The Japan-Mexico FTA: A cross-regional step in the path towards Asian regionalism

Pacific Affairs

Volumn 80, Issue 2, 2007, Pages 279-301

  Solís, Mireya ^a   Katada, Saori N ^b  

^a AMERICAN UNIVERSITY   (United States)

^b UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

BILATERAL AGREEMENT; DIPLOMATIC RELATIONS; ECONOMIC RELATIONS; FOREIGN DIRECT INVESTMENT; FREE TRADE; INTERNATIONAL TRADE; REGIONALISM; TRADE LIBERALIZATION;

ASIA; EURASIA; FAR EAST; JAPAN; MEXICO [NORTH AMERICA]; NORTH AMERICA;

EID: 36048992365     PISSN: 0030851X     EISSN: None     Source Type: Journal    
DOI: 10.5509/2007802279     Document Type: Article

References (84)

1. And cotrary to other economically insignificant FTAs, there was no security rationale behind this inter-governmental agreement, either. Neither Japan nor Mexico stood to make geostrategic gains from proceeding with this negotiation.
2. A clarification of terms is in order here. The official title of the free trade agreement is Japan-Mexico Economic Partnership Agreement (JMEPA). The Japanese government uses the term EPA because it includes an economic cooperation chapter. However, in keeping with the use of terms proposed in the analytical framework of this special issue, we use cross-regional trade agreement (CRTA) to refer to the Japan-Mexico free trade agreement (and will discuss the economic cooperation chapter as appropriate), unless we make specific reference to the official tide of this bilateral trade agreement. The term FTA will be used to make reference to free trade agreements in general.
3. Naoko Munakata, "How Trade Agreements Can Reform Japan," The Globalist. 10 July 2002. [Online, cited 17 May 2007]. Available at .
4. Jorg Faust and Uwe Franke. "Attempts at Diversification: Mexico and Asia Pacific." The Pacific Review, vol. 15, no. 2 (2002), pp. 299-324.
5. Gerardo Bracho, "Mexico's Foreign Trade Strategy in Trouble: The impact of China." [Online, cited 29 September 2006]. Available at:.
6. Robert Donnelly. "Dealing with the Rising Sun. Mexico eyes a Japanese trade deal." Mexico Connect. 2002. [Online, cited 29 September 2006]. Available at: .
7. Japan External Trade Organization (JETRO), "Report of the Committee for Closer Economic Relations between Japan and Mexico." [Online, cited 12 February 2003] Available at .
8. Mireya Solís, "Mexico and Japan: The Opportunities of Free Trade," Report commissioned by Mexico's Ministry of Trade and Industry, 1999," [Online; cited 12 February 2003]. Available at .
9. Mireya Solís, "Japan's New Regionalism: The Politics of Free Trade Talks with Mexico," Journal of East Asian Studies, vol. 3 (2003), pp. 377-404.
10. We use the term minilateral to designate any agreement with more than two parties and less than the entire WTO membership.
11. T.J. Pempel and Shujiro Urata, "Japan: A New Move toward Bilateral Trade Agreement," in Vinod Aggarwal and Shujiro Urata, eds., Bilateral Trade Agreements in the Asia-Pacific (London: Routledge, 2005);
12. Naoko Munakata, "Evolution of Japan's Policy toward Economic Integration," Working Paper, Center for Northeast Asian Policy Studies (Washington DC: The Brookings Institution, 2001);
13. Shujiro Urata, "Towards an East Asia Free Trade Area," Policy Insights, no. 1 (Paris: OECD, 2004).
14. Edward D. Mansfield and Eric Reinhardt, "Multilateral Determinants of Regionalism: The Effects of GATT/WTO on the Formation of Preferential Trading Arrangements." International Organization, vol. 57, no. 4 (2003), pp.829-62.
15. Shujiro, Urata, "Towards an East Asia Free Trade Area."
16. Saadia Pekkanen, Mireya Solis, and Saori Katada, "Trading Gains for Control: International Trade Forums and Japanese Economic Diplomacy." International Studies Quarterly (forthcoming).
17. Peter Alford. "All foods on the table in trade talks with Japan." [Online, cited 28 November 2006]. Available at .
