International Trade: A View from Japan

International Trade: A View from Japan

This piece was originally published in the December 2016 issue of electroindustry.

Toshihiro Matsumoto, Director and General Manager, General Planning Department, Japan Electrical Manufacturers’ Association

The Japan Electrical Manufacturers’ Association (JEMA) represents major Japanese electrical manufacturing companies that cover a wide spectrum, from nuclear and thermal power systems generators, renewable energy systems, and related equipment to industrial systems equipment and white goods.

JEMA promotes the liberalization of trade and closely monitors unfair trade practices in conjunction with the Japanese government. Activities include transmitting member companies’ opinions to the government and supporting free trade agreement (FTA) negotiations by providing information about product details and related markets to the industry. JEMA also supports the export of infrastructural systems through the joint efforts of public and private sectors.

The export value of JEMA’s electrical equipment, including white goods, amounted to approximately $26.4 billion for fiscal year 2015. The biggest export countries are the United States and China; exports to those two countries account for around 39 percent.

The pace of establishing FTAs has been increasing worldwide. Japan also has concluded economic partnership agreements with 20 countries. The FTA coverage ratio (i.e., the ratio of FTA countries to the trade amount) is 39.5 percent, which is likely to increase. Multilateral, bilateral, and regional FTAs will become more important for manufacturing industries.

Multi-country FTAs

Broad regional and comprehensive economic partnership agreements may give multinational companies opportunities to establish their global supply chains. Currently, a series of multi-country FTAs are being negotiated, including the Asian Regional Close Economic Partnership (RCEP), Japan-European Union FTA, and U.S.–European Union (EU) Transatlantic Trade and Investment Partnership (TTIP).

The Trans-Pacific Partnership Agreement (TPP) was signed by 12 member nations, including Japan and the U.S., in New Zealand in February 2016. TPP covers approximately 40 percent of the world’s gross domestic product and strives to achieve a high level of liberalization not only on tariffs but also on services and investments. This economic partnership agreement establishes rules in wide range of fields such as intellectual property, e-commerce, state-owned enterprises, and the environment.

Like the United States, Japan is dealing with its own domestic ratification procedures. JEMA hopes that the member countries will ratify the TPP agreement and that it comes into force swiftly. Japan continues the Japan-EU FTA talks and hopes to conclude them this year and to intensify the RCEP and Japan-China-Korea FTA negotiations.

Environmental Goods Agreement

JEMA is focusing on negotiations to eliminate and reduce tariffs on specific sectors under the World Trade Organization (WTO) and welcomes recent negotiators’ and related industries’ efforts to conclude negotiations on an Environmental Goods Agreement (EGA) by the end of 2016.

JEMA is working closely with the government to promote this negotiation and believes that eliminating tariffs on environmental goods is likely to boost global trade of the covered goods, lead to positive environmental outcomes, and promote economic growth globally. JEMA hopes the EGA negotiations will conclude successfully.

Trade Facilitation Agreement

It is important to maintain and strengthen the free trade system. The WTO continues to play an important role in this. JEMA is watching the current status of the Trade Facilitation Agreement (TFA), which was concluded in December 2013 and will come into force when two-thirds of WTO members have ratified it. The TFA can improve the efficiency of international trade procedures, leading to reduced trade costs and enhancing participation in the global value chains. This agreement is the first WTO multilateral trade agreement reached since the WTO’s creation in 1995. JEMA hopes WTO members ratify this pact as soon as possible to establish an efficient multinational trade system.

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