Asia Times 27.10.10
India and Japan eye a glowing partnership
By Purnendra Jain
ADELAIDE - India for years actively sought closer ties with Japan - but Tokyo expressed little interest. This has changed slowly but surely amid a shifting regional landscape and momentum in bilateral ties this week gathered pace.
During his three-day official visit to Tokyo starting October 24, Prime Minister Manmohan Singh and his Japanese counterpart, Naoto Kan, issued a joint statement covering a wide-range of issues. While these included worthy issues such as expansion of the East Asian Summit to include theUnited States and Russia, and reform of the United Nations, all eyes were fixed elsewhere.
Progress of two important bilateral matters: an India-Japan Comprehensive Economic Partnership Agreement (CEPA) andcooperation on civilian nuclear technology captivated attentions. While a deal is sealed on the first, negotiations will continue on the second.
For the record, the two prime ministers announced "the successful conclusion of negotiations on a balanced and mutually beneficial India-Japan Comprehensive Economic Partnership Agreement" and "expressed optimism that the India-Japan CEPA will deepen economic engagement in terms of trade in goods and services, investment and cooperation and contribute to mutual prosperity".
Negotiations for a CEPA began in early 2006 and went through 14 rounds of negotiations between January 2007 and September 2010 after a feasibility report prepared by a joint India-Japan study group.
While Japan has signed such agreements with a number of Asian countries, for India this is only its third after Singapore and South Korea. Although the content of the 850-page CEPA remains embargoed, it was hailed by Singh as a "historic achievement" which would lead to a "quantum increase" in bilateral trade and investment. The pact is likely to take three to four months to come in effect. It will eliminate tariffs on a number of items and is aimed at increasing the volume of bilateral trade, which currently stands at about US$10 billion.
Until the details of the agreement are made available, it is difficult to say how India is going to address its huge trade deficit with Japan. Given Japan's stagnant economy, India will likely seek niche markets for exports. New Delhi will expect greater Japanese investment for infrastructure development, such as roads, ports, airports and transportation.
Japanese companies have often complained about bureaucratic bottlenecks and corruption inIndia as impediments to doing business. How these long-standing issues are going to be addressed will be of great interest.
Prior to Singh's departure, it seemed that talks on a civilian nuclear cooperation agreement would take a back seat, but the issue was included in the joint declaration setting out a timeframe for the next round of negotiations. The two leaders affirmed that the Agreement for Cooperation in the Peaceful Uses of Nuclear Energy would lead to new opportunities and enhance bilateral ties.
Just a few years ago, it was unthinkable that India and Japan would negotiate on a civil nuclear cooperation agreement. Given Japan's international pre-eminence as a voice against nuclear proliferation and its continued criticism of India's nuclear policy - voiced most loudly in response to nuclear tests in 1998 - what has made Japan consider a civilian nuclear cooperation agreement?
The answers lie in a complex web of international and domestic imperatives. Japan is in the midst of profound transition at home and within the region and concerns about China's economic and military resurgence are a central factor pushing the two countries closer.
While no direct mention was made of China in the joint statement, it made note of the possibility of exploring "bilateral cooperation in development, recycling and re-use of rare earths and rare metals". It is not difficult to link this to the recent spat between China and Japan in the East China Sea and China's reluctance to sell rare earths to Japan.
The real motivation behind Japan's consideration of nuclear cooperation with India is the US–India civilian nuclear cooperation agreement concluded in late 2008. Japan is a member of the 45-nation Nuclear Suppliers Group that regulates the transfer of nuclear technology and lifted a three-decade global ban on nuclear trade with India just after the US–India agreement was signed. Yet Tokyorefrained from making any bilateral commitment to India.
American and French companies, along with Russian and South Korean companies, are now seeking to win contracts for 20 nuclear power plants India plans to build by 2020 to deal with its chronic shortage in electric power. But since Japanese firms are deeply entangled in the US and French nuclear industry, Japan is an essential player.
Leading US suppliers such as GE (in consortium with Hitachi), Westinghouse (owned by Toshiba), and French company Areva (a joint venture with Japan's Mitsubishi Heavy Industries) are eager for Japan to see the abolition of nuclear and high-tech export controls that forbid Japanese companies from engaging in such transactions with India.
Pressure also comes from Japanese companies wanting to expand into India's multi-billion dollar nuclear energy markets. If they miss out, South Korean and Russian companies may secure most of the contracts – a situation unpalatable to a Japan in recession, which has already lost the burgeoning Indian market to South Korean companies in auto and white goods.
Japan's Ministry of Economy, Trade and Industry, and its Atomic Energy Agency, have favored a nuclear deal with India despite caution from the Ministry of Foreign Affairs. The scales appear to have now shifted towards the former's position.
The Kan government faces two mutually irreconcilable domestic constituencies: the influential business sector pushing for nuclear cooperation with India, while the strong anti-nuclear and pacifist lobby opposes this concession to a country that refuses to sign the Nuclear Non-proliferation Treaty. External conditions and domestic pressure from powerful business groups have moved the Kan government towards negotiating a deal with India.
Japan needs new markets for an economy in recession and India is keen to get Japan's technological and financial assistance for its economic development. While that provides strong logic for Japan and India to come closer, perhaps the greatest impetus is concerns over China. China has fueled further anxiety in Japan through its actions in the East China Sea, while Beijing's growing influence in India's neighborhood, especially in Pakistan, is of great concern to New Delhi.
Purnendra Jain is professor in Asian Studies at Australia's University of Adelaide.
