Forging Ties: The Evolution of Mongolia-Japan Trade Relations

1 Introduction

Historical trade relationships between countries have played a key role in shaping the economic, cultural, and political dynamics of entire regions. They have facilitated mutual growth and fostered deeper understanding between nations. This is particularly evident in Northeast Asia, where Mongolia and Japan have long sought to establish and strengthen their bilateral relations. Through various periods in history, the continuous improvement of trade and economic ties between these two nations has not only enhanced their economic prosperity but also encouraged more profound cultural exchange and political cooperation. This enduring partnership underscores the significance of trade as a vital component in the development and sustenance of international relations.

The historical relationship between Mongolia and Japan has been the subject of extensive academic study, with numerous studies examining the multifaceted interactions between the two countries. A particularly notable episode in this historical narrative is the Mongol invasions of Japan in the thirteenth century. These invasions, despite being marked by intense military conflict, did not end interactions between the two countries. Scholars emphasize that diplomatic overtures between Mongolia and Japan continued in centuries that followed, reflecting a complex and resilient bilateral relationship. This ongoing engagement, marked by diplomatic missions, cultural exchanges, and trade relations, illustrates the depth and persistence of their interactions despite historical adversities. Such studies highlight the importance of analyzing these early episodes to fully understand the enduring and evolving nature of Japan-Mongolia relations.

Conversely, other researchers contend that while Japan and Mongolia have been aware of each other since the thirteenth century, significant barriers prevented the development of close relations. These scholars highlight the substantial differences in geography, culture, and the political history of Asia as impediments to the formation of a robust and sustained bilateral relationship. They argue that these factors contributed to a prolonged period of limited interaction, during which opportunities for trade and economic cooperation were significantly constrained.

In this context, it is crucial to examine how historical trade relations have evolved and continue to shape present-day economic cooperation between Mongolia and Japan. This study aims to trace the trajectory of bilateral trade relations between Mongolia and Japan over time, delving into the economic integration and long-term development implications arising from Mongolia’s strategic trade engagements, including its Economic Partnership Agreement (EPA) with Japan.

Throughout history, the trade relationship between Mongolia and Japan has undergone several transformative phases. From ancient trade routes of the Mongol Empire, early contacts laid the foundation for future trade, characterized by the exchange of goods, ideas, and cultural influences that underscored deep-rooted connections between the two nations.

As both countries re-emerged onto the global stage in the eighteenth and nineteenth centuries, their trade relations evolved into more structured and diversified collaborations encompassing a broad spectrum of goods and services. This article explores these phases, from the early historical exchanges to the establishment of modern trade agreements. It focuses on significant periods of cooperation amidst divergent economic systems, setting the stage for more formal economic relations.

In the modern era, the trade relationship between Mongolia and Japan has evolved into a structured and diversified collaboration across various sectors, the culmination of which was evolving trade relations marked by the negotiation and establishment of the EPA. We provide a detailed examination of the negotiation process, including challenges, strategic considerations, and key milestones leading to the formalization of the EPA. The article offers insights into how Mongolia and Japan collaborated to create a framework for enhanced economic cooperation, anticipating further evolution in their trade and economic relations.

Through an analysis of the historical trade relationships between Mongolia and Japan, and an examination of the EPA, it becomes clear that the ongoing evolution of the two countries’ trade and economic relations will be guided by a shared commitment to economic development and stability. This partnership is poised to promote long-term prosperity and strengthen the enduring bonds between the two countries. Realizing this vision may require addressing the considerations outlined at the conclusion of this article.

