Content area
Full Text
Introduction
To most observers, Japan and Mexico seem distant economic partners, with only a modest volume of bilateral trade and foreign direct investment and a large geographical and cultural gulf between them. By this account, the Japanese decision to negotiate with Mexico is puzzling if not downright nonsensical. Why would Japan invest so much political capital in the negotiation of a complex free trade agreement (FTA) with a nation accounting for such a minuscule share of its international economic exchange?1
We challenge this interpretation of Japan's second FTA ever and demonstrate that far from irrational or insignificant, the stakes involved in the Japan-Mexico FTA were very high. This cross-regional initiative stands to exert powerful influence over the future evolution of Japan's turn towards economic regionalism.2 For a number of Japanese industries (automobiles, electronics, and government procurement contractors), negotiating with Mexico was essential to level the playing field vis-à-vis their American and European rivals already with preferential access to the Mexican market based on their FTAs. For the Japanese trade bureaucrats, housed in the Ministry of Economy, Trade and Industry (METI), the stakes of the trade agreement with Mexico were also very high; not only would it enable Japan to use bilateral trade deals as an instrument to counter trade diversion abroad, but it would also be crucial in setting precedents on negotiation modalities regarding issues such as service liberalization or rules of origin (ROO). In addition, it would be all-important in helping the ministry tip the domestic balance in favour of an active FTA diplomacy despite the opposition from the agricultural lobby.3 The FTA negotiations with Mexico were in fact conceived from the beginning as an integral part of Japan's regional overtures in Asia in that they would constitute the litmus test both for the Japanese government and in the eyes of potential FTA partners in Asia on whether Japan could offer a satisfactory liberalization package to prospective FTA partners to make these negotiations worthwhile.
Mexican trade officials also assigned a high priority to a preferential trade agreement with Japan, both to achieve long-standing goals and to deal with pressing current issues. For a long time Mexico has attempted to diversify its economic relations in order to ameliorate its heavy reliance on the American market.4...