Economic interdependence in the East Asian Region

The East Asian region has attained rapid economic growth in the 1990s, overcoming the financial crisis that struck some of the countries in 1997. Although the region has experienced downturn of the economy in 2001, most of the countries have recovered remarkably in 2003 and 2004. China, the second largest economy in the region, has maintained high growth throughout the period. Japan has suffered from longstanding recession and deflation, but real GDP growth rate in fiscal 2003 marked 3.2 percent, and figures for the first quarter of fiscal 2004 indicates further expansion.

Improvement in basic industrial infrastructure, accumulation of advanced technology, and high quality of education in the region promises potential of even higher economic development.

The interdependence of economies in the East Asian region has become extremely high. The intra-regional trade has doubled in the past ten years, and 43 percent of all exports are bound for countries within the region. For Japan, trade with countries in the region comprises almost 45 percent of the total trade. Regional interdependence of trade in the East Asian region is almost comparable to that of the west Europe region in 1958, when the European Economic Community (EEC)was founded.

Strengthening the economic ties is essential for continuous growth and prosperity of the region. Moreover, economic interdependence would without doubt contribute to the peace and stability of the region.

Japan’s attempts for strengthening economic partnership

Japan has concluded its first free trade agreement with Singapore, in November of 2002. In October of 2003, the leaders of Japan and ASEAN have agreed on the framework of Comprehensive Economic Partnership. While it is Japan’s ultimate goal to establish an economic partnership agreement with ASEAN as a whole, it is more realistic to begin with bilateral negotiations with the major states in ASEAN.

The most serious difficulty for Japan is to open its market of agricultural, forest, and marine products. While most of our counterparts show strong interest in these areas, these sectors are less competitive and they are concerned that rapid trade liberalization might severely damage the domestic industries. Although these issues are both economically and politically difficult and complex, I am certain that both sides can reach a reasonable compromise. I believe that Japan must be ready to sacrifice some of its individual interests, taking into account the magnitude of benefits such arrangements could provide.

Eventually, such economic partnership agreements should be expanded to cover the whole East Asian region, and be integrated into East Asia Free Economic Agreement.

Japan’s policies toward regional economic development

As the largest economy in the East Asian region, it is Japan’s responsibility to provide certain level of support for economic development in the region.

Unfortunately, Japan had to cut back its ODA spending, due to severe budget constraints in the recent years. It needs to provide efficient and effective support, according to the stage of development and various socio-economic conditions of each country.

Japan is currently trying to increase inward flow of foreign direct investment. Prime Minister Koizumi has announced last year to double the cumulative FDI in the five-year period until 2008, by eliminating barriers and providing favorable conditions to investors. Increase in FDI, I believe, will benefit both the investors and the host nation, through not only inflow of funds but also through collaboration of business skills and technologies.

Japan is also trying to increase the number of tourists from Asian countries; the government has recently launched the “Visit Japan Campaign”. Many tourists from Asian countries come to Japan every year to experience our traditional and modern culture, and beautiful nature.

Challenges toward economic partnership

One of the problems that we need to address is harmonization of trade and investment rules, both legal and informal practices. In order to promote trade and investment, the business communities in various states need to be able to make predictable decisions, be treated fairly and rights and properties rightfully protected. Cooperation in the protection of intellectual property is one of the most urgent subjects that must be addressed.

The countries in the region should also cooperate in prevention of crimes, including drug trafficking, and transmission of infectious diseases.

Environment is another area that requires multilateral cooperation. Inappropriate environmental policies in one country may result in unexpected and unpleasant effect in other countries of the region.

I would like to emphasize again that strengthening the economic ties through economic partnership agreements would surely benefit the region and respective states in the region. I believe that exchange and close cooperation between parliamentarians would promote partnership in the region, and contribute to its development and prosperity.