18. Ministry of Economy, Trade, and Industry, "Japan's Policy on FTAs/ EPAs." [Online, cited 11 November 2005]. Available at .
19. Gilbert Rozman, Northeast Asia's Stunted Regionalism: Bilaleral Distrust in the Shadow of Globalization (Cambridge: Cambridge University Press, 2004), pp. 220, 234.
20. UPI, "Walker's World: Battles around the New Asia Summit," 4 April 2005. [Online, cited 10 November 2005]. Available at .
21. Lincoln (2005) believes the United States has not reacted strongly this time because, among other reasons, it heavily discounts the possibility of an East Asian bloc developing and is signing its own FTAs with Asian countries to avoid the possibility of discrimination from ongoing bilateral initiatives. Edward Lincoln, "The Bush Second Term and East Asian Economic Regionalism." [Online cited 10 November 2005]. Available at .
22. Mark Manger, "Competition and Bilateratism in Trade Policy: The Case of Japan's Free Trade Agreements," Review of International Political Economy, vol. 12, no. 5 (December 2005), pp. 804-28.
23. For the more general argument on the impact of trade diversion on FTA proliferation see Richard E. Baldwin, "The Causes of Regionalism," The World Economy, vol. 20, no. 7 (1997), pp. 865-88.
24. World Trade Organization, Trade Policy Reuiew: Mexico 2002. [Online, cited 10 October 2005]. Available at;,http://www.wto.org/ English/tratop_e/tpr_e/tp190_e.htm>.
25. JETRO, Report of the Committee for Closer Economic Relations: 4.
26. JETRO, Report of the Committee for Closer Economic Relations: 4.
27. Takao Nakahata, "Nichiboku EPA to Nihon Kigyô [The Japan-Mexico EPA and Japanese firms]," In JETRO, Shinkôkokuno taigai keizai senryaku (FTA nado) to nihon kigyô, March 2005, p. 320.
28. Author's interview with JETR0 official, Tokyo, summer 2005.
29. Until then and despite the restrictions mentioned above, Japanese firms had solid presence in supplying Mexican government procurement. For instance, until the year 2000, Japanese firms had captured more than 40 percent of electric power plant construction projects in Mexico ("Corporate influence looms behind Mexico trade talks," Nikkei Net News, 15 October 2003).
30. Interview with Mexico's FrA negotiating team, Mexico City, July 2004.
31. With rollup, a component's origin is attributed to the country of majority content, so that a part with 51 percent US content is considered 100 percent American when it crosses the Canadian border. American companies accused Japanese car makers with plants on both sides of the US-Canada border of taking advantage of multiple cross-border shipments to artificially boost their content levels (Alain De Remes, Timothy Fitzpatrick and Antonio Ortiz, "NAFTA and the Automotive Industry," in Van R. Whiting, Jr., ed., Regionalization in the World Economy (Delhi: Macmillan India, 1996), p. 125.
32. Paul Magnusson and James B. Treece, "Honda: Is It an American Car?" Business Week, 18 November 1991.
33. Mireya Solis, "Sharing the Spoils of Economic Integration? Japanese Direct Investment in North America," in Whiting, Jr., Regionalization in the World Ecanomy.
34. NAFTA's stiff ROO also made it difficult for Japanese companies in the United States to export finished vehicles to Mexico that qualified for duty-free treatment.
35. Nakahata, "Nichiboku EPA to Nihon Kigyô" p. 307.
36. This program had in fact originated much earlier (in the mid-1960s) when Mexico and the United States devised a preferential tariff program to foster industrialization in border cities after the elimination of the US guest worker program. Through the maquiladora program, Mexico eliminated tariffs on inputs and machinery for production of goods to be exported to the United States. In turn, the United States exempted US components incorporated in such products from tariffs when they crossed the border. Although devised primarily as a bilateral cooperation program, it is important to note that the maquiladora program was open to the participation of enterprises from third countries.
