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The Nikkei View

Suga should build on Abe's laudable efforts to expand free trade

Japan can play a key role in fighting the rising wave of protectionism

Japanese Prime Minister Yoshihide Suga and U.S. Secretary of State Mike Pompeo bump fists before their meeting in Tokyo on Oct. 6. (Photo by Takaki Kashiwabara)

Expanding free trade areas involving Japan was one of former Prime Minister Shinzo Abe's biggest achievements during his nearly eight years in office. His successor, Yoshihide Suga, should build on those efforts by championing free trade with the same energy.

Japan and the U.K. have agreed in principle on a new economic partnership agreement. Japan has an EPA with the European Union that came into effect in February 2019. But Britain’s departure from the bloc means Tokyo and London must sign a new bilateral accord before the Brexit transition period expires at the end of 2020, when the U.K. will no longer be covered by the Japan-EU deal.

Japan and the U.K. have sensibly agreed to adopt most of the preferential tariffs applied to trade between Japan and the EU under their EPA. Tokyo and London should quickly ratify the deal to ensure that it comes into force on Jan. 1, 2021.

Meanwhile, the U.K. and the EU are struggling to make progress in their trade negotiations, threatening to bring an end to the current zero-tariff regime. Failure to reach a deal would result in cross-Channel tariffs that would hurt companies around the world. To protect those businesses, Japan should prod both sides to make more concessions.

The Suga government's diplomatic savvy will be tested by trade policy challenges that go beyond the Brexit trade talks.

British International Trade Secretary Liz Truss has shown strong interest in making the U.K. a new member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a regional free trade agreement among 11 Asia-Pacific nations. Truss has indicated that London will soon formally apply to join the deal, possibly in early 2021.

Expanding the membership of the CPTPP would create an effective bulwark against the rising wave of protectionism. Japan led the negotiations for the multilateral trade pact after the U.S. withdrew from the Trans-Pacific Partnership, the CPTPP's predecessor. Tokyo should follow on that precedent by taking the initiative in bringing Britain onboard.

The negotiations for the Regional Comprehensive Economic Partnership involving Japan, China and 14 other Asia-Pacific nations are at a critical juncture. India left the talks last year after protesting sharp cuts in tariffs that it feared would hurt domestic producers.

With India out of the picture, a deal among all 16 nations appears difficult. But all parties involved should keep trying to bring New Delhi back to the negotiating table until the very last moment.

In addition to forging FTAs designed to eliminate trade barriers, Japan also needs to pursue bilateral investment deals that will enhance legal frameworks for cross-border joint ventures and the transfer of production. The investment-related clauses of the CPTPP and the RCEP alone do not have legal infrastructure sophisticated enough to address these issues.

The trilateral investment pact among Japan, China and South Korea, which took effect in 2014, fails to meet the needs of Japanese companies operating in China. The Suga government must help corporate Japan by forging strategic investment agreements with other countries and regions, including Taiwan and members of the Association of Southeast Asian Nations.

Another key trade policy challenge is rebuilding the troubled World Trade Organization. A good place to start is electing a new WTO chief and fixing its dysfunctional dispute-settling machinery.

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