With Mexico FTA Set, Japan Turns Toward Asia

Japan and Mexico are poised to give the final go-ahead Friday on a free-trade agreement that trade officials hope will smooth the way for bilateral deals closer to home in Asia.

The deal, to be signed as early as June, will bring Mexico a much-needed boost to slumping foreign investment and create new jobs over the next decade. For Japan, it will open doors to cheaper farm products and help car and steel manufacturers gain more access to the Mexican market.

Most importantly, an FTA would show Japan is able to ignore the cries of powerful agriculture interest groups to heed the calls of special industry interest groups. The hope is that the Japanese people, who pay an estimated 3.8 trillion yen to import 60 percent of what they eat, will benefit.

A final agreement depends on the outcome of the ministerial-level teleconference.

According to Mexico, the deal would encourage Japanese investment worth an average $1.3 billion a year, or $12.7 billion over 10 years. Mexico currently receives 1.3 percent of Japan's investment outflow.

Existing Mexican tariffs, ranging between 18 percent and 30 percent, will be lifted on Japanese games, motorcycles, computer peripherals, photocopiers, telecommunications equipment, CD players and musical instruments.

Japan and Mexico will also create a new tariff-free export quota for Japanese cars, in addition to the existing quota of roughly 30,000.

Japanese officials said the duty-free quota is to make up 5 percent of the Mexican market in the first year. The quotas would be expanded gradually before being completely lifted by the seventh year.

Steel tariffs would also be scrapped within 10 years.

The tariffs on industrial goods were a large burden for manufacturers Canon Inc., NEC Corp. and Sanyo Electric Co., which recently withdrew from Mexico due to the high price of machine parts shipped from Japan.

The two sides also agreed to a 80,000-ton quota on pork at a duty of 2.2 percent, down from 4.3 percent. Low-tariff import quotas would also be in place for 6,500 tons of orange juice, 4,000 tons of fresh oranges, 6,000 tons of beef and 8,500 tons of poultry.

Japan currently imports almost all of its avocados, tequila and salsa from Mexico, as well as limited volumes of pork, poultry, meat, tuna, juice and pumpkins.

Mexico's Economy Department said the deal is expected to create annual growth of 10.6 percent in Mexican exports to Japan.

Trade officials rejoiced Thursday at the progress toward an agreement.

"What is most important is that for the first time, Japan was able to free so many farm and industrial products," said Hirokazu Hayashi, head of the trade policy bureau at the Ministry of Economy, Trade and Industry.

The agreement would likely give a huge push to ongoing FTA talks with Malaysia, Thailand, the Philippines and South Korea, he said.

"It makes simple sense," said Luis Arturo Rojas, export manager at Grupo Jumex, a Mexican juice maker. "Japan has the technology, we have the agricultural power. Our economies are perfectly complementary."

Mexico has trade agreements with 32 countries, only one of which, South Korea, is in Asia. Mexico has agreed not to seek new trade accords after signing one with Japan.

It would be only the second deal for Japan, which signed an FTA with Singapore in 2002 that did not include the touchy area of agricultural products.