Prof Urata presentation

Report
Japan’s New Economic Strategy in
Asia-Pacific:
Implications for the EU
July X, 2012
Shujiro URATA
Waseda University
1
Contents
I. Japan’s Economic Situation
II. High Economic Growth and Regional
Economic Integration in Asia-Pacific
III. Japan’s New Economic Strategy in AsiaPacific
IV. Japan-EU EPA/FTA
V. Concluding Remarks
2
1. Japan’s Economic Situation
Current situation
Low economic growth
Recovering from the Eastern Japan Disaster (March 11,
2011)
Closed economy
Future prospects
Declining and aging population
Declining savings rate
Increasing government debt
Challenge for achieving economic growth
Increase productivity
Increase economic interaction with growing Asia
Solutions
New Economic Strategy in Asia-Pacific
Japan-EU EPA
3
GDP Growth Rates (%)
4
GDP
5
Trade-GDP Ratios (%)
6
Japan’s Declining Population
1,000
140,000
65120,000
15-64
0-14
100,000
80,000
60,000
40,000
20,000
0
7
%
Gross Domestic Savings (% of GDP)
40
35
30
25
20
15
10
5
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
8
Government Debt-GDP Ratios (%)
%
Japan
250
US
UK
Germany
200
France
Italy
Canada
150
100
50
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
9
II. High Economic Growth and Regional Economic
Integration in Asia-Pacific
Market-driven Regional Economic Integration
High economic growth achieved by rapid
expansion of foreign trade and foreign direct
investment (FDI)
 Advances in regional economic integration
 Expansion of trade and FDI in machinery sector
(electronic machinery, transportation machinery)
Increase in parts and components trade
Fragmentation strategy by multinational
corporations: formation of regional production
networks
Liberalization of trade and FDI policies
10
Total Trade (Exports+Imports) :
EU, East Asia and North America
11
Intra-regional Trade Dependence (%)
12
Intra-regional Trade Ratio (%)
13
Shares of East Asia’s Trade with Regions (%)
14
Share of Parts and Components in
Intra-regional Trade (%)
15
Declining Tariff Rates
%
60.0
50.0
C hina
Indonesia
M alaysia
P hilippines
Thailand
40.0
30.0
20.0
10.0
0.0
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
16
Trade Liberalization: Declining Tariff Rates (%)
Japan
1988
2007
China
1992
2007
Korea
1988
2007
Indonesia 1989
2007
Malaysia 1988
2007
Philippines1988
2007
Singapore 1989
2007
Thailand 1989
2006
Australia 1991
2007
Primary
Manufactured
Total
goods
goods
8.3
3.5
4.2
11.4
2.9
4.2
35.1
40.6
40.4
9.0
8.9
8.9
19.3
18.6
18.6
20.8
6.6
8.5
18.2
19.2
19.2
6.6
5.8
5.9
10.9
14.9
14.5
2.8
6.5
5.9
29.9
27.9
28.3
6.0
4.8
5.0
0.2
0.4
0.4
0.2
0.0
0.0
30.0
39.0
38.5
13.6
10.4
10.8
3.0
14.1
12.8
0.9
3.1
2.8
17
Emergence of institution-driven regional economic integration
 Rapid expansion of free trade agreements (FTAs) in East
Asia in the 21st century
 FTA (free trade agreement): free trade (elimination,
reduction of tariff and non-tariff barriers among FTA
members)
 In East Asia ASEAN has become a hub of FTAs:
5 ASEAN+1 FTAs have been implemented
 4 initiatives have been proposed for region-wide FTA:
ASEAN+3 (East Asia FTA), ASEAN+6 (CEPEA),
ASEAN++ (RCEP), Free Trade Area of Asia-Pacific
(FTAAP)
 The US has become active in region-wide FTA: TransPacific Partnership (TPP)
18
FTAs in East Asia (December 2011)
Bangkok Treaty (1976)
AFTA (1992)
Singapore-NZ (2001)
Japan-Singapore (2002)
Thailand-NZ (2005)
Singapore-India (2005)
Korea-Singapore (2006)
Japan-Malaysia (2006)
Japan-Brunei (2008)
China-NZ (2008)
Taiwan-Nicaragua (2008)
Singapore-Peru (2009)
Singapore-Australia (2003)
Singapore-EFTA (2003)
Singapore-US (2004)
Korea-Chile (2004)
China-Hong Kong (2004)
China-Macao (2004)
Taiwan-Panama (2004)
Singapore-Jordan (2004)
Japan-Mexico (2005)
China-ASEAN (2005)
Thailand-Australia (2005)
Korea-EFTA (2006)
China-Chile (2006)
Korea-ASEAN (2006)
Singapore-Panama (2006)
Japan-Chile (2007)
Japan-Thailand (2007)
China-Pakistan (2007)
Malaysia-Pakistan (2007)
Japan-Philippines (2008)
Japan-ASEAN (2008)
Japan-Indonesia (2008)
China-Singapore (2009)
Japan-Switzerland (2009)
Japan-Vietnam (2009)
India-ASEAN (2010)
ASEAN-Australia-NZ (2010)
China-Peru (2010)
China-Taiwan (2010)
Korea-EU (2011)
Japan-India (2011)
China-Consta Rica (2011)
Korea-Peru (2011)
19
7
FTAAP: Free Trade Area of the Asia-Pacific
Efforts under various frameworks
ASEAN+3(EAFTA)
(ASEAN + JP, CH, KR)
TPP
ASEAN+6(CEPEA)
(ASEAN+JP, CH, KR, IND, AUS, NZ)
Current members
Vietnam
Viet Nam Brunei
US
A Peru
Malaysia
TPP
Singapore
New Zealand
Australia
Chile
RCEP Establishment of 3 working
groups (for trade in goods,
services and investment) in 2012
FTAAP (APEC)
Japan-China-Korea
Russia
China
Korea Japan
CH.
CH. Taipei
HongKong
Thailand Brunei
Malaysia
Singapore
Vietnam
Philippines
Canada
US
Mexico
Peru
Indonesia PNG
Launch of
negotiations in 2012
Australia
Chile
New Zealand
20
(Source: METI, Japan)
Motives behind FTAs in East Asia
 Increase market access through trade and FDI
 Rapid expansion of FTAs in the world
 Promote domestic reform
 Rivalry between East Asian countries
Motives behind region-wide FTAs in East Asia
 Financial crisis in 1997-98
 Global financial crisis in 2008 Overcome Spaghetti bowl effect
 Establish region-wide single production base and
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unified market
Rapidly Increasing FTAs in the World
22
Expected Impacts of FTAs
Trade and FDI expansion between and
among FTA members
 Economic growth

