TRADE POLICIES OF JAPAN & CHINA

Trade Policies of Japan and China

Trade Policies of Japan and China

Introduction

According to the authors of 'The China Factor Blunts The Cutting-Edge Of The Japan Free Trade Agreement', most of the industrialize countries of the world are worry with the fast growth of China economic during year 2000s. Therefore all of these countries have to seek ways to protect and balance their economic interest due to this scenario. It is described by mass media as 'China Factor in World Trade' (Khondaker Mizanur Rahman, Rafiqul Islam Molla, and Md W.Murad, 2008: The Cutting-Edge of the Japan Free Trade Agreement).

In this paper we compare/contrast of Japan and China's trade policies and its affect on the global economy to observe the effect of China factor in influencing the effectiveness of this bilateral trade between Japan and Malaysia. Beside, the history and development of Malaysia- Japan FTA will be explained further.

Overview

Free trade area is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods and services traded between them. It can be considered the second stage of economic integration. Countries choose this kind of economic integration form if their economical structures are complementary. If they are competitive, they will choose customs union (Wikipedia: 2007).

Comparison

The Cutting-Edge of the Japan Free Trade Agreement) from 1986 to 2007, the bilateral trade between Malaysia - Japan became stagnant during 2001 to 2005 with an average of annual value of USD25.35 billion as a result of the China factor (Khondaker: 2008). Therefore as a result to protect their bilateral trade growth with emergence of 'China factor', the FTA between Malaysia and Japan was realized in 2005 and implemented from 2006 with the expectation that it would further enhance the trade and investment relationship between the two countries.

In China, foreign direct investments has been a priority of the trade policy. The first measure of the opening-up policy was to allow in FDI, and to create special economic zones to attract foreign investors. The policy toward FDI included both strong incentives, as well as severe constraints. Joint ventures benefited from tax exemptions and reductions, along with concessional import duties. These preferential schemes were applied selectively, depending on the industrial branches and geographic areas in question. The "open zones" were progressively extended to a large part of the coastal area. But currency inconvertibility, and the requirement to balance their foreign exchange operations has been a major obstacle for foreign investors. The development of Foreign exchange adjustment centres (FEACs), since the middle of the 1980s, has been a way to alleviate the difficulty.

The FSCs have also tended to attract inflows of foreign capital but expected them to result mainly from their economic liberalization. In the FSCs, currency convertibility for current account operations and the free transfer of profits have been a decisive move for foreign investors. In the first years of the transition, preferential fiscal treatments for foreign investors also aimed at ...