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Japan´s strategy on the Free Trade Agreement: Working as a connection between two major powers?


The role of Japan, the fourth largest exporter and importer in the world may become crucial in a scenario of continuous trade wars.




Takemasa Sekine, Ana Mª Goy Yamamoto and José Maria Viñals.
Takemasa Sekine, Ana Mª Goy Yamamoto and José Maria Viñals.
On January 31st, we had the pleasure of holding this session at Fide with the participation of the following speakers: Takemasa Sekine, Professor, Graduate School of Management, Nagoya University of Commerce & Business (NUCB) (*); José Maria Viñals, Partner, Squire Patton Boggs (UK) LLP (*). The session was moderated by: Ana Mª Goy Yamamoto, Professor at the Centre for East Asian Studies (Universidad Autómoma de Madrid). Specialist in market techniques and Asian consumer behaviour (*)
 
As is well known, in recent years a "trade war" has broken out at a global level. In this context, tensions between the United States, China and the European Union have been increasing considerably in recent times. Tensions derived, among others, from the US exit from the Joint Comprehensive Plan of Action (JCPOA) accompanied by the re-imposition of sanctions on the Islamic Republic of Iran and the lifting of the suspension of Title III of the Helms-Burton Act, in addition to the imposition of tariffs on certain European products by the United States. In this way, the role of Japan, which has signed free trade agreements with both parties, is important. Consequently, and together with the problems affecting the WTO, the possibility arises of Japan acting as a "bridge" and mediator between two of the main world powers, as well as promoting the desired and necessary reform in the WTO.

Firstly, the reputation of the World Trade Organization (WTO) has been called into question in recent times, specifically by the effectiveness of its dispute resolution mechanism carried out by its body commonly known as the Appellate Body. Many nations have shown their discontent and the situation of trade blockade and the need for reform is real. In this regard, the role of the United States has been decisive since it has exercised its right to veto on two key occasions, firstly, it has vetoed the incorporation of new Members since 2017 and, secondly, it has repeatedly vetoed the appointment of the judges that make up the Appellate Body. Therefore, we find ourselves in a situation of total paralysis as far as dispute resolution is concerned, since this body requires the consensus of all Members.
 
The United States has pointed out on numerous occasions that one of the major problems with the system is the so-called "Obiter Dicta". In its view, the decisions of the Appellate Body go further than the question at issue, thus going beyond the scope of the question at issue.
 
As a result of this crisis, many nations have sought alternatives for the resolution of their potential trade disputes. This is the case, for example, of the European Union and Canada, which have taken the initiative to design a provisional arbitration system within the WTO, following the same principles, rules, and methods as the Appellate Body, in order to overcome the situation of blockage of the dispute resolution mechanisms while maintaining the essence of the same. This system, which according to the parties seeks to promote security and dispute resolution with a view to the stability of international trade, has received good criticism and some countries such as Norway have joined the agreement.
 
Secondly, since February 2019 the European Union and Japan have signed an Economic Partnership Agreement (EPA), one of the most ambitious negotiated so far. It is a modern, broad and deep agreement. Among other measures, the elimination of practically all tariffs stands out. The wine, leather, and footwear sectors have benefited the most.
 
Meanwhile, the United States, after abandoning the Trans-Pacific Partnership (TPP), did the same and also signed, last January, a free trade agreement with Japan. However, this agreement has greater limitations than the EPA.
 
In this context, the role of Japan, the fourth largest exporter and importer in the world may become crucial in a scenario of continuous trade wars. All this, together with the fact that in recent years it has signed numerous agreements such as the EPA, Regional Comprehensive Economic Partnership (RCEP) or Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) or other free trade agreements with countries such as Australia, making it a key strategic partner in eradicating latent trade tensions in the area (i.e. China-USA). So much so, that it could be considered as a true "global mediator" that, through its intervention in international operations under the terms of the various trade treaties, would allow the generation of the desired trade stability.

Photo taken during the session
Photo taken during the session
(*) Short bios:

• Takemasa Sekine, Professor at NUCB Business School. He received his legal education at Keio University, Japan (Ph.D. and LL.M) and was later engaged as a post-doctoral research fellow at the Japan Society for Promotion of Science (JSPS). He is currently a board member of the Government Procurement Review Board in Japan, and also joining research projects hosted by Japanese governmental institutions, such as the Ministry of Foreign Affairs of Japan and the Research Institute of Economy, Trade and Industry (RIETI).

• Jose María Viñals,Partner at Squire Patton Boggs and part of the international trade team based in Madrid and Brussels offices. He has more than 15 years of experience as a qualified lawyer, with a focus on internationalization and a well-established sanctions practice. He has been active in the fields of FDI and international commerce, as well as Project Finance, investment protection and more recently FinTech.

• Ana Mª Goy Yamamoto, Professor at the Centre for East Asian Studies (Universidad Autómoma de Madrid). Specialist in market techniques and Asian consumer behaviour.