2 Early Historical Contacts of Trade Between the Mongol Empire and Japan

During the reign of Genghis Khan and his successors, the Mongol Empire expanded across many territories in the thirteenth century. Japan, on the other hand, remained largely isolated from external influences. It was within this historical context that the earliest documented instances of diplomatic engagement between Mongols and Japan occurred, notably characterized by the Mongols’ use of intermediaries to dispatch missives and emissaries to Japan. During the Mongol Empire, foreign policy was steadily developed through specific procedures such as sending envoys with special stamps or tags to other countries, receiving foreign envoys, and negotiating treaties, as highlighted by Otgonsaikhan (2023, 69–79). In his efforts to establish diplomatic ties, Khubilai Khan, one of the most prominent kings of the Great Mongol Empire and founder of the Yuan Dynasty,^[1] corresponded^[2] with Japanese rulers during the thirteenth century. Goryeo^[3] briefly assumed the role of intermediary between the Yuan Dynasty and Japan during this period. In a missive addressed to the Japanese ruler, the Goryeo monarch ruler detailed, “The king of the Yuan Dynasty expresses a desire to foster amicable relations with your esteemed realm… The Khan will respectably welcome your nation if you forge positive links with us. Consider dispatching messengers to observe this circumstance firsthand. Wishing well-being upon your realm, November 1267” (Munkhtsetseg 2000, 25).

Many scholars have extensively examined these events, offering diverse interpretations from political, economic, and international relations standpoints. Some argue that these events signify a policy of territorial expansion. Others propose that they represent the Mongols’ early efforts to establish diplomatic ties and foster mutually beneficial trade and economic cooperation with Japan. Japanese academics hold differing views regarding Khubilai Khan’s interest in Japan. Some emphasize Japan’s economic significance to the Mongols, citing Marco Polo’s description to Khubilai Khan of a nation abundant in gold and silver. Other scholars suggest that the Mongols viewed Japan as a strategic target to undermine the Southern Song state’s trade connections (Morgan 2007, 120).

During the Great Yuan Dynasty, established by the Mongols, there was notable stability in political and economic life. This stability was in part sustained through agrarian policies, which contributed to a marked augmentation in agricultural yields encompassing crops, rice, and livestock. Consequently, a surge in trade ensued, elevating the nation’s production capacity significantly. Notably, the Yuan Dynasty actively engaged in maritime commerce with regions spanning the Persian Gulf, the Malay Peninsula, the Indian Peninsula, the Philippine Islands, and the Indonesian Islands, while concurrently fostering an extensive land network (Sharavsambuu 2021, 60). Given the empire’s extensive involvement in such far-reaching trade endeavors, it is clear that the Mongols’ interactions with Japan transcended mere conquest aspirations, underscoring a multifaceted strategic objective encompassing diplomatic and economic considerations.

In Japan, the Kamakura period (1185–1333) saw the rise of a military government and increased maritime trade with neighboring countries, including China and Korea (Encyclopaedia Britannica 2024). While there is limited historical evidence of direct trade with Mongolia during this period, Japan’s maritime connections to East Asia would have indirectly linked it to trade networks influenced by Mongol expansion. Although Japan was not directly part of the famous Silk Road^[4] trade routes, it was indirectly connected through maritime trade routes and intermediaries. These exchanges may have included the spread of technologies, ideas, and artistic influences, albeit indirectly through intermediaries along trade routes.

In subsequent centuries, particularly up until the nineteenth century, there is limited information about the relationship between Mongolia and Japan, which can be attributed to Japan’s isolationist policies during the Edo period.^[5] Known as Sakoku, these policies restricted foreign trade and contact. Although direct evidence of interactions between the two countries during this time is scarce, indirect connections likely persisted through intermediary regions.

During the mid-nineteenth century, Japan and Mongolia experienced a reconnection after the aforementioned period of relative isolation. According to Jansen (2000, 144–202), Japan underwent a significant transformation known as the Meiji Restoration, marked by rapid industrialization and modernization. During this time, Japan absorbed Western institutions, technologies, and ideas while expanding foreign trade in an attempt to develop partnerships that would eventually lead to the Meiji reforms. Meanwhile, Mongolia remained a landlocked country under Qing rule, characterized by a predominantly agricultural and nomadic herding economy. The geographical and geopolitical barriers between Mongolia and Japan limited direct trade between the two nations, resulting in primarily indirect exchanges. Nonetheless, it can be said that the influences from Japan’s regional activities and Mongolia’s location along trade routes may have had some impact on their economic relations during this period. An archival document (Figure 1) provided by the “Mongolia and Japan-Our history through archival documents” project claims that certain Japanese visitors to Europe took notes about Mongolia and its economy which have since been preserved. The document delivering a diverse portrayal of Mongols’ housing, writing, cuisine, and lifestyle demonstrates how interested the Japanese were to discover the country’s economic situation as well as to foster trade and relationships.

