In September 2010, Japan and the Republic of India, on the basis of a series of negotiations since January 2006, confirmed the substantive agreement on the Comprehensive Economic Partnership Agreement between Japan and the Republic of India (APPAI). JiCEPA was signed by both countries in February 2011 and entered into force in August 2011.JICEPA became the twelfth Economic Partnership Agreement for Japan, following its conclusion with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, the entire ASEAN, the Philippines, Switzerland and Vietnam. India and Japan therefore have a similar structure, particularly with regard to their dependence on the services sector. In recent years, the two countries have strengthened their bilateral ties through new initiatives and programs ranging from economic and cultural ties to defense and security ties. The year 2007 was also officially celebrated as the year of friendship between the two countries. Japan provides 30 per cent of its official development assistance (ODA) to India and has remained engaged during the global economic downturn. For example, Japan has provided nearly $4 billion for the Delhi-Mumbai Industrial Corridor (DMIC). 1. Summary of the JICEPA Agreement promotes the liberalization of trade in goods and services and the facilitation of investment between Japan and India, strengthens the bilateral economic partnership and strengthens cooperation in various fields, including the free movement of natural persons and intellectual property. The agreement had two main concerns, namely: infrastructure in India and non-tariff barriers in Japan.
On the infrastructure front, the two countries agreed in 2006 to collaborate on the massive $90 billion Delhi-Mumbai Industrial Corridor (DMIC) project. The main agenda of the DMIC project includes the development of nine industrial zones; a high-speed freight line; three ports; six airports; a six-lane highway with no intersection; and a 4,000-megawatt power plant. The project agreement looks very promising in the context of the new manufacturing policy, according to which India aims to increase the share of manufacturing industry in GDP to 25% within a decade and possibly create 100 million jobs. This paper attempts to analyse the initial impact of the India-Japan Comprehensive Economic Partnership Agreement on trade and investment relations as well as other areas of cooperation. Although it is still too early for a thorough impact assessment, the study seeks to identify some facts related to the effectiveness of the agreement. The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan was signed on 16 February 2011 and entered into force on 1 August 2011. In addition to accelerating trade activities, the agreement aimed to eliminate tariffs on 90 percent of Japanese exports to India, such as auto parts and electrical appliances, and on 97 percent of imports from India, including agricultural and fishery products, by 2021. Since the introduction of CEPA, merchandise trade between India and Japan has increased by 38%, with total bilateral trade expected to reach $24 billion by March 2013. Mukhopadhyay and Bhattacharyay (2011) assessed the macroeconomic impact of Trade Integration between Japan and India using the Analysis of the World Trade Analysis Project (GTAP) analysis.
It was noted that production from India and Japan will increase slightly in 2020 after tariff reductions compared to the status quo. The results expected marginal export growth, adequate trade creation and an improvement in the well-being of both countries by 2020 with the successful implementation of CEPA. India, for its part, has also expressed its own concerns about the agreement. New Delhi called on Japan to remove all non-tariff barriers to trade in order to realize the real benefits under CEPA, particularly those that would be obtained in the Japanese pharmaceutical market. It is mutually recognized that Japan`s strong demand for generics can potentially be met by India, which is a win-win situation for both countries. On April 30, 2012, the first ministerial-level economic dialogue between India and Japan was held to pursue the same objectives as under CEPA. The dialogue showed that relations between the two nations have become more equal today – both allow for mutual concessions and compromises to achieve the expected gains. Both countries agree that the success of CEPA depends on several dimensions. The identification of potential areas of trade and investment between the two countries presents them with an important policy agenda to achieve the expected gains of the pact. Japan and India agreed in 2007 to increase bilateral trade flows to $20 billion by 2010. However, the total missed the target, reaching only 1290 billion yen (about $15.85 billion).
For 2011-2012, bilateral trade between India and Japan amounted to $18.31 billion, a 32 percent increase over the previous year. The India-Japan Comprehensive Trade Agreement aims to nearly double bilateral trade to $25 billion by 2014. Japan mainly exports machinery, electronics, steel products to India, while India mainly exports oil, iron ore and chemicals to Japan. Japan is India`s 12th largest trading partner, while India is Japan`s 27th largest trading partner. Bilateral trade and investment flows between the two countries have not been spectacular, as Japanese companies have focused on doing business with China and Southeast Asia. About 870 Japanese companies operate in India, and Japan`s direct investment in India amounted to about 241 billion yen in 2010 (543 billion yen in 2008), according to the Japanese government. In the context of the global recovery and the two countries` attempt to increase trade and exports, a paper on Indo-Japan trade relations, as well as an analysis of services, investment and other areas of cooperation in the context of the signing of the Economic Partnership Agreement (EPA), would be relevant to highlight the problems of the two countries and propose measures to promote trade and investment between them. 3.
Key Elements of the Agreement (1) Trade in Goods: Agreement on the Complete Elimination and Reduction of Tariffs on Mining and Industrial Products and on Agricultural Products in Bilateral Trade. . . .