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The Making of Asia's First Bilateral FTA: Origins and Regional Implications of the Japan-Singapore Economic Partnership Agreement


  • Takashi Terada


Japanese Prime Minister Junichiro Koizumi ushered in a new era in Japan’s international trade policy in January 2002 when he and his Singaporean counterpart, Goh Chok Tong, signed the Japan-Singapore Economic Partnership Agreement (JSEPA), the first bilateral Free Trade Agreement (FTA) signed between Asian countries. This trade strategy also reflected Japan’s interest in launching its so-called ‘multi-layered trade policy’ which meant the pursuit of bilateral and regional trading arrangements, including FTAs, in an attempt to complement multilateralism based on the GATT/WTO to reinvigorate efforts to achieve global trade liberalisation. This paper aims to examine how and why Japan and Singapore decided to pursue FTAs, what interests both perceived in their pursuit of FTAs, what elements contributed to both countries being linked in this trade policy arrangement, and what implications the JSEPA has had for the FTA movement in East Asia. It argues that the JSEPA was made possible mainly through Singapore’s initial offer to exclude agricultural products from tariff elimination. But Japan faced problems in seeking FTAs with other ASEAN countries which were less developed than Singapore and had a higher proportion of agricultural exports, as the exclusion of specific agricultural products, such as rice and sugar, would contradict Japan’s claim that its FTAs would bolster the WTO-based multilateral system. The proliferation of FTAs in East Asia may generate a ‘spaghetti-bowl’ effect with varying rules of origin that may divert and distort trade, but the ‘new age’ aspects of the Japan- Singapore agreement will also have some positive economic effects. Although the preferential trade elements of the agreement are detrimental, the smaller portion of tariff elimination results in a smaller trade diversion effect on trading partners. Therefore, the Japan-Singapore agreement carries symbolic meaning in terms of trade policy debates as well as signifying a paradigm shift in Japan’s international trade policy.

Suggested Citation

  • Takashi Terada, 2006. "The Making of Asia's First Bilateral FTA: Origins and Regional Implications of the Japan-Singapore Economic Partnership Agreement," Asia Pacific Economic Papers 354, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:csg:ajrcau:354

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    References listed on IDEAS

    1. Shujiro Urata, 2004. "The Emergence and Proliferation of Free Trade Agreements in East Asia," Japanese Economy, Taylor & Francis Journals, vol. 32(2), pages 5-52.
    2. repec:wsi:wschap:9789812701350_0018 is not listed on IDEAS
    3. Thomas W. Hertel & Terrie Walmsley & Ken Itakura, 2005. "Dynamic Effects Of The "New Age" Free Trade Agreement Between Japan And Singapore," World Scientific Book Chapters,in: Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 18, pages 483-523 World Scientific Publishing Co. Pte. Ltd..
    4. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
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    Cited by:

    1. Guanyi Leu, 2011. "ASEAN’s Preferential Trade Agreements (PTA) Strategy," Journal of Current Southeast Asian Affairs, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 30(2), pages 31-64.

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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration


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