Figure 1:

Record of a single-horse expedition. Source: https://www.archives.go.jp/about/activity/international/jp_mn50/mongolian/ch02.html.

One of the reasons behind Japan’s efforts to expand its relationships can be attributed to the necessity of restructuring its politics, redefining national objectives, and formulating a clear strategy to achieve these goals from 1858 to the early 1880s. More specifically, Japan’s trade structure in the early Meiji period was “vertical,” as is typical of a developing nation, as it exported tea leaves, raw silk, and primary commodities (Friday 2012, 234). Further, Japan aimed to import materials to meet domestic needs and be used as inputs for produced goods.

Concurrently, the Meiji era witnessed the emergence of two significant diplomatic objectives: renegotiating inequitable trade pacts with Western powers and reclaiming tariff autonomy. For instance, Japanese import tariffs were established at 5 % in 1866 and remained static for over three decades. Although a partial reinstatement of tariff rights commenced in 1899, achieving full restoration necessitated nearly half a century, culminating only in 1911 (Ohno 2017, 37).

In a nutshell, although there may not have been a great deal of trade between Mongolia and Japan at the time, Mongolia’s economic significance due to its resources and geographic location contributed to the larger economic dynamics of East Asia, indirectly affecting Japan and setting a foundation for future economic relations.

3 Initial Modern Trade Agreements and Interactions

Examining the historical development of the long-standing relations between Japan and Mongolia reveals that the foundation for modern relations was established prior to 1945. Particularly between 1910 and 1920, both sides endeavored to forge business connections and, at times, political ties, broadening the scope of their foreign relations. This trend continued until the latter half of the 1930s (Batbayar 1998, 200).

In the early 1910s, Mongolia made numerous efforts to gain recognition of its independence from major world powers, including Japan. For example, on November 18, 1912, the Ministry of Foreign Affairs addressed a note to the ambassadors of nine nations, including France, Germany, England, the United States, Belgium, Japan, Denmark, Holland, and Austria, which proposed “enhancing the friendship of the countries by establishing a mutual agreement and promoting trade.”

During this period, Mongolia sought to open itself more to the outside world, aiming to create broad trade and economic relations. Monetary relations expanded, markets with regular operations increased, and cities grew in significance to Mongolian social life, leading to increased population movement. Mongolia’s wealth of natural resources increasingly attracted the attention of distant nations seeking trade opportunities. As early as the twentieth century, foreign diplomats and representatives from trading firms based in Beijing began visiting Mongolia. Initially, a few merchants from the United States, England, and Germany showed interest in Mongolia. Over time, these nations appointed Chinese representatives, who were familiar with the Mongolian market and the needs of the locals, to act on their behalf. Similarly, Russian traders started operating in Mongolia once the Trans-Siberian Railway was in service. Consequently, trade with other countries began to transform Mongolia’s traditional economy, accelerating its development and establishing new financial and trade links.

Interest in Mongolia extended beyond Western countries to include Asian nations from the 1910s onwards. During this period, the Japanese trade company Mitsui dispatched personnel to Ikh Khüree to investigate the Mongolian market. The company’s officials visited Chinese, Russian, and Mongolian markets in the city to research the goods and needs of the locals, meeting with Japanese residents to gain a deeper understanding of Mongolia.

Further, trade and service relations began to develop not only at the level of business enterprises but also among individuals. Japanese settlers in Ikh Khüree opened watch shops, pharmacies, canteens, and various goods stalls (Khishigt 2011, 60). Archival records preserve interesting facts about such trade relations. For instance, a document from the early 1900s describes a Japanese citizen named Satsuwa, who lived and worked in Mongolia with his wife. This document, stored in the Central National Archives of Mongolia, reveals that Satsuwa, who had been originally working as a clock repairer in Imperial Russia, sought to move to Maimaa, Mongolia, due to a lack of income. He intended to start a business and rent a Chinese house for a year, so he submitted a request for a letter of protection for himself and his wife for that period. This scenario closely parallels the “presence of natural persons” mode of service supply outlined in the current WTO General Agreement on Trade in Services (GATS).

