Indo-Japan FTA

IT is heartening that after prolonged negotiations, India and Japan have signed a Free Trade Agreement that sets the pace for a quantum jump in bilateral trade and investment. Considering that India currently accounts for a bare 1 per cent of Japan’s total trade in value terms, this opens up huge possibilities for harnessing the massive potential for bilateral trade. Under the FTA, the two countries will scrap tariffs on goods that account for 94 per cent of the two-way trade flows progressively over the next 10 years. For Japan, the principal gain is that its auto makers such as Suzuki will have tariffs eliminated on car parts shipped to their factories in India. As for India, the FTA will ease access for generic drug makers to a lucrative market in Japan. Tokyo also plans to scrap duties on some foodstuffs — including curry ingredients, pepper and tea but will maintain high tariffs to protect its politically sensitive rice sector. Apart from auto parts, India will cut trade barriers on Japanese steel, electronics and machinery products.

The free trade accord is particularly significant because it will help Japan to reduce its heavy dependence on the Chinese market. In the new geo-political game of one-upmanship between India and China, this is a shot in the arm for India in strategic terms. Diplomatic ties between Japan and China have suffered lately after Japan arrested a Chinese fishing boat captain whose trawler collided with Japan’s Coast Guard ships near the Japanese-administered Senkaku Islands, which are also claimed by China. The added reason for heightened Japanese interest is that Japan’s 2010 white paper on trade estimated that middle-income households in India will increase to 620 million people in 2020 from an estimated 190 million in 2010. The Japanese realize that with China’s labour costs rising, India is attractive not only as a market but also as a production centre.
India must now use its enhanced clout to get Japan to agree to accept Indian nurses and caregivers at a time when almost one in four persons in Japan is aged over 65 and the aged-care sector is suffering labour shortages. Another key deal sought by New Delhi, on civilian nuclear cooperation, must also be vigorously pursued