By Purnendra Jain
ADELAIDE - India for years actively sought closer ties with Japan - but Tokyo expressed little interest. This has changed slowly but surely amid a shifting regional landscape and momentum in bilateral ties this week gathered pace.
During his three-day official visit to Tokyo starting October 24, Prime Minister Manmohan Singh and his Japanese counterpart, Naoto Kan, issued a joint statement covering a wide-range of issues. While these included worthy issues such as expansion of the East Asian Summit to include theUnited States and Russia, and reform of the United Nations, all eyes were fixed elsewhere.
Progress of two important bilateral matters: an India-Japan Comprehensive Economic Partnership Agreement (CEPA) andcooperation on civilian nuclear technology captivated attentions. While a deal is sealed on the first, negotiations will continue on the second.
For the record, the two prime ministers announced "the successful conclusion of negotiations on a balanced and mutually beneficial India-Japan Comprehensive Economic Partnership Agreement" and "expressed optimism that the India-Japan CEPA will deepen economic engagement in terms of trade in goods and services, investment and cooperation and contribute to mutual prosperity".
Negotiations for a CEPA began in early 2006 and went through 14 rounds of negotiations between January 2007 and September 2010 after a feasibility report prepared by a joint India-Japan study group.
While Japan has signed such agreements with a number of Asian countries, for India this is only its third after Singapore and South Korea. Although the content of the 850-page CEPA remains embargoed, it was hailed by Singh as a "historic achievement" which would lead to a "quantum increase" in bilateral trade and investment. The pact is likely to take three to four months to come in effect. It will eliminate tariffs on a number of items and is aimed at increasing the volume of bilateral trade, which currently stands at about US$10 billion.
Until the details of the agreement are made available, it is difficult to say how India is going to address its huge trade deficit with Japan. Given Japan's stagnant economy, India will likely seek niche markets for exports. New Delhi will expect greater Japanese investment for infrastructure development, such as roads, ports, airports and transportation.
Japanese companies have often complained about bureaucratic bottlenecks and corruption inIndia as impediments to doing business. How these long-standing issues are going to be addressed will be of great interest.
Prior to Singh's departure, it seemed that talks on a civilian nuclear cooperation agreement would take a back seat, but the issue was included in the joint declaration setting out a timeframe for the next round of negotiations. The two leaders affirmed that the Agreement for Cooperation in the Peaceful Uses of Nuclear Energy would lead to new opportunities and enhance bilateral ties.
Just a few years ago, it was unthinkable that India and Japan would negotiate on a civil nuclear cooperation agreement. Given Japan's international pre-eminence as a voice against nuclear proliferation and its continued criticism of India's nuclear policy - voiced most loudly in response to nuclear tests in 1998 - what has made Japan consider a civilian nuclear cooperation agreement?
The answers lie in a complex web of international and domestic imperatives. Japan is in the midst of profound transition at home and within the region and concerns about China's economic and military resurgence are a central factor pushing the two countries closer.
While no direct mention was made of China in the joint statement, it made note of the possibility of exploring "bilateral cooperation in development, recycling and re-use of rare earths and rare metals". It is not difficult to link this to the recent spat between China and Japan in the East China Sea and China's reluctance to sell rare earths to Japan.
The real motivation behind Japan's consideration of nuclear cooperation with India is the US–India civilian nuclear cooperation agreement concluded in late 2008. Japan is a member of the 45-nation Nuclear Suppliers Group that regulates the transfer of nuclear technology and lifted a three-decade global ban on nuclear trade with India just after the US–India agreement was signed. Yet Tokyorefrained from making any bilateral commitment to India.
American and French companies, along with Russian and South Korean companies, are now seeking to win contracts for 20 nuclear power plants India plans to build by 2020 to deal with its chronic shortage in electric power. But since Japanese firms are deeply entangled in the US and French nuclear industry, Japan is an essential player.
Leading US suppliers such as GE (in consortium with Hitachi), Westinghouse (owned by Toshiba), and French company Areva (a joint venture with Japan's Mitsubishi Heavy Industries) are eager for Japan to see the abolition of nuclear and high-tech export controls that forbid Japanese companies from engaging in such transactions with India.
Pressure also comes from Japanese companies wanting to expand into India's multi-billion dollar nuclear energy markets. If they miss out, South Korean and Russian companies may secure most of the contracts – a situation unpalatable to a Japan in recession, which has already lost the burgeoning Indian market to South Korean companies in auto and white goods.
Japan's Ministry of Economy, Trade and Industry, and its Atomic Energy Agency, have favored a nuclear deal with India despite caution from the Ministry of Foreign Affairs. The scales appear to have now shifted towards the former's position.
The Kan government faces two mutually irreconcilable domestic constituencies: the influential business sector pushing for nuclear cooperation with India, while the strong anti-nuclear and pacifist lobby opposes this concession to a country that refuses to sign the Nuclear Non-proliferation Treaty. External conditions and domestic pressure from powerful business groups have moved the Kan government towards negotiating a deal with India.
Japan needs new markets for an economy in recession and India is keen to get Japan's technological and financial assistance for its economic development. While that provides strong logic for Japan and India to come closer, perhaps the greatest impetus is concerns over China. China has fueled further anxiety in Japan through its actions in the East China Sea, while Beijing's growing influence in India's neighborhood, especially in Pakistan, is of great concern to New Delhi.
Purnendra Jain is professor in Asian Studies at Australia's University of Adelaide.
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