Economic Obstacles to FTAs

Opposition from non-competitive sectors
23
IV. Japan’s New Economic Strategy in Asia-Pacific
Comprehensive Economic Partnership
Agreement (EPA) including trade and FDI
liberalization, facilitation, economic cooperation
 Export infrastructure such as transportation
system and water supply system including hard
and soft infrastructure
 Export agricultural products
 Attracting foreign direct investment inflows and
high skilled personnel
 Attracting foreign tourists
 etc.

24
Japan’s FTAs (EPAs): June 2012
Implemented
Singapore
November 2002
Mexico
April 2005
Malaysia
July 2006
Chile
September 2007
Thailand
November 2007
Indonesia
July 2008
Brunei
July 2008
Philippines
December 2008
ASEAN
December 2008
Switzerland
September 2009
Vietnam
October 2009
India
August 2011
Peru
March 2012
Share in
Japan's trade
18.7%
(2010)
Under
negotiation
Korea
GCC
Australia
Mongolia
Under
study
ASEAN+3
ASEAN+6
China, Japan, Korea
EU
TPP
Canada
Colombia
20.0%
25
Motives
 Expand export market for Japanese firms
 Improve investment environment for
Japanese firms
 Obtain energy and natural resources
 Promote structural reform in Japan
 Improve and establish good relationship
 Provide economic assistance to developing
countries
Opposition
 Agriculture, fishery
26
Impacts of FTAs on GDP (%): Simulation Results
Japan
China
Korea
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Other Southeast Asia
Australia
New Nealand
India
Hong Kong
Taiwan
NAFTA
EU15
Rest of the World
ASEAN
ASEAN+3
ASEAN+6
ASEAN+3 ASEAN+6
FTA
FTA
0.44
0.54
4.72
4.84
3.55
3.71
3.94
4.14
8.62
9
6.28
6.52
4.24
4.42
7.02
7.32
9.67
9.92
2.91
2.95
-0.09
1.35
-0.06
1.87
-0.1
3.45
0
-0.01
-0.08
-0.01
-0.01
-0.01
-0.01
-0.01
-0.06
-0.08
5.67
1.93
1.68
5.89
2.05
2.11
27
High Tariff Agricultural Products (%)
B eef
D airy products
W heat
B arley
Sugar
P ork
C orn
Starch
P eanuts
R ice
Konnyaku potato
0
200
400
600
800
1000
1200
1400
1600
1800
28
Japan-EU EPA
Developments
Scoping exercise for Japan-EU EPA began in May
2011 and ended in May 2012
Waiting for the negotiations to begin
Expected benefits
Strengthen economic and non-economic relations
Expand exports and FDI not only bilaterally but with
other countries, contributing to economic growth: EU
GDP to increase 0.14 percent, Japan’s GDP 0.31
percent (Copenhagen Economics, 2009)
Contribute to rule-making in the global economic
system
29
Japan’s Trading Partners: 2010 (%)
China
21%
Others
25%
Malaysia
Hong Kong 3%
3%
Saudi Arabia
3%
Indonesia
3% Thailand
US
13%
Korea
6%
4%
Australia
4%
EU
10%
Taiwan
5%
30
Japan’s Foreign Direct Investment Destinations: 2011 (%)
31
Japan’s Position
Eager to start negotiations with an interest in
strengthening economic relations and overcoming
disadvantageous position in the EU market vis-à-vis
Korean firms: EU tariffs--cars (10%), flat screen TVs
(14%), microwave ovens (5%) etc.
EU position
 Somewhat hesitant in starting negotiations
immediately (in response to Japan’s inability to join
TPP negotiations?)
Eager to open Japan’s government procurement
market and reduce non-tariff measures, in order to
expand trade and FDI
32
V. Concluding Remarks



Faced with many difficult challenges, Japan has to open up
its economy and carry out structural reforms, in order to
achieve economic growth or to maintain high living
standard, to contribute to economic growth in Asia-Pacific
and in the world.
WTO liberalization being stalled, free trade agreements
(FTAs) are second-best solution for promotion of trade and
FDI
Japan can gain a lot from FTAs not only in East Asia but
also with countries in other parts of the world such as the
US, the EU, and Latin American countries
33






Japan should play active roles in establishing regionwide FTAs: RCEP, TPP by liberalizing its market
Then expand these FTAs by merging with other
FTAs, leading to global trade liberalization
FTAs face opposition from non-competitive sectors
For Japan, trade liberalization in agriculture faces
strong opposition
Various measures including gradual phase-in
liberalization, and temporary assistance to negatively
affected workers can moderate the negative impacts
during the process of transition
Need strong political leadership to promote FTAs
34

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