Tokyo, June 22 - At meetings in Rio de Janeiro recently, representatives fom Japan and Brazil have been holding talks to discuss ways to increase trade between the two countries. Japan seeks a trade pact with Brazil, and a primary reason for that pact, from Japan's point of view, is ethanol.  Japan has limited natural energy resouces, not least amongst energy crops, since the county's limited land area is devoted to food production.

 

Japan has been surpassed by China as Brazil’s largest Asian trade partner. It now ranks sixth among buyers of Brazilian exports. Prime Minister Junichiro Koizumi wants to reverse this trend. In 2005, when President Lula visited Japan, Mr. Koizumi’s government raised the possibility of signing a free trade agreement with Brazil. But the talks did not result in any agreements being signed.

Brazil has an sizeable colony of Japanese descendants, most of whom reside in the state of Sao Paulo. Brazilians of Japanese descent comprise the largest concentration of ethnic Japanese outside Japan.

2008 marks the one-hundredth anniversary of the arrival of the first Japanese immigrants.  With this centennial approaching, the governments of the two countries have created a bilateral committee headed by Eliezer Batista. The purpose of this group is to study and propose means to strengthen ties between the two countries. One of the measures being considered is the establishment of a free trade agreement.

Brazil, however, remains wary of such proposals. It has been approached by other governments several times in the past to discuss such issues. “In the end, we discovered that the other parties’ true intention was to set up an agreement to protect domestic investment”, says the Director for International Negotiations of the Brazilian State Department, Regis Arslanian.

The Brazilian government isn’t interested in these agreements because, according to Mr. Arslanian, the model proposed by developed countries demands total freedom for capital transfers, including from stock markets, and the power, given to foreign private investors, to take legal action against the Brazilian government should litigation arise. “Even when we talked with the Europeans”, says Mr. Arslanian, “we withdrew the issue of investment agreements; however, if Japan wants to discuss the theme, along with a cooperation agreement, we are open to negotiations”.

Japanese diplomats say they have a strong desire to establish a trade agreement. They say that since Lula’s first visit in 2005 the atmosphere has changed in Japan, and that it's traditionally insurmountable agricultural trade barriers have been lowered.

Free trade discussions also have to overcome the resistance of Brazilian industrialists, who fear Japanese competition. And because Brazil is a member of Mercosur, any agreement would have to be established between Japan and the Southern Cone economic bloc, which also includes Argentina, Uruguay, and Paraguay.

In August, the bilateral committee will present to President Lula and Prime Minister Koizumi a series of suggestions to strengthen bilateral relations. The centerpiece is likely to revolve around the production and sale of ethanol to the Japanese market, reviving the main item on President Lula’s 2005 visit to Japan.

See previous articles on Brazillian biofuels: 

UK's Evergreen Fund invests $77 million in Brazilian ethanol
http://www.biofuelreview.com/content/view/140/2/ 

5-year study shows driving on ethanol cheaper than gasoline
http://www.biofuelreview.com/content/view/131/2/

David Smith, Singapore