Currently, it takes some time to respond to comments because I have some other things I have to prioritize.

Wednesday, October 27, 2010

Economic Partnership Agreement

On September 25th, EPA (Economic Partnership Agreement) was concluded bewteen Japan and India.
It'll have huge economic effect both for Japan and India. 90% of the total export is going to be tax-exempt for Japan, while 97% of the import from India is going to be exempted from taxation.
Two heads mentioned the cooperation on the development of rare metal and rare earth although it was not concluded as a treaty.

It was a good timing considering the present situation between Japan and China.
There's no denying the risk to be dependent on China who boasts anti-Japan as national policy. "China risk" has been discussed for many years, but Japan has shortsightedly chosen to rely on China for cheap labor and some resources. I hope this will be a turning point to start decreasing dependency on China.
I'm not saying "All companies must retreat from China." It's not feasible and would have disastrous effects on Japanese economy if it happened.
It is reasonable to gradually shift factories from China to other countries (most countries are willing establish Japanese factories)
It's not because Japan dislikes China. It's simply because there's the risk out there and there are many other possible partners all around the world.

I'm highly interested in how China, a country too dependent on foreign factories, reacts when withdrawals begin.

2 comments:

  1. Thats wonderful news! I'd much rather rely on India rather than China for manufacturing cheaper products too. Unlike China, India is a democracy and is not threatening Japan, the US, Taiwan, or ASEAN. I'm very happy for Japan, and i hope it teaches the Chinese government a lesson, though i do feel sorry for it's people who are caught in between the CCP's aggressive policies, and foreign investors. Unemployment is already very high in China (job turnovers are 30% now in China) and as Japan provides many jobs for Chinese citizens i also wonder how they will react, though i fear based on their past actions it may be easily guessed..

    China also placed a rare Earths embargo on America as well recently (which acually surprised me), but i think it will be a good thing in the end. We shut down our rare earth mining operations in 1995 because China worked out a deal that they would sell it to us cheaper than we could produce it, in exchange for us leaving the rare Earth's market (giving them a 92% share of the market). Now that they are trying to exploit that, we have restarted mining rare earths out of the rocky mountains, and it should be ready for exports by 2011. It will be more expensive to mine, but in the end it will be a reliable source of rare Earth material to both the US and it's friends.

    I've also heard of somthing similar between Japan and the US, apparently there is talk of a free trade agreement that is entering a new stage. I think this is a good idea too, as i'm sure the US could provide Japan with many of it's needs such as raw materials and food, though i am not sure how Japan feels about it.

    I hope we follow Japan's example and follow suit in India, i can not trust a communistic government and their aggressive actions over the past 15 years have been fueled by their enhanced economic power. I do worry how China will react if we did that though..

    We have reasonable economic ties with India, and because their population is larger, and their currency is not as valuable as the Wong, it should be cheaper to manufacture products in India than in China now. I think the more we invest in friendly countries, the less likely we will be threatened later on.

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  2. [i do feel sorry for it's people who are caught in between the CCP's aggressive policies, and foreign investors.]
    People at the bottom are always victimized.

    [Unemployment is already very high in China (job turnovers are 30% now in China)]
    This is one of the reasons why China needs a scapegoat.

    [we have restarted mining rare earths out of the rocky mountains, and it should be ready for exports by 2011.]
    Since Japan does not house the kind of materials, researchers are trying to establish efficient recycling system instead.

    [I've also heard of somthing similar between Japan and the US, apparently there is talk of a free trade agreement that is entering a new stage.]
    We are trading so much that it can cause shock in the market. Even the treaty on the trade between Japan and India, which is much smaller in scale, is going to gradually remove tariff barriers in ten years. We need to be as careful as possible.

    [US could provide Japan with many of it's needs such as raw materials and food, though i am not sure how Japan feels about it.]
    Japanese people have strong tendency to cling to vested interests, so I think people involved in primary industry will definitely speak against it.

    [I think the more we invest in friendly countries, the less likely we will be threatened later on.]
    I really think it's important to choose "friendly countries."

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