The leaders of India and Japan signed a broad agreement Monday aimed at increasing trade and agreed to speed up talks toward a civilian nuclear energy deal _ despite sensitivity in Japan over India's past atomic test blasts.
Indian Prime Minister Manmohan Singh called the conclusion of nearly four years of negotiations on the economic partnership agreement a "historic achievement." The deal, which needs to be ratified by Japan's parliament to come into force, slashes tariffs on goods from auto parts to bonsai plants and introduces measures to promote investment and deal with intellectual property rights.
"It will open up new business opportunities and lead to a quantum increase in trade and investment flows between our two countries," Singh said at a joint press conference with Prime Minister Naoto Kan.
Forging this kind of pact is increasingly a priority for Japan, which sees itself falling behind regional rival South Korea in the area of free trade agreements.
The deal could also be a step toward reducing Japan's heavy dependence on the Chinese market after a spat over disputed islands has strained ties between Beijing and Tokyo and led to anti-Japanese protests in China, some calling for boycotts of Japanese products.
Despite the size of their economies, Japan and India have had limited trade, which totaled 636 billion yen, or about $7.7 billion, for the first six months of the year, just 1 percent of Japan's global trade. Trade with China, Japan's top partner, totaled $176 billion over the same period.
Kan and Singh also agreed to speed up talks toward a civilian nuclear cooperation deal that would allow Japanese companies to export nuclear power generation technology and related equipment to India _ a boost to Japan's flagging economy.
But India's refusal to sign the Nuclear Non-Proliferation Treaty has stirred up some public concerns about Tokyo's decision to pursue talks with India on the matter.
Kan said he made it clear to Singh that India needs to understand the feelings of people in Japan as the only country to suffer an atomic bomb attack.
While India announced a moratorium on further nuclear testing, Japan wants New Delhi to be more explicit on that commitment. The two sides, which have met twice since starting the talks in June, are also working to decide on consequences should India conduct another nuclear test.
Monday's move is a step forward from when former Japanese Foreign Minister Katsuya Okada visited New Delhi in August and cautioned India against any further testing of nuclear devices, adding that no timeline was set for the conclusion of a civil energy deal.
An India-Japan nuclear agreement is crucial for international nuclear power companies to do business with India. While U.S.-based firms GE-Hitachi Nuclear Energy and Westinghouse Electric, a subsidiary of Japan's Toshiba Corp., are waiting to set up plants in India, some key components for the plants are supplied by Japanese companies.
New Delhi had faced a nuclear trade ban since conducting its first atomic test in 1974 and refusing to sign nonproliferation accords. It began emerging from nuclear isolation in 2008 when it signed a civil nuclear cooperation agreement with the United States. The 45-nation Nuclear Suppliers Group then lifted a three-decade global ban on nuclear trade with India.
Under the economic partnership agreement, or EPA, Tokyo will remove tariffs on 97 percent of Indian imports, with India eliminating tariffs on 90 percent of goods imported from Japan.
Japan will improve market access on most products in the industrial sector, as well as several agricultural products such as durian, curry, tea leaves, lumber, shrimp and shrimp products.
India in turn will improve Japan's market access in auto parts, steel panels, DVD players and video cameras as well as miniature "bonsai" trees, as well as Japanese yams, peaches and strawberries.
The two countries also signed a memo of understanding on visa simplification aimed at increasing tourism and educational exchanges.