#96-DOF-24 "APEC as Seen from the Eyes of a Japanese Economist"
           (Ryutaro Komiya, July 1996.)

A WHOLE SENTENCE

ABSTRACT

    The Japanese trade policy authorities showed great enthusiasm 
toward the formation and growth of APEC. Viewed from Japan's 
perspective, since the second half of the 1980s there have been two 
worrying developments in the world trade system. First, the Uruguay 
Round did not progress smoothly, and second, regionalism, which 
included elements running contrary to globalism, was spreading. The 
ASEAN countries, Australia, Japan, and South Korea hoped for the 
maintenance and development of a free, multilateral world trade system,
as well as for keeping the EU and North America as open as possible. 
APEC was also expected to strengthen the negotiating power of the West
Pacific countries vis-a-vis the U.S. and the EU.
    The APEC countries agreed to liberalize trade and investment by 
2010 or 2020, but the meaning is not clear. I see difficulties with 
either of the two approaches to promote the liberalization of trade 
and investment in APEC: an MFN approach and a reciprocity approach. 
Most East Asian countries, at least at present, are not in favor of 
the second approach, which implies the formation of a free trade area.
Whereas the U.S. is negative toward an MFN approach, which allows the 
EU a free ride on the APEC liberalization wagon.
    The heat of Japan-U.S. trade "friction" has declined  
substantially, and this trend will more or less continue. There is 
widespread acceptance of the concept that Japan has very high trade 
barriers, but it is a mistaken view.
    Will the Japanese government include agricultural products among 
the targets for free trade? In Japan, "agricultural prefectures" are 
relatively poor and economically stagnant, but politically influential.
Japan's protective agricultural policies will more or less continue 
for the time being. Because the majority of the Japanese people 
support free trade, however, Japan's trade barriers relating to 
agricultural products are unlikely to become higher than at present. 
Japan is now the world's largest importer of foodstuffs, and the value
of its food imports doubled in sevenyears from 1987 to 1994. Since 
Japan's agricultural production is expected to stagnate or decrease in
the future, its food imports will probably expand steadily in the 
future.
    APEC has so far been a great success. The evaluation of APEC in 
the next several years will depend on how much progress is made in 
terms of liberalization and facilitation of trade and investment and 
economic cooperation among members.