JAPAN, MEXICO REACH FREE TRADE AGREEMENT

After 16 months of often tough negotiations, Mexico and Japan reached a free trade accord on 12 March, to be signed in June and set to enter into force in January 2005. Mexico is the second country with which Japan has signed a free trade agreement (FTA); the first being Singapore. The final agreement was reached through a video conference between key ministers, following intensive negotiations between trade delegations on all key issues.

With over 300 agricultural products covered, the agreement marks the first comprehensive Japanese deal covering the agricultural sector. Under new preferential tariffs, Mexican farmers will be able to export 80,000 tons of pork and 6,500 tons of orange juice a year to Japan, two of the areas that had been sticking points in the talks. Mexican Agriculture minister Javier Usabiaga estimated that Mexico's exports to Japan could grow by as much as 10.6 percent annually over the next 10 years as a result of the accord, creating 277,000 new jobs in the process. He expressed his hope that his country could become one of Japan's principal sources of foodstuffs. About 60 percent of food consumed in Japan is imported, creating a market for exporters worth US$35 billion. Minister Usabiaga also said he expects foreign direct investment from Japan to rise to US$12.7 billion over the next 10 years.

Japanese Economy, Trade and Industry minister Shoichi Nakagawa noted that ''this is effectively Japan's first comprehensive economic cooperation agreement. The impact of the deal with a country with a population of 100 million and which is a member of the OECD (Organisation for Economic Cooperation and Development) will be big''. In the industrial sector, Mexico agreed to abolish tariffs on all types of steel products from Japan within the next 10 years, and to increase quotas for cars, making their import tariff-free in seven years time. Minister Nakagawa said the agreement would help Japanese firms regain competitiveness in Mexico, where they had faced competition from US and European producers, which had been in a stronger position due to Mexico's existing FTAs with these countries.

Japan also saw the deal with Mexico as a practice round for further FTAs it is looking to seal in Asia. According to Japanese Foreign Minister Yoriko Kawaguchi, ''Japan learned a lot from the negotiations with Mexico and that will be useful for our negotiations with other Asian countries''.

To access a joint statement on the agreement by Japan and Mexico, see http://www.meti.go.jp/policy/trade_policy/l_america/mexico/j_mexico/data/press_e.pdf

"Mexico and Japan reach free trade pact - source," REUTERS, 9 March 2004; "Mexico, Japan Agree On Ag, Industry Terms For Trade Pact," DOW JONES, 10 March 2004; "Japan, Mexico reach accord on free trade," UNITED PRESS INTERNATIONAL, 12 March 2004; "Japan, Mexico reach final accord on free trade," KYODO NEWS, 13 March 2004.