Global Biz

Japan, India to sign trade, investment deal

(Agencies)
Updated: 2010-10-25 17:08

TOKYO - The leaders of India and Japan were set to sign a sweeping agreement Monday on boosting trade while the visiting Indian prime minister pushed for a nuclear energy deal _ a touchy issue for Tokyo because of India's past atomic test blasts.

With its economy sputtering, Japan began talks in June toward a possible civilian nuclear deal, which would allow Japanese companies to export nuclear power generation technology and related equipment to India.

But Tokyo is balking because of India's refusal to sign the Nuclear Non-Proliferation Treaty. Anti-nuclear sentiment runs high in Japan, the only nation to suffer atomic bomb attacks. Indian Prime Minister Manmohan Singh has called a civilian nuclear deal a "win-win proposition," but little progress was expected during his three-day visit.

When former Foreign Minister Katsuya Okada visited New Delhi in August, he cautioned India against any further testing of nuclear devices and said no timeline was set for the conclusion of a civil energy deal.

The broad economic partnership agreement, or EPA, that Singh and Japanese Prime Minister Naoto Kan will sign calls for slashing import taxes on a range of goods from auto parts to bonsai plants. It is broader than a typical free trade agreement because it includes ways to promote investment and also deals with intellectual property rights.

Forging this kind of pact is increasingly a priority for Japan, which sees itself falling behind regional rival South Korea in this area.

Despite the size of their economies, Japan and India have had limited trade, which totaled just 636 billion yen, or about $7.7 billion, for the first six months of the year, about 1 percent of Japan's global trade. Trade with China, Japan's No. 1 partner, totaled $176 billion over the same period.

India and Japan are also likely to sign an agreement in the procurement and exploration of rare earth minerals needed for advanced manufacturing, according to an Indian official who asked not to be indentified because he is not allowed to speak to the press.

Under the deal, Japan would get access to India's rare earths, while India would gain from technology to exploit its rare earths reserves.

According to the US Geological Survey, India is the fifth-largest rare-earth producer in the world. It holds 3 percent of global reserves, or 3.1 million tons, located mainly in the southern Indian states of Kerala and Tamil Nadu and southeastern Orissa state.

Japan and India had reached a basic EPA deal in September, nearly four years after starting negotiations in early 2007. Under the basic agreement, Tokyo will remove tariffs on 97 percent of Indian imports, with India eliminating tariffs on 90 percent of goods imported from Japan.

Japan will improve market access on most products in the industrial sector, as well as several agricultural products such as durian, curry, tea leaves, lumber, shrimp and shrimp products.

India will improve Japan's market access in auto parts, steel panels, as well as DVD players, video cameras and industrial machinery. The country will also allow greater access to miniature "bonsai" trees, as well as Japanese yam, peach, strawberries and persimmons.

In two rounds of talks on nuclear energy cooperation, India and Japan have been hammering out language on a possible deal.

While India announced a moratorium on further nuclear testing, Japan wants New Delhi to be more explicit on its commitment not to conduct a nuclear test in the future. The two sides are also formulating what would be the consequences if India were to conduct a nuclear test.

An India-Japan nuclear agreement is of critical important for international nuclear power plant companies to do business with India. While US-based firms GE-Hitachi Nuclear Energy and Westinghouse Electric, a subsidiary of Japan's Toshiba Corp, are waiting to set up plants in India, some key components for the plants are supplied by Japanese companies.

New Delhi had faced a nuclear trade ban since conducting its first atomic test in 1974 and refusing to sign nonproliferation accords. It began emerging from the nuclear isolation in 2008 when it signed a civil nuclear cooperation agreement with the United States. The 45-nation Nuclear Suppliers Group then lifted a three-decade global ban on nuclear trade with India.

During his talks with Singh, Kan plans to stress the need for further effort to bring the 1996 Comprehensive Test Ban Treaty into force to outlaw all nuclear test explosions, the Japanese foreign ministry said.