37. Solís, "Sharing the Spoils of Economic Integration?" p. 210.
38. By the late 1990s, the Japanese Chamber of Commerce in Mexico (1998) in Mexico reported that 53 out of 59 Japanese electronic companies in Mexico were established in the maquila sector. (Mekishiko Nikkei Kigyô Shinshutsu Ichiran [A Glance at Japanese Companies in Mexico]. Mexico City: Japanese Chamber of Commerce in Mexico, p. ii).
39. Solís, "Mexico and Japan."
40. Japan-Mexico Joint Study Group on the strengthening of bilateral economic relations. "Final Report." [Online, cited 16 February 2003]. Available at p.15.
41. Japan-Mexico Joint Study Group, "Final Report," p. 14. Yen figures converted to dollars by authors with the average exchange rate for 2001.
42. Statistics from Japan's Ministry of Finance.
43. Statistics from Mexico's Ministry of Economy.
44. As noted before, Mexican trade officials worried that the loss of duty drawback benefits and rising labour costs in the maquiladoras could produce an exodus of Japanese companies from Mexico to China. Restoring competitiveness vis-à-vis China in order to retain and promote Japanese direct investment became a major source of Mexican interest in a preferential trade agreement with Japan. See Robert Donnelly, "Dealing with the Rising Sun."
45. Japan Foreign Trade Council. 2001. "Toward the Japan-Mexico Free Trade Agreement (An Appeal by Japan Foreign Trade Council)." [Online, cited 21 August 2002]. Available at .
46. For a good analysis of Keidanren's lobbying activities on behalf of free trade agreements see Hidetaka Yoshimatsu, "Japan's Keidanren and Free Trade Agreements: Societal Interests and Trade Policy," Asian Survey, vol. 45, no. 2 (2005), pp. 258-78.
47. Keidanren, "Urgent Call for Active Promotion of Free Trade Agreements. Toward a New Dimension in Trade Policy." [Online, cited 31 October 2001]. Available at <.http://www.keidanren.or.jp/english/ policy/2000/033/proposal.html>, p. 1.
48. Indicated by a METI official author interview, Tokyo, July 2005.
49. The distinction between "defensive (mamorino) FTA" and "offensive (semeno) FTA" is often made by METI officials. Asahi Shimbun, April 19, 2004.
50. In 1996, the President of Sanyo Video Components that operates maquiladora in Tijuana was kidnapped for $2 million ransom. This was widely reported news that alerted the maquila-based businesses for the possible personal risk in operating business in Mexico. (Financial Times, 17 August, 1996, p. 3).
51. The negotiation with Mexico was also deemed important to expose to international competition manufacturing sectors traditionally protected. A case in point is the concessions in leather and the rapid increase in shoe imports from Mexico. Mexican shoe manufacturers, are planning to expand its 10,000 annual shoe sale in 2004 to 250,000 pairs in 2005 (Interview with a JETRO official, Tokyo, 14 July 2005). More generally, FTAs are expected to contribute to structural reform in Japan in a number of ways. For example, Japan's protected service sector, including medical and education services, will have to be reformed in order to make the system compatible with Japan's FTA partners if mutual recognition agreements are reached (Urata, "Towards an East Asia Free Trade Area," pp. 394-95).
52. Asahi Shimbun, ("Hogo" dakeja dame: "shoku no anzen" de jimin to, nosui zoku, henbo no toki) 31 March 2004, p.4).
53. Christina Davis, Food Fights Over Free Trade: How International Institutions Promote Agricultural Trade Liberalization (Princeton NJ: Princeton University Press, 2003);
54. Aureha George, "The Politics of Interest Representation in the Japanese Diet: The Case of Agriculture," Pacific Affairs, vol. 64, no. 4 (1992), pp. 506-28.
