Comment on “Abenomics and Japan's Trade Policy in a New Era”

• DOI: http://doi.org/10.1111/aepr.12206
• Date: 01 January 2018
• Published date: 01 January 2018

Comment on “Abenomics and Japan’s Trade

Policy in a New Era”

Yorizumi WATANABE†

SFC, Keio University

JEL codes: F13, F15, F53

Accepted: 17 September 2017

Solis and Urata (2018) make a great contribution in providing a concise but well-

elaborated account of Japan’s involvement in the Trans-Pacif‌ic Partnership Agreement

(TPP) negotiations and its implications for Japan’s growth strategy, the third “arrow”of

Abenomics. Solis and Urata endeavorto go beyond their analysis on the past development

of Japan’s domestic political economy in pursuing Free Trade Agreement (FTA)/Eco-

nomic Partnership Agreement (EPA) policies is quite remarkable in the sense that they

discuss Japan’s“alternative”trade policies under the new circumstances after Mr Trump

became President on January 20, 2017 and subsequentlywithdrew from the TPP.

In explaining Japan’s hesitance or rather reluctance to engage in preferential trade

agreements up until the end of the 20th century, Solis and Urata are quite right in

pointing out that Japan took the view that regional agreements were inherently discrim-

inatory to third countries and, therefore, marking an exception to the most favored

nation principle of the multilateral trading system embodied in the General Agreement

on Tariffs and Trade (GATT) and later in the World Trade Organization (WTO). It is

very true that the Japanese government, particularly the Ministry of Foreign Affairs, was

aware of the legal consistency with the GATT articles and contemplated a possible legal

breach of not being able to fulf‌ill the provision in Article XXIV:8(b) of the General

Agreement, namely, that FTAs should cover “substantially all trade,”given that Japan

had diff‌iculties in eliminating tariffs on agricultural products.

As Solis and Urata rightly described in their Section II, Japan changed its view on

FTAs for two reasons: (i) an increasingly large number of countries enacted FTAs,

resulting in discrimination against Japan (notable in the case of Mexico and Chile);

and (ii) the diff‌iculty in starting multilateral trade negotiations under the WTO (and

subsequent stagnation in the Doha Round negotiations).

It is, however, my view that there was one more signif‌icant reason for Japan to revise

its foreign trade policy,that is, there had been a quite extensive developmentof production

networks as a result of massive Japanese foreign direct investment to the Association of

Southeast Asian Nations (ASEAN) countries as well as to other East Asian countries

after the Plaza Accord, the major exchange-rate re-alignment that took place in

†Correspondence: Yorizumi Watanabe, Faculty of Policy Management, SFC, Keio University,

5322 Endo, Fujisawa-shi, Kanagawa 252-0882, Japan. Email: yorizumi@sfc.keio.ac.jp

124 © 2018 Japan Center for Economic Research

doi: 10.1111/aepr.12206 Asian Economic Policy Review (2018) 13, 124–125