Canada will take another run at sparking free-trade talks with Japan, the world’s third-largest economy, by launching a joint study on a trade deal, sources say.
Earlier attempts to reach an agreement stalled because the former Liberal Democratic government in Tokyo was cool to opening politically sensitive protected markets and possibly riling constituencies such as farmers.
But after signals that the new government is willing to liberate the country’s trade, Canada is moving to explore the possibility of talks.
Sources said that the two countries are set to announce the joint study, possibly as soon as Thursday, on what a free-trade deal might look like. And although Trade Minister Peter Van Loan didn’t explicitly confirm that, he said there is new hope of relaunching talks.
A joint study typically examines the costs and benefits of a trade deal, and what areas, from beef to cars to computer parts, might be included.
Prime Minister Naoto Kan’s cabinet has adopted a policy of looking toward greater trade openness and finding new opportunities. He and Prime Minister Stephen Harper have pushed their governments to move toward trade talks, according to sources familiar with the file.
“Japan has been particularly historically closed to trade. And there have been some very interesting signs of late,” Mr. Van Loan said. “We’re certainly exploring whether there is an opportunity for Canada in the new openness.
“We’re very encouraged that there is an opportunity now on the free-trade front.”
That doesn’t mean a deal is close. Studies lead to negotiations, which can take years, or fail. And Canada and Japan conducted a study early in Mr. Harper’s tenure, but it never went to negotiations.
Automobiles are among the leading imports to Canada from Japan and are subject to a 6.1-per-cent duty.
The duty applies to some of the most popular vehicles in Canada, which include the compact Mazda3 and several subcompact cars such as the Honda Fit and the Toyota Yaris.
For Japan, free-trade talks opened sensitive domestic questions about who would be hurt when protections for certain sectors were brought down, notably for farmers, and producers of beef, pork and other foods that would face Canadian competition.
“That was then and this is now,” said Joseph Caron, who was Canada’s ambassador to Japan at the time.
Japan’s Democratic Party became the government in 2009, and Mr. Kan has voiced the need to restructure the stagnant economy and open to trade.
Most economic focus in Asia is now cast toward China and India, rather than Japan, but its economy is the world’s third-largest and Asia’s high-tech leader.
Mr. Caron said opening trade with Japan makes sense for Canada just because of the size of its $5-trillion economy, but it also has extensive investment and trade links throughout other fast-growing Asian economies, such as China.
Mr. Van Loan said expanding trade ties with such a big economy would be important, but also noted that few Asian countries have broad free-trade agreements. He expressed hope that a broad deal with Japan might encourage others to take the same approach.
“It’s important on its own, simply bilaterally, because of the size of the economy,” he said. “But it may be an important step in our broader Asian strategy.”
With a report from Greg Keenan in Toronto