Japan Proposing Massive Asian Trade Pact.

By Steve Herman,Tokyo,[Via VOA] 04 April 2006

Japan has proposed creating an Asian free trade agreement covering half the world's population. Both the scope and the timetable are being seen as ambitious, in light of Japan's strained relationship with China and the track record of one-on-one trade agreements in the region.

Trade Minister Toshihiro Nikai said Tuesday that the Japanese government would ask China, South Korea, India, Australia, New Zealand and the 10 members of the Association of Southeast Asian nations to consider creating a regional free trade zone.

Japan will propose that negotiations on creating a trade union begin in two years with the goal of concluding an agreement by 2010.

Professor David Kang, research director at Dartmouth University's Center for International Business, says if past free trade talks in the region are any indication, the Japanese proposal is quite ambitious. Like many other experts, he points out that there have been few successful trade agreements implemented in Asia. "My guess is that what's going to hold up regional FTA talks is these more mundane things that have held up the FTA talks in any case, which is agricultural issues in all of the countries, various issues of how to do the tariff reductions and things like that," he said.

The proposed trade group would cover half the world's population and four major trading powers - China, India, Japan and South Korea. However, while most of the countries in the region rely heavily on exports for economic growth, many tend to limit imports of a range of goods and services, such as farm produce and financial businesses.

Some analysts suggest Japan wants a regional trade group because it is concerned about falling behind China in world trade.

Kang says concerns about South Korea's effort to reach a trade pact with the United States also worry Japan and other economies.

"If [South] Korea and United States get an FTA that will put real pressure on Japan and other countries to conclude their FTA's as well. So I see this as sort of a response or indicator that all the countries in the region are going to begin looking at a regional FTA much more seriously," said Kang.

Japan has trade agreements with three countries - Singapore, Mexico and Malaysia. It is finalizing less broad deals with Thailand and the Philippines and is negotiating with South Korea and ASEAN.

The trade ministry estimates the 16-nation group would boost Japan's gross domestic product by more than $42 billion. The ministry says the other 15 countries would see GDP rise by a total of $212 billion.