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The Globe and Mail

Canada, Japan move toward free trade talks

Newly produced cars await shipment at an industrial port in Yokohama.

© Toru Hanai / Reuters/REUTERS

Canada and Japan are taking initial step toward free trade negotiations, with the first formal meeting of senior officials since the March declaration the two countries intended to seek closer economic relations.

Officials of the Joint Economic Committee began two days of discussions in Ottawa on Wednesday in what is seen as a table-setting exercise to broader talks.

The agenda calls the discussions to focus on reconstruction efforts following last spring's earthquake and tsunami, bilateral co-operation in energy, natural resources, as well as co-operation in science and technology.

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Although Japan is the world's third-largest economy, with a gross domestic product of almost $6-trillion, the Canada-Japan free trade initiative has mostly flown under the radar since the announcement this spring.

More top of the news has been Canada's bid to join the Trans-Pacific Partnership, the European Union trade talks and even negotiations with the India.

But in a note, Trade Minister Ed Fast's office said as of 2011, Japan was still Canada's biggest partner in foreign direct investment in Asia, reaching $8.4-billion at the end of 2011.

It is also one of Canada's biggest trading partners. Canadian exports to Japan totalled $10.7-billion last year, mostly in the areas of natural resources, oil seeds, wood and meat.

Imports for the same year from Japan were valued at $13-billion, principally cars and machinery.

A joint study by the two countries estimates that a successful agreement could boost the Canadian economy by about $3.8-billion and exports by two-thirds.

The talks have the backing of several key industry groups, particularly agricultural producers looking to expand into a lucrative market, but the Canadian Auto Workers has warned it would hurt the economy overall.

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CAW president Ken Lewenza said after the March announcement that Canada has a $5-billion auto deficit with Japan even though the country has no tariffs on auto imports.

"There will be no benefit to our auto industry or other important sectors of the economy like manufacturing and processed goods," he argued. "Instead there will be a huge cost to key sectors when we eliminate the small tariff on goods coming into Canada."

The Harper government has gone all in on the trade front, however, and mostly brushed off critics as overly alarmist.

In the budget, the government named trade a key pillar for the economy of the future and pledged to actively pursue "new trade and investment opportunities, particularly with large, dynamic and fast-growing economies."

It is believed the admission ticket to the TPP table was Ottawa's willingness to discuss modification to its supply management system in dairy and poultry, as well possibly further tightening of patent and intellectual property protections.

With the TPP and now Japan, Ottawa will have four major trade talks in progress at the same time, with China likely waiting in the wings.

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Ottawa has identified key sectors it believes could benefit from a free trade deal with Japan, including agriculture, food and beverages, information and communications technology, aerospace and defence, environmental industries and clean technology, energy, mining and forestry, and life sciences.

Officials estimate the talks could take about two years to reach a conclusion.

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