Based on the historical sequence of events, it is evident that the bilateral relations between the two were initially modest in scale, yet experienced a notable expansion during the initial decades of the twentieth century. This period witnessed a discernible upsurge in commercial and economic engagements, marked by a burgeoning of trade activities and the increasing dynamism of economic exchanges between Japan and Mongolia.

Following the cessation of hostilities in World War II, a pivotal phase emerged wherein Japan commenced its multifaceted journey towards reintegration into the global economic landscape. This epoch witnessed significant milestones, notably in 1952 when Japan acceded to membership in both the International Monetary Fund (IMF) and the World Bank, thereby formalizing its participation in the foundational institutions of the post-war economic order (Sato 1994). Concurrently, Japan embarked on a path of deeper economic engagement by formally initiating its application process for accession to the General Agreement on Tariffs and Trade (GATT), a pivotal mechanism for fostering international trade cooperation. This commitment to multilateralism culminated in 1956 with Japan’s accession to the United Nations (UN), symbolizing its emergence as a recognized and contributing member of the global community. The reintegration facilitated further growth in Japan’s international trade, including its economic interactions with Mongolia.

During the period from the mid-1950s to the early 1970s, Japan’s economy experienced a remarkable trajectory characterized by an average annual real growth rate of approximately 10 percent. This sustained growth was underpinned by a confluence of factors, including the deliberate incorporation of foreign institutions into domestic frameworks, strategic infrastructure development, engagement of foreign consultants for specialized expertise, modernization of educational and vocational training systems, and active involvement of state-owned enterprises in pivotal sectors. Additionally, the establishment of research centers and the orchestration of trade fairs played decisive roles in fostering technological innovation, knowledge dissemination, and market expansion within Japan’s economic ecosystem (Smith et al. 2003, 249–261).

Concurrently, during the 1950s, Mongolia prioritized industrialization, focusing on sectors such as manufacturing, mining, and infrastructural development. The government invested in the formation of state-owned enterprises, including those in construction, metallurgy, and coal mining, to promote economic development and self-sufficiency. However, Mongolia’s economy remained relatively isolated from global markets during this time, with limited trade and economic ties beyond the Soviet bloc. The country’s economic policies emphasized self-sufficiency and economic cooperation with other socialist states.

Due to the contrasting economic systems and priorities of Mongolia and Japan at the time, direct economic relations between the two countries were minimal, as both were undergoing substantial internal transformations. However, following their initial interactions, the cultural and economic ties between Japan and Mongolia have undergone a nuanced process of gradual evolution and deepening. The nascent stages of bilateral economic engagement were marked by the commencement of discussions aimed at fostering trade relations. For instance, in late July 1959, delegates from the Japan Foreign Trade Council, at the request of Mongolia’s Ministry of Foreign Trade, convened for negotiations. These deliberations culminated in the signing of the first protocol on mutual goods supply between the two countries in 1960, as highlighted by Buyantugs (2002, 49).

Moreover, by Resolution No. 180, dated April 10, 1961, emanating from the conclave of secretaries of the Central Committee of the Revolutionary Party of Mongolia (as depicted in Figure 2), authorization was extended to the Ministry of Foreign Trade for its engagement in the Tokyo trade fair, along with the designation of notable delegates to oversee trade affairs. This development may be construed as indicative of an initial upsurge in the bilateral relationship, particularly concerning trade and economic synergies. Additionally, since 1970, the Ministry of Foreign Affairs of Japan has undertaken the dissemination of “Mongolian Monthly News” or “Geppoo,” facilitating the translation and publication of materials sourced from the central press of Mongolia (Munkhtsetseg 2000, 6). This initiative further highlights the ongoing efforts to strengthen the cultural and informational exchanges between the two nations.

Figure 2:

Mongolian representatives to Tokyo trade fair. Source: https://www.archives.go.jp/about/activity/international/jp_mn50/mongolian/ch04_1.html.

Through concerted endeavors from both parties, a discernible amelioration in relations and cooperative endeavors transpired, which resulted in the formal establishment of diplomatic relations between Japan and Mongolia in 1972. An illustrative instance of this burgeoning collaboration was the establishment of a non-governmental organization (NGO) known as the Japan-Mongolia Economic Cooperation Committee. This organization was established with the overarching objective of fostering the expansion of economic, scientific, and technical collaboration between the two nations, alongside advancing trade initiatives and cultivating cordial relations.

