Natural disasters bind Japan-NZ partnership NBR – 29 July 2011

The third Japan-New Zealand Partnership Forum met in the face of adversity, humbled by the sheer magnitude of the recent disasters affecting both countries.

Forum Co-Chair,  Yoshihiko Miyauchi summed up the challenge in his opening remarks ? “Today we are called to build to be builders of hope”.

The other chairman, Philip Burdon echoed the sentiment, saying increased co-operation held the key for a brighter future for both economies.

More than 100 delegates paid respect for lives lost and renewed their partnership, re-affirming their shared goal of building the strongest possible bi-lateral relationship.

Discussion focused on the importance of innovation and highlighted a range of areas where Japan and New Zealand can co-operate.  Some of these are in the more established areas like high value food and sustainable agriculture, horticulture and fisheries.

Particularly important to both countries at this time is co-operation in the built environment and renewable/sustainable energy.

We heard about new possibilities for “smart house” construction ? built using sustainably produced and engineered timber, generating and storing its own power from solar panels, providing energy for smart cars and acting as a carbon sink.   The case is compelling for demonstration homes to be built in both Christchurch and northeastern Japan.

Japan’s economy has struggled since the earthquake and tsunami on 11 March.  Consumer confidence, already at a low ebb post the global financial crisis, took a dive.

Short term GDP growth will continue to be held back by supply disruptions, electricity shortfalls and weak domestic demand. But the Japanese Government’s fiscal response has been swift with a supplementary budget equal to 0.8% of GDP.

Longer term, as in Christchurch, the huge reconstruction effort will boost economic activity.

In the broader Asia Pacific region, demand from emerging economies in Asia is leading the recovery in global trade. Import demand from these economies was responsible for more than half of the growth in global trade for the last three quarters in a row.

Business in the region has already organised to capitalise on this structural shift with ever diversifying and more integrated supply chains but the region’s economic framework is lagging behind.

This is a major driver for the Trans Pacific Partnership (TPP), which seeks to reflect the way business is now actually being done.   TPP aims to make doing business easier, lower costs to consumers, promote competitiveness and increase supply chain efficiency.

Japan’s economic recovery would be enhanced if the Government of Prime Minister Naoto Kan can deliver on its promise of bringing about what he has called “the great opening of the Heisei era”.

Several speakers underlined the need for economic change in Japan and support was expressed on both sides for future Japanese membership of TPP.

Whether it ultimately proves possible to overcome the objections of Japan’s highly protected agricultural industry remains to be seen.  This is a decision for Japan to make and only if Japan shares what Business NZ CEO Phil O’Reilly called the “power of a big idea” – the idea that a more unified economic space could be created in the Asia Pacific region through an FTA which starts with a smaller number of more outward looking economies and gradually expands its membership over time.

There were clear indications that Japanese business understands the significance of TPP as an ambitious, high quality and comprehensive initiative and a potential pathway towards the broader vision of a Free Trade Area of the Asia Pacific.

Hopefully, the Forum will have motivated a number of influential players who do not want to see Japan stand aside from this new platform for economic growth.

These are all lofty ambitions for a relationship which may have gained some new relevance in the light of the recent disasters but which often seems to fail to spark the imagination of New Zealand business in the same way that China and India do today.

Yet Japan is still the world’s third largest economy, one of the world’s largest consumer markets and New Zealand’s fourth largest trading partner.