Trade Agreement: Some Ideas

 https://mainichi.jp/english/articles/20201115/p2g/00m/0bu/094000c

Article:

TOKYO (Kyodo) -- Japanese business leaders welcomed the signing of the world's largest trade deal by Tokyo and 14 other Asia-Pacific partners on Sunday, expecting a boost in trade and investment in the region and strengthening of supply chains.

"The signing is extremely significant toward realizing a free and open international economic order" at a time when some countries are becoming inward-looking due to the global novel coronavirus pandemic, said Hiroaki Nakanishi, chairman of the Japan Business Federation known as Keidanren.

The Regional Comprehensive Economic Partnership, covering some 46 percent of Japan's total trade, will be the country's first trade deal with both China, its largest trading partner, and South Korea, its third largest.

Ideas and Commentary: (Analysis):

Japanese businesses, that export and those who want to export, should be interested and excited about this new trade agreement. 

It potentially opens even more the markets in Asia that maybe, for some products and services, might have been somewhat closed.

But it still comes down to the customer in the other countries. Japanese companies still need to know and understand the customer and provide products that customers want and not think just because its a Japanese product that a customer in another country is automatically going to buy the product.

Of course another very important question is who is really going to benefit from the trade agreement? Is it the distributors and middlemen or is it the final customer? Will the middlemen pass on the lower tariff prices to the customer or just keep the price as it was before?

Article:

Under the deal, Japan will see tariffs eliminated on 86 percent of items exported to China, 81 percent to South Korea and 88 percent to the countries of the Association of Southeast Asian Nations, Australia and New Zealand.

RCEP also sets common rules on e-commerce, intellectual property, customs and rules of origins.

Due to the rules and lowering of tariffs, supply chains established by Japanese companies in Asia "will become more broad, effective and resilient," Akio Mimura, chairman of Japan Chamber of Commerce and Industry, said in a statement.

Ideas and Commentary: (Analysis):

While the idea of lowered tariffs potentially is a positive, the idea still remains who is going to really benefit from the reduced tariffs, the final customer or the middlemen?

For example many reports came out about the US/Korea FTA, when it was finally signed what was the reality was the final customers didn't see the benefits of the lower tariffs, only the middlemen saw the benefits and they didn't pass on the lower prices to the final customer on many of the products.

At this present time supply chains globally might be in a challenging situation because of the pandemic. But no doubt the new trade agreement might help in reducing some of the challenges.

Up until the past few weeks the pandemic was beginning to slow down, but now it has picked up. What kind of new challenges is it going to have on supply chains and getting products where they need to be and or resources if there are production facilities in other countries.

Article:

The 15 signatories to the deal said Sunday the pact remains open for India, which has skipped all negotiations since late last year due to concerns about opening up its market to China, and included provisions that would facilitate the Southern Asian country's smooth participation should it decide to return to the pact.

"We hope RCEP members will tenaciously encourage" India's return to the pact, which will contribute to strengthening supply chains encompassing the region, said Ken Kobayashi, chairman of the Japan Foreign Trade Council.

Among the agreements on market access with China, the world's second-largest economy will incrementally eliminate the 40 percent tariff it imposes on Japanese sake over 21 years after the deal takes effect.

Ideas and Commentary (Analysis):

India is a huge market, beside China, so the idea of India joining the trade agreement is a positive.

But at the same time, both economically and politically there is always going to be challenges in countries and markets. Its a given. While it would be nice that  its only about business and economics, unfortunately, there is always the political side too. 

For example, on a sad note, the 2nd largest Uniqlo store, in Seoul, will be closing at the end of January. The largest is in NYC. Why is it closing? Part might be the pandemic and part might be the ongoing, lets just say misunderstanding between Japan and South Korea and even more recently, the actions that have taken place the last two years.

In the summer of 2019, a so-called boycott of Japanese products started in South Korea. 

Of course the ideas was to protest some actions related to the Japanese government by not buying Japanese products in SK. 

Unfortunately who really was affected by the boycott? The South Korea companies that brought in Japanese products to sell, the Japanese companies in selling their products in South Korea, and the thousands of South Korean workers either working for South Korean companies or Japanese companies.

So who benefited from the boycott? The South Korean economy was already not doing so good and then a boycott comes along. Maybe it makes a very small percentage of some feel good but its doesn't benefit the rest of society or the economy, and it certainly doesn't benefit all of the South Korean workers who just wanted to work and make a living.  

Unfortunately, in many ways SK is still a one mindset country in some situations, while there are of course many who don't really worry about politics and such, they are just trying to work and live, they follow along to get along. The might not like or agree exactly with the boycott but they refrain with buying some Japanese products. 

But at the same time, I've been to many Japanese stores and such in South Korea and there are still plenty of customers in all of the stores. 

And potentially the idea of China and India might be in a similar situation down the road. 

Article:

China will also remove tariffs on some 87 percent of Japanese auto parts, steel products and household appliances, making 86 percent of Japan's China-bound industrial goods tariff-free as a result, sharply up from 8 percent.

Japan will remove tariffs on 49 percent to 61 percent of agricultural and fisheries products, but excluding five sensitive product categories -- rice, wheat, dairy products, sugar, and beef and pork -- and 47 percent to 99.1 percent of industrial goods.

RCEP consists of 10 ASEAN countries -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam -- plus Japan, China, South Korea, Australia and New Zealand. Japan has free trade frameworks in effect with ASEAN, Australia and New Zealand.

Ideas and Commentary (Analysis): 

In any trade agreement there are some positives and some not so positives. No trade agreement is 100 percent a positive for any country. There is always the need for compromise in some areas to get more benefits in other areas. And there are always some product categories that are protected and or not negotiated on such as the usual related to rice and such in Japan and in South Korea too.

Each country probably has its areas of concern for some products an industries to protect from outside competition.

Case in point, when the US/Korea trade agreement was being negotiated the SK farmers and the meat producing groups had some fairly intense protests to put it mildly.

The South Korean government for many years had been trying to prepare the agriculture markets for future openings for many years, but each time a new agreement was taking place the farmers and others continued to resist and they say they are not prepared for an opening.

It can be said that many were not prepared as they were unable or unwilling to adapt or change to the new competition and the lower priced products that might enter the country while some were able to prepare and adapt.  

So the SK government had to try and compromise with the farmers and with the US negotiators on some very sensitive markets and products.

Now in 2020 you no longer here about protests, or no protests really related to the RECP. Of course the pandemic be might the reason there is not much related to the RECP and protests.