55. Munakata, "How Trade Agreements Can Reform Japan."
56. See, for example, on foreign aid, Alan Rix, Japan's Economic Aid: Policy-making and Politics (New York: St. Martin's Press, 1980);
57. on trade liberalization Leonard J. Schoppa, Bargaining with Japan: What American Pressure Can and Cannot Do (New York: Columbia University Press, 1997);
58. on capital outflow liberalization, Mireya Solís, Banking on Multinationals: Public Credit and the Export of Japanese Sunset Industries (Stanford: Stanford University Press, 2004).
59. Interview with MAFF official in charge of FTA negotiations for several years, Tokyo, July 2005. See also Masaki Sakai, "Wagakuni no Shokuryô Anzenhoshô to Jiyúbôeki kyôtei [Our country's Food Security and FTAs]," Nôgyô to Keizai (February, 2003), pp. 57-66.
60. Interview with a MAFF official Tokyo, July 2005.
61. Akio Fujiwara, "Nichiboku FTA Kôshô no Uchimaku [Inside story of Japan-Mexico FTA Negotiation]," Gaikô Forum, (May, 2004), p. 54-59.
62. Diplomatic Blue Book 2001 Tokyo: MOFA, 2001 [Online, cited 22 August 2005]. Available at .
63. Mark Manger, "Competition and Bilateralism in Trade Policy," p. 815.
64. Yoshimatsu (2005), p.269; Yoshimatsu also notes that MOFA officials questioned why Japan should conclude an FTA with an extra-regional partner like Mexico.
65. This explains MOFA's uneasiness when the Mexican government insisted (and later on secured) a negative list approach for service trade. This was not only incompatible with Japan's FTA with Singapore (which adopted the positive list), but was also incompatible with the WTO. Interview with a MOFA official, Tokyo, July 2004.
66. Moreover, MOFA was not impervious to the needs of Japanese industries. For example, Yanagihara notes that MOFA was also heavily influenced by the business community when it published its FTA strategy in 2002. Toru Yanagihara, "Nihon no 'FTA senryaku' to 'kantei shudô gaikô' [Japan's FTA strategy and Prime Minister-led Diplomacy]," Kaigai jjiô (April 2004), pp. 92-108.
67. Interview with MOF official, Tokyo, June 2005.
68. Nihon Keizai Shimbun, 11 October and 13 November 2003.
69. Nihon Keizai Shimbun, November 13, 2003. MOFA had established the FTA office much earlier than the other two in November of 2002, but the number of staff was increased three fold from thirty in October 2002 to ninety in January 2003 (Nihon Keizai Shimbun, 29 November 2003).
70. Mireya Solis, "Japan's New Regionalism," p. 395.
71. The argument is that if the Japanese people consumed more tropical fruits they would decrease their consumption of fruits harvested in Japan.
72. Joint Study Group, "Final Report," pp. 18, 22.
73. Joint Study Group, "Final Report," p. 22.
74. Information provided to author by Consejo Nacional Agropecuario, May 2005.
75. Roberto Zamarripa, "Harakiri" Reforma, 21 October 2003. Author interviews with officials of Mexico's Ministry of Economy, and with representatives of COECE and CAN, Mexico City, May 2005.
76. Hussain Khan, "Mexico Free Trade Founders on Japan's Farmers" Asia Times, 23 October 2003.
77. Nihon Keizai Shimbun, 17 October 2003.
78. Nihon Keizai Shimbun, October 17, 2003.
79. Interview from a METI official, Tokyo, July 2005; Pempel and Urata (2005, p. 88) note that METI had a difficult time exerting pressure on the MAFF toward agricultural liberalization in support of Japan's FTA efforts, for under METI itself there are many uncompetitive industries that resist liberalization.
80. Naoko Munakata, "Whither East Asian Economic Integration?" CNAPS Working Paper Topic (Washington DC: Brookings Institution, June 2002), p.34.
81. Interviews with officials from Mexico's FTA team, Mexico City, May 2005, and with METI and MOF officials, Tokyo, June and July 2005.
82. Interview with MOF official, Tokyo, June 2005.
83. Interview with a METI official, Tokyo, July 2005.
84. Interview with a METI official, Tokyo, July 2005.