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C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 000916 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS USTR 
 
E.O. 12958: DECL: 02/16/2017 
TAGS: PREL PGOV ECON ECIN EINV JP CH IN
SUBJECT: WITH AN EYE ON CHINA, JAPAN AND INDIA KICK OFF 
ECONOMIC PARTNERSHIP NEGOTIATIONS 
 
 
Classified By: PolCouns Ted Osius for Reasons 1.4 (B,D) 
 
¶1.  (C) SUMMARY:  The governments of India and Japan are 
hoping to commence a new economic partnership with round one 
of negotiations on the Japan-India Economic Partnership 
Agreement (EPA), followed by the visit of a high-level 
Japanese business delegation to India.  The Economic Minister 
of the Japanese Embassy said February 6 that the first round 
of negotiations, held in New Delhi Jan. 31-Feb. 2, did not 
address major issues, but laid the groundwork for future 
negotiations centered on lower import duties and streamlined 
visa processes.  He said the aim of the EPA was free movement 
of people, money and goods, and that, the combination of 
Japan's 50% GDP share in Asia with India's 10% GDP share 
(non-PPP) would be a "very dynamic bargaining tool,"  noting 
that "it is important to maintain balance in the region among 
India, Japan and China."  At a high-powered Japanese business 
delegation meeting February 14, Indian Union Minister for 
Science and Technology Kapil Sibal invited Japanese 
businessmen to India, and reportedly stated, "Let there be 
joint ventures to bring together Japanese technology and the 
potential Indian market, as it would enable us to access the 
world market."  For now, this agreement is more about the 
politics of cementing an Indo-Japanese partnership to balance 
China than about any real economic benefit.  END SUMMARY. 
 
Laying the Groundwork 
----- 
 
¶2.  (C) Toshitsugu Uesawa, Economic Minister of the Japanese 
Embassy, said February 6 that the first round of negotiations 
on the Japan-India Economic Partnership, agreed to when Prime 
Minister Singh visited Tokyo in December 2006, had been held 
Jan. 31-Feb. 2 in Delhi.  Heading the Japanese delegation was 
Mr. Masaharu Kono, Deputy Minister for Foreign Affairs, and 
the Indian side was led by GK Pillai, Secretary of Commerce. 
Uesawa said that this round had been "just a kick off," 
 
SIPDIS 
designed to lay the groundwork for future negotiations on the 
bilateral trade agreement.  The primary accomplishments of 
this meeting had been defining the scope of future 
discussions, determining the constitution of the delegation, 
scheduling future meetings, determining press guidelines and 
the formation of basic principles.  The two sides will meet 
every two months, alternating between Japan and India, with 
the next round scheduled for the week of April 9th in Japan. 
According to the Government of India (GOI) Ministry of 
Commerce, the EPA negotiations are likely to be concluded in 
the next 18 months.  (Note:  This is an ambitious target for 
Indian trade negotiators, and if achieved, will probably be 
because the agreement contains marginal changes to GOI trade 
practices.  End note.) 
 
Free Movement of People, Money and Goods 
----- 
 
NEW DELHI 00000916  002 OF 003 
 
 
 
¶3.  (C)  Uesawa said the aim of the EPA was "free movement of 
people, money and goods," noting that India had stated it 
wanted Japan to accept unskilled Indian workers.  Uesawa 
indicated that the Japanese consider their market to be free, 
but that the Indians "think it is full of obstacles and 
invisible barriers."  He also stated that Japan will be firm 
in asking India to abolish duties for 90% of its tariff line 
items within ten years, declaring, "we will hold on to this 
demand until the end."  Outside of those issues, Uesawa 
reported that there were no serious differences between Japan 
and India. 
 
Japan GDP Plus Indian GDP:  A Dynamic Bargaining Tool 
----- 
 
¶4.  (C) Uesawa assessed that, by combining Japan's 50% share 
of Asian GDP with India's 10% share (not calculating using 
Purchasing Power Parity Power), the total of a 60% share 
would be "a very dynamic bargaining tool."  (Note:  It was 
unclear from Uesawa's comment whether he envisioned that this 
bargaining power would be useful to India and Japan in the 
WTO Doha Round or in negotiating further market access via 
BTAs or regional trade agreements (RTAs) in Asia.  In any 
case, Uesawa likely sees greater Indo-Japanese cooperation as 
a counterweight to China's growing economic clout in the 
region.  End note.)  This sentiment was echoed at the 34th 
India-Japan Joint Business Cooperation meeting, where 
Japanese Ambassador to India Yasuki Enoki said that the two 
countries "can corner 60 percent of the Asian GDP."  Also at 
the meeting, organized by the Federation of Indian Chambers 
of Commerce and Industry for the Japanese business delegation 
led by Mitsui Chairman and Executive Director N. Ohashi, was 
Indian Union Minister for Science and Technology Kapil Sibal, 
who invited Japanese businessmen to India.  "India is a low 
cost economy with a very high quality human resource base, 
and offers much more opportunities than China," Sibal said, 
according to the press. 
 
Issues for Round Two 
----- 
 
¶5.  (C) Uesawa said issues to be discussed in forthcoming 
rounds include: 
 
- market access and general rules related to trade in goods 
- rules of origin 
- customs procedures 
- trade in services 
- investment 
- intellectual property 
- improvement of business environment and investment 
cooperation. 
 
 
NEW DELHI 00000916  003 OF 003 
 
 
Comment:  More Political Than Economic 
------- 
 
¶6.  (C) It's not altogether clear how a bilateral trade 
agreement between Japan and India will benefit U.S. companies 
unless the agreement tackles restrictions in difficult 
sectors like agriculture, which is highly unlikely.  If 
anything, the trade diversion effects inherent in a WTO-plus 
BTA may adversely impact U.S. exports to India of certain 
high-tech and capital goods which Japan also produces. 
Indian BTA negotiations usually leave out the sensitive and 
highly protected agriculture sector, which is the crux of the 
impasse in the Doha Round.  More ambitious Indian trade 
negotiations, in particular with the ASEAN countries, have 
run into difficulties over sensitivities and India's negative 
lists that exclude a large chunk of trade.  The proposed 
India-Japan EPA is likely to emulate the unwritten goals of 
the India-EU BTA negotiations launched a few months earlier: 
modestly increased market access for non-sensitive goods, 
technical cooperation on trade facilitation, and no 
discussion of agricultural trade.  Where the Japan talks 
differ is that the unstated goal of forging a Japan-India 
partnership to counter China reflects the very real political 
aim of this ostensibly economic effort.  End comment. 
MULFORD