Aspects of the new agreement between India and Japan

Wednesday, February 16, the Japanese and Indian governments signed a partnership and free trade agreement in Tokyo, strengthening their political, economic, and commercial relations.

In particolare, i dettagli dell’accordo riguardano l’ abolizione delle tariffe, pari al 94% sul commercio dei beni, nel giro di dieci anni. L’accordo è stato siglato tra il ministro degli Esteri giapponese, Seiji Maehara, e il ministro del Commercio indiano, Anand Sharma: Giappone ed India diventeranno quindi reciprocamente i più importanti partner di libero scambio.

This agreement must be read, especially from the Japanese perspective, in a specific light: the signing of the treaty was a priority for the Tokyo government. Just a few days ago, in fact, Japan ceded second place to China as the largest economy in the world. Japan's population is among the oldest in the world, and its economy has been stagnant for two decades: it was the Japanese Prime Minister, Naoto Kan himself, who emphasized that Japan must open up to revive its prospects. Japan is therefore following the path of South Korea, which through its trade agreements with other countries has managed to increase its global competitiveness.

The agreement with an emerging power like India represents an important milestone as well as a necessity for Tokyo. On the other hand, India, through its Minister of Commerce, Anand Sharma, has defined the agreement as “historic and important,” highlighting how the country is influencing global economic trends and directions.

Pur essendo due grandi economie, Giappone e India hanno avuto scambi commerciali limitati nel 2010, pari ad una cifra equivalente a 11 miliardi di USD, appena l’1% del commercio mondiale giapponese. Basti pensare che gli scambi commerciali annuali tra Giappone e Cina superano i 317.000 miliardi di dollari.

The agreement provides for greater flexibility for Japanese investments in the Indian telecommunications sector and for the sale of Indian medicines in Japan. Greater access to the Japanese market will also be allowed for products such as curry, tea leaves, wood, and shrimp, while India, in turn, will reduce tariffs on Japanese automotive products, steel, DVD players, and video cameras, as well as on peaches, strawberries, and potatoes.

Instaurando rapporti più stretti con l’India, si potrebbe aprire la strada a investimenti giapponesi per lo sviluppo delle risorse minerarie: già nello scorso Ottobre  il primo ministro indiano Manmohan Singh aveva ipotizzato assieme al primo ministro giapponese, Naoto Kan, una possibile cooperazione in questo ambito che miri alla diversificazione delle risorse naturali. Il Ministro Anand Sharma ha anche proposto la creazione di un fondo di 9 miliardi dollari  per contribuire a finanziare un corridoio industriale, operazione che mette in evidenza gli sforzi dell’India per migliorare la situazione delle proprie infrastrutture. Già dal 2007 esiste un progetto finanziato dal Governo Indiano e da diverse aziende giapponesi per un miglioramento dei collegamenti tra Nuova Delhi e Mumbai, capitale finanziaria dell’India.

The agreement, therefore, widely supported by Japanese industrialists and entrepreneurs, is not limited to a mere commercial exchange but also extends to other projects, intensifying relations between the two countries. In the future, a nuclear cooperation agreement could be planned that would allow Japanese companies to build new reactors in India.

From a geopolitical point of view, the signal sent by Japan and India to another major power, China, is indeed strong: it is known that Chinese influence in the region is not well viewed by Japan and that relations between Tokyo and Beijing are dire. Recent trade, currency, and territorial disputes have certainly not improved the situation, instead strengthening ties between India and Japan.

On the Asian chessboard, New Delhi is moving with determination and wisdom. A hypothetical deterioration of diplomatic and commercial relations between the two leading Asian powers could only favor the third. But India itself also views with suspicion Chinese territorial and infrastructural operations near its borders and the loans granted to Myanmar, Sri Lanka, Bangladesh, and Pakistan for the improvement of these countries' infrastructure. These are the keys to understanding the Indian-Japanese agreement.

ALSO READ:

The success of Italian companies in India

Internationalizing your business abroad: strategic choice or opportunity?

Digital export manager (DEM): internationalization in a digital context