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ECONOMY > Trade

What went on behind the scenes of the Japan-EU EPA

  • August 1, 2017
  • , p. 56 - 57
  • JMH Translation
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On July 5, LDP Diet members who support the interests of the Ministry of Agriculture, Forestry, and Fisheries, or MAFF Zokugiin, including former MAFF Minister Koya Nishikawa, were flabbergasted when they heard the news that Japan and the EU had reached a “broad agreement” in the economic partnership agreement (EPA) they had flown to Belgium to negotiate, as they deplaned at Brussels Airport. While they were travelling in the plane, not only were negotiations concluded, Foreign Minister Fumio Kishida and EU Commissioner for Trade, Cecilia Malmström, held their joint press conference to announce the news. The two representatives smiled for the cameras as they painted the eyes of two darurma dolls, one red and white and the other blue and yellow, to represent their respective flags, commemorating the historic occasion. The special-interest MAFF Zokugiin, led by Nishikawa, who is the Chairman of the Research Commission on Food Strategy, never had a chance to play a role in the negotiations.

 

This never happened in previous trade negotiations, not during the WTO’s multilateral trade talks (Doha Round) nor the TPP. The legislators championing the causes of MAFF have been active participants, as the LDP never failed to send the Zokugiin to trade negotiations to monitor government negotiators, and provide input at critical points in the discussions.

 

Disliking this style of negotiating, the Abe administration has shut out the MAFF Diet members and centralized the flow of information in the Cabinet Office for the TPP negotiations. Still, the legislators continued to make their way into the negotiation venues, get briefed on developments, and exchange views with negotiating partners’ counterparts and industry leaders. However, they had never been “late” to the conclusion of any trade talks before.

 

Duped by the MAFF minister

 

The zokugiin were not the only ones who lacked access to information. The Central Union of Agricultural Cooperatives (JA Zenchu), which governs farmers’ cooperatives across Japan, sent its officials in charge of the Japan-EU EPA to Brussels. What was unfortunate for JA Zenchu was that the crucial stage of the EPA negotiations coincided with its chairmanship election. The central union was forced to agree to reforms, including becoming an incorporated body, after pro-reformist Choei Okuno was elected in the last election two years ago. In the most recent election held on July 5, conservative Toru Nakaya won by a landslide, so JA Zenchu had its hands full replacing its top position and had no time to attend the EPA talks.

 

It just so happened that the National Federation of Agricultural Cooperative Associations (JA-Zenno), which governs the trading function, was going through a sweeping reshuffle of its board. It developed a position for parachuting retired MAFF government officials, a practice it had refused for the longest time, to welcome Kazuyoshi Honkawa, former vice-minister of MAFF, as a member of its business management committee. The JA Group was too caught up in its reorganization efforts to pay close attention to the development of national policy.

 

When former MAFF minister Nishikawa and the senior JA-Zenchu members came back to Japan, they were again shocked by MAFF minister Yuji Yamamoto’s statement made after the broad agreement. “Agreement was made five minutes before 8pm on the 1st [at the July ministerial negotiations held in Tokyo]. It was miraculous,” revealed Yamamoto proudly as he reflected back on the developments of the Japan-EU EPA negotiations. However, Yamamoto had said, “We remain in a state of deadlock, and our differences are evident,” after a day of negotiations on July 1, emphasizing the existing gap. The politicians with close ties to MAFF and JA-Zenchu swallowed Yamamoto’s words hook, line, and sinker.

 

Nishikawa was cross from the start of the LDP task force meeting held on July 11 in response to the broad agreement. He was especially difficult during a foreign ministry’s presentation, shouting “bring a decent presentation deck next time,” and “what is the point of reference documentation they don’t help broaden understanding?” He even made an inappropriate offhand comment saying, “These cryptic handouts would be fine in the Diet.” The opposition party criticized Nishikawa’s comment as “disrespectful to the Diet,” adding insult to injury.

 

Disagreement on investment rules shelved

 

Putting aside the qualitative decline of the MAFF zokugiin, the driving force behind the hasty broad EPA agreement was Yoichi Suzuki of the Ministry of Foreign Affairs. Suzuki, after previously serving as the director-general of the Foreign Ministry’s Economic Affairs Bureau and the Japanese ambassador to France, was assigned to the Ministry of Foreign Affairs’ Osaka Liaison Office, a post regarded as for someone waiting retirement, until he was assigned to be the Japan-EU EPA chief negotiator in March of this year. He also chaired the regular sessions of the WTO Agricultural Committee in 2000, and was Minister and Deputy Permanent Representative of Japan to the WTO in Geneva. With his network of connections from his previous experiences, he is a formidable negotiator, one that MAFF watches out for.

 

Soon after Suzuki was appointed chief negotiator, he employed a decoy tactic that only he could. While he hinted that he would stick to clarifying the points of contention, he actively drove negotiations forward after the German national parliament elections in September. After the Japan-EU EPA negotiations held in Tokyo in early April, Suzuki led secret negotiations in a way that blocked MAFF’s plan to send Minister Yamamoto to Brussels, and undermined METI’s influence.

 

The key to the agreement is that it is a “broad, or owaku, agreement” and not a ”general, or osuji, agreement” The government, namely MOFA negotiators, has glossed over the difference by saying, “Its virtually the same thing,” citing the fact that both are often translated into English as “agreement in principle.” However, there is a fundamental difference in that the owaku agreement that allows certain negotiation topics to be shelved altogether. Specifically, the investment rules that have large differences in opinion between Japan and the EU remain untouched. The investor-state dispute settlement (ISDS) is a dispute settlement system between foreign companies and host countries often incorporated into trade agreements. While Japan proposes an American-style settlement procedure almost exactly like the one in the TPP, the EU wants to establish a two-tiered permanent investment court system, stalling negotiations due to the vast divide between the nations. Even if a compromise could be reached between the chief negotiators, many EU nations would reject the agreement, making ratification very difficult. The owaku agreement allows for resolution to these tough issues to be postponed.

 

Some mainstream media commentators have mistakenly explained that owaku agreement is less mature than an osuji agreement, so that the former would take more time to reach a final agreement. The difference between owaku and osuji is not the degree of maturity, but a difference in negotiation tactic. Although the EU consists of 28 nations, agreements are negotiated through one representative, making it virtually a bilateral negotiation. Unlike the TPP negotiations that involve multiple signatories, topics of negotiation can be adjusted flexibly in a bilateral negotiation, so long as both parties agree. In multilateral negotiations, on the other hand, it is virtually impossible to defer entire topics, such as the investment rules, as each participant has its own set of interests and priorities.

 

“Finding a reasonable compromise is osuji, while fitting into a framework is owaku,” laughs one negotiator as he reveals his trade secret. It is wrong to criticize the Japan-EU EPA as not being mature without understanding this essential difference. The EU has established a customs union with all member states in which all members apply the same common customs tariff for products outside the EU while no tariffs are applied for products within. No ratification procedures are required among members. Japanese business groups hope to abolish the current 10% automobile tariff as soon as possible.

 

It is highly likely that Suzuki’s next move will be to expedite the implementation of tariff-related conditions before anything else.

 

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