariff cuts as a condition for Japan to
accept the EU standards.''
Whether to accept the EU standards is high on the agenda of Japan's new
ministerial committee for free-trade tactics.
But a senior foreign affairs official involved in the panel said those
standards are under the jurisdictions of different ministries, and that
consolidating their opinions is not easy.
Some panel members ''only say no to everything,'' said the official. The roads
to an upgraded Japan-EU relationship seems long and winding. Japan's
''political will'' is being tested.
==Kyodo