C U R R E N T   R E L E A S E
August 25, 1999

Rotman Professor Recommends Free Trade With Japan.
Report Issued in Advance of Prime Minister's Visit.

The Future of the Japan-Canada Economic Relationship
Professor Wendy Dobson
Director, Institute for International Business
Rotman School of Management, University of Toronto

Click here to download the report (205K) The Future of the Japan - Canada Economic Relationship

TORONTO — In mid-September, Prime Minister Chretien will lead a Team Canada trade mission to Japan. One of the main policy goals of this visit should be to make a new beginning in the bilateral economic relationship. The new basis for the relationship is outlined in a study prepared by Rotman Professor Wendy Dobson, former Associate Deputy Minister of Finance, former President of the C. D. Howe Institute and expert on the Japan-Canada economic relationship.
           Canada and Japan share common interests that extend far beyond trade, including investment and technology flows, as Dobson outlines in the study. Yet the bilateral economic relationship is not as healthy or developed as it could be. Indeed, outside of a few industries the two countries share a mutual disinterest in each other economically.
           A new beginning is required. To mark the new millennium, the two governments, in cooperation with their private and non-governmental sectors, should set targets they will jointly achieve. Governments should set a target for complete liberalization of trade and investment by 2010. Governments, the two business communities and other parts of the private sectors should work together on initiatives that will promote exchange in the knowlege-based industries of the "new economy". To the same end, they should work together to initiate the proposed new round of multilateral trade negotiations at the WTO and advance sectoral liberalization in APEC.
           The basis for greater bilateral interdependence exists, but its realization will require that the two countries break out of existing inertia. The traditional complementary trading relationship, one in which Japanese firms buy Canada's natural resources and Canadians buy Japan's manufactured goods, is outdated. Trade in the future will increasingly be intra-industry trade, both in traditional industries like autos, and in key sectors such as communications equipment and services, health and social services and medical equipment and environmental goods and services.
           To transform the economic relationship, the two business communities must be willing to play a key role. If they do not, it will not happen. But governments must also signal their willingness to pursue all possible means to reduce barriers to bilateral trade and investment in consultation with the business communities. At present considerable energy is devoted to dealing with irritants when redirection of the entire relationship should be the priority. The timing for striking a new direction is opportune. Japan is struggling to solve one of the most serious economic crises in its history. Old managed relationships are giving way to market forces and greater transparency. Canadian capabilities in knowledge generation, information technology innovation, services and medical devices for aging populations, environmental goods and services can be turned to mutual advantage.

Professor Dobson recommends that:

1. The two governments jointly adopt 2010 as the target for achieving comprehensive liberalization of bilateral trade and investment.
   
   
2. This target should be complemented by the commitment to work together to give momentum to and ensure that the bilateral initiative is consistent with the new round of WTO multilateral negotiations.
   
   
3. Liberalization initiatives could begin with sectoral discussions to resolve irritants, remove barriers to trade and investment, and to promote greater specialization as the basis for intra- industry trade between the two economies
   
   
4. Common interests in such sectors as communications, health and medical services and medical devices and environmental goods and services should be the initial focus of business and government efforts.
   
   
5. The joint business groups in both countries should organize ways, including ad hoc committees in "fifth wave" industries (those created by information and communications technologies), to lay the groundwork for inter-governmental negotiations.

For more information:

Ken McGuffin Media Relations Officer Rotman School of Management Voice | (416) 946-3818 Fax | (416) 978-1373 E-mail | mcguffin@rotman.utoronto.ca

Wendy Dobson Director, Institute for International Business Rotman School of Management University of Toronto Voice | (416) 978-7792 Fax | (416) 978-0002 E-mail | dobson@rotman.utoronto.ca

. . . . . . . . . . . . . . . . . . . .