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 should be read, above all from the Japanese point of view, from a certain point of view: the signing of the treaty was a priority for the Tokyo government. In fact, just a few days ago, Japan gave 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: it was the Japanese premier, Naoto Kan, who underlined 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 such as India represents an important milestone for Tokyo as well as a necessity. On the other hand, India, through the voice of its Commerce Minister, 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 large economies, Japan and India had limited trade in 2010, equivalent to USD 11 billion, just 1% of Japan's world trade. Suffice it to say that annual trade between Japan and China exceeds 317,000 billion dollars.
The agreement provides greater flexibility for Japanese investment in India's telecommunications sector and for the sale of Indian medicines in Japan. It will also allow more 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 for the development of mineral resources: already last October, the Indian Prime Minister Manmohan Singh, together with the Japanese Prime Minister, Naoto Kan, hypothesized 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, an operation that highlights India's efforts to improve the state of its infrastructure. Since 2007 there has been a project financed by the Indian Government and various Japanese companies to improve 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. In the future, a nuclear cooperation agreement could be envisaged 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 the other great power, China, is really strong: it is known that Chinese influence in the region is not viewed 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.
In the Asian arena, 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 even India itself does not welcome Chinese territorial and infrastructural operations near its borders and loans granted to Myanmar, Sri Lanka, Bangladesh and Pakistan for the improvement of these countries' infrastructures. These are the keys to understanding the Indian-Japanese agreement.
READ ALSO:
The success of Italian companies in India
Internationalizing your business abroad: strategic choice or opportunity?
Digital Export Manager (DEM): internationalization in a digital context
Are you interested in our service?
Fill out the form or contact us at the number
+39 059 9770184
