Japan Considering Free Trade Agreement

Earlier this week, Japanese Prime Minister Yoshihiko Noda announced his intention to enter into free trade talks with U.S. trade officials. While he has not committed yet, his announcement has shaken the Japanese government and frightened Japanese farmers worried about their livelihood.

Prime Minister Noda has argued that free trade could pose a solution to Japan’s ailing economy. In particular, it would help the nation recover from March’s devastating tsunami and the subsequent nuclear meltdown at the Fukushima nuclear plant. Current estimates claim that entering a free trade zone with the United States could increase Japan’s GDP by almost $35 billion.

The Japanese economy has traditionally been closed in order to protect domestic production. Only 16 percent of Japan’s economy is covered by free trade agreements (compared to 36 percent in neighboring South Korea) and other industries are protected by high tariffs. The Japanese rice industry, for example, is protected by a 778 percent trade tariff.

Given Japan’s historical protectionism, American officials are approaching these talks warily. In a letter to U.S. Trade Representative Ron Kirk, the House Ways and Means Committee wrote, “Japan’s inclusion would add dramatically new dimensions and complexities to the TPP negotiations.”

Japanese officials are equally wary of a free trade agreement. Japan’s farm sector, a small part of the economy, but a large part of the government, has threatened political revolt if Japan enters into a free trade agreement. Members of Noda’s own Democratic Party of Japan have threatened to leave the party and bring down Noda’s government if the agreement passes.

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Written by: Justin Ellison / Farm Plus Staff Writer