Keidanren and FTAs until 2013

Keidanren has consistently conveyed a strong economic rationale for pursuing FTAs since Japan’s early FTA initiation efforts in the late 1990s. In a July 2000 policy statement, Keidanren strongly urged the Japanese government to promote FTAs and exhibit leadership on the issue, lamenting that Japanese businesses are “placed at a competitive disadvantage in doing business with countries that have already concluded FTAs elsewhere” (Keidanren 2000b). On April 2000, Keidanren issued a joint statement with their counterpart in Mexico (the Mexican Council for Foreign Trade), calling for a comprehensive Japan-Mexico FTA that “would include tariff elimination as well as rules on investment, government procurement, anti-dumping and intellectual property, together with effective dispute settlement mechanisms” (Keidanren 2000a).The joint statement also pointed out the need to level the playing field for Japanese companies who faced a cost disadvantage compared to their competitors in NAFTA and the EU. Later in the fall of the same year, Keidanren issued a policy statement strongly supporting the initiation of FTA negotiations between Japan and Singapore, and asked for greater degrees of trade liberalization, improvements in business environment, and domestic structural reforms in both countries (Keidanren 2000c).

Existing studies on the role of Keidanren in Japan’s bilateral trade negotiations indicate that Keidanren has played a critical role in promoting and shaping Japan’s FTAs. For example, in Japan’s first FTA with Singapore, the Japanese government faced the arduous task of creating an FTA model that would serve as a precedent for future FTAs. Keidanren gathered information from Japanese businesses to help the government determine the “scope and content for the agreement” (Yoshimatsu 2005, 265). Yoshimatsu (2005) further documents that 31 out of 46 points from Keidanren’s proposal for the Japan-Singapore FTA were included in the final FTA agreement with Singapore (ibid.). While 31 points account for a small portion of the total agreement, from Keidanren’s viewpoint, many of its demands were successfully incorporated into the FTA agreement.

In Japan’s second FTA with Mexico, Keidanren played a critical role even before the inception of formal FTA negotiations. In the late 1990s until 2000, the Japanese government did not prioritize an FTA with Mexico, but instead prioritized concluding FTAs with Singapore and South Korea. Mexico was a small trade partner for Japan and Japanese foreign direct investment in Mexico was also limited (Manger 2009,‘Chapter 5’;Yoshimatsu 2005). For Japanese firms that had invested in Mexico, however, an FTA with Mexico was imperative. Due to NAFTA and the EU-Mexico FTA, Japanese firms operating in Mexico faced cost disadvantages vis-à-vis their U.S. and EU competitors that enjoyed preferential access to the Mexican and North American markets. Japanese electronics and automobile firms in Mexico heavily relied on imported parts to assemble their products in Mexico, which were then exported to a third country such as the U.S. An FTA with Mexico would enable the import of intermediate capital goods (i.e., input parts) at a low cost, leveling the playing field for Japanese firms relative to their competitors (Manger 2009,‘Chapter 5’).

Keidanren actively represented the interests of these exporting firms that had invested in Mexico. Keidanren issued the “Report on the Possible Effects of a Japan-Mexico Free Trade Agreement on Japanese Industry” in 1999 and issued a joint statement with their Mexican counterpart in 2000 to pressure the government to initiate FTA negotiations with Mexico. In addition to compiling studies and reports on the necessity of a Japan-Mexico FTA, Keidanren also directly lobbied senior government officials in Japan and Mexico to propel the FTA negotiation forward (Yoshimatsu 2005, 269). Once the Japan-Mexico negotiation began, Keidanren’s role was to “muster enough political support to help METI prevail in the interministerial rivalry with MAFF, and to offer a counterweight to the protectionist forces of rural constituencies...” (Manger 2009,‘Chapter 5’). Given strong resistance from protectionist farm interests (e.g., JA-Zenchu and the JA Group), Keidanren also actively lobbied and met with MAFF officials and politicians representing farm interests (ibid.). Strong farm resistance led the negotiations to the brink of failure. It would not be an exaggeration to say that without Keidanren’s strong efforts to propel the Japan-Mexico FTA, farm resistance would most likely have derailed or substantially delayed the Japan-Mexico FTA.

Keidanren’s role in the Japan-Singapore and Japan-Mexico FTAs illustrate the important role of Keidanren as a pro-FTA voice throughout the 2000s. As examined in Chapter 2, Japan’s FTAs until 2013 were with relatively smaller trader partners that did not pose a significant threat to Japan’s protected agricultural sector. While protectionist agricultural interests contributed to excluding major agricultural exporting countries as potential FTA partners, business interests represented by Keidanren played an important role in driving FTAs with remaining trade partners and shaping the content of the FTAs. As Pekkanen et al. (2007) comment, “bilateral FTAs allow selective control over partners and issues, enabling Japanese officials to score significant diplomatic gains that are directly responsive to the concerns of powerful business communities” (962). Given the heavy bias in favor of protectionist interests in Japan’s trade policymaking until 2013, Keidanren continued to play an important role in subsequent FTA negotiations with Chile,Thailand, and Malaysia (Manger 2009).

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