On Wednesday 16 February, the Governments of Japan and India signed a partnership and free trade agreement in Tokyo, strengthening their political-economic-commercial relations.
In particular, the details of the agreement concern the abolition of tariffs, equal to 94% on trade in goods, within ten years. The agreement was signed between the Japanese Foreign Minister, Seiji Maehara, and the Indian Trade Minister, Anand Sharma: Japan and India will therefore become each other's most important free trade partners.
This agreement must be read, especially from the Japanese point of view, from a certain perspective: the signing of the treaty constituted a priority for the Tokyo Government. Just a few days ago, in fact, Japan gave up second place to China as the largest economy in the world. The Japanese population is among the oldest in the world and its economy has been blocked for two decades now: it was the Japanese Prime Minister, Naoto Kan, who underlined that Japan must open up to relaunch 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 goal for Tokyo as well as a necessity. On the other hand, India, through its Minister of Commerce, Anand Sharma, defined the agreement as "historic and important", highlighting how the country is influencing the trends and trends of the global economy.
Despite being two large economies, Japan and India had limited trade in 2010, amounting to a figure equivalent to USD 11 billion, just 1% of Japanese world trade. Suffice it to say that annual trade between Japan and China exceeds 317 trillion dollars.
The agreement provides greater flexibility for Japanese investments in the Indian telecom sector and for the sale of Indian medicines in Japan. It will also allow greater access to the Japanese market 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 peaches, strawberries and potatoes.
By establishing closer relations with India, the way could be paved for Japanese investments in the development of mineral resources: already last October the Indian Prime Minister Manmohan Singh had hypothesized, together with the Japanese Prime Minister, Naoto Kan, a possible cooperation in this area that aims at the diversification of natural resources. Minister Anand Sharma also proposed the creation of a $9 billion fund to help finance an industrial corridor, which highlights India's efforts to improve its infrastructure situation. Since 2007 there has been a project financed by the Indian Government and several Japanese companies for improving connections between New Delhi and Mumbai, India's financial capital.
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. A nuclear cooperation agreement allowing Japanese companies to build new reactors in India could be envisaged in the future.
From a geopolitical point of view, the signal sent by Japan and India to the other great power, China, is really strong: it is known that Chinese influence in the region is not seen well by Japan and that relations between Tokyo and Beijing they are bad. Recent trade, currency and territorial disputes have certainly not improved the situation, instead strengthening relations between India and Japan.
On the Asian stage, New Delhi is moving with determination and wisdom. A hypothetical tightening of diplomatic-commercial relations between the first two Asian powers could only favor the third. But India itself also does not look favorably on Chinese territorial and infrastructural operations near its borders and the loans granted to Myanmar, Sri Lanka, Bangladesh and Pakistan for the improvement of the infrastructure of these countries. These are the keys to understanding the Indian-Japanese agreement.
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