Furthermore, in a diplomatic communication conveyed by the Ministry of Foreign Affairs of Mongolia to its counterpart in Japan on February 5, 1974, a proposition was forwarded aiming to “enhance trade relations, such as by facilitating mutually beneficial conditions for foreign trade” (Batbayar 2022, 208). In essence, the communication articulated Mongolia’s intent to avail of the customs tariff concessions extended to other nations by Japan, thereby reflecting a strategic alignment with international trade policies and practices. This policy orientation appears to have arisen from Mongolia’s non-membership status in the GATT^[6] during that period, which may have precluded the applicability of equivalent trade conditions enjoyed by GATT member states, such as Japan. As per the understanding between both parties, it appears that the Japanese government may have commenced providing customs concessions on Mongolian agricultural commodities from April 1, 1974, possibly hinting at a potential correlation between the complementary economic structures of the two nations and the driving force behind this decision.

On March 17, 1977, Mongolia and Japan formalized an agreement about economic cooperation, with the official document ratified and released on August 25 of the same year. Under the auspices of this accord, the Japanese entity “Itochu” entered into a contract with the Mongolian counterpart, the “Complex Equipment Corporation,” resulting in the establishment and operationalization of the “Gobi” wool processing facility in 1981.

As a direct consequence of the aforementioned developments, the trade and economic linkages between Mongolia and Japan underwent a pronounced activation, leading to bilateral trade volumes surmounting one million US dollars during the early 1970s, and subsequently a threefold increase by the conclusion of the 1970s.

During the 1980s, trade relations between Mongolia and Japan surged, characterized by a growing collaboration between the Mongolian Export and Import Alliance and around 20 Japanese trading entities. Notable firms such as Itochu, Nissho Iwai, Nomura Boeki, and Wako Boeki were among the key players in this burgeoning partnership (Batbayar 2022, 209). Additionally, starting from 1988, commodities such as copper and molybdenum concentrates from the Mongolian-Russian joint mining venture, “Erdenet,” consistently found their way to Japan, as evidenced by records cited by Buyantugs (2002, 52).

In a bid to bolster these ties, Japan took the initiative to convene the ninth session of the Asian Trade Promotion Organization in Ulaanbaatar in August 1995 (Baldoo 2003, 208).

These initiatives laid the groundwork for substantial growth in bilateral trade between Mongolia and Japan. By 1985, the aggregate volume of trade between the two nations had skyrocketed to 9.4 million dollars. This figure continued to climb, reaching 31.4 million dollars by 1989, as documented by Naran (2006, 82).

In the final years of the twentieth century, global interdependence deepened, fostering heightened cooperation between developed and developing nations across continents and regions. In Northeast Asia, Mongolia and Japan navigated a region marked by significant diversity in population, landmass, political systems, economic development, natural resources, and cultural attributes. Despite these disparities, overlapping interests afforded ample opportunities for collaboration, particularly in key facets of societal advancement, notably economic development. Thus, concerted efforts from both Mongolia and Japan, bolstered by bilateral cooperation, are instrumental in fostering regional trade development, elevating their relations to a new echelon of quality.

Following the transition to a free-market economic system, Mongolia witnessed substantial shifts in both its external and internal environments, accompanied by policy adjustments aimed at fortifying its economic autonomy as indicated by Otgonsaikhan and Batbold (2021, 101–126). A pivotal manifestation of this shift is exemplified by the inception of an intergovernmental trade agreement between Mongolia and Japan in 1990, which catalyzed notable improvements in bilateral trade and economic cooperation between the two nations. The agreement delineates a comprehensive list of commodities slated for bilateral trade, encompassing a broad spectrum of items including machinery, equipment, chemical products, paints, pharmaceuticals, consumer goods, textiles, and mining products originating from Mongolia, such as coal and semi-precious stones, and alcoholic beverages from the Japanese side. Furthermore, both nations articulated their commitment to facilitating favorable conditions for reciprocal trade, conducting transactions in freely convertible currencies, and exerting efforts to maximize the volume of trade between them.

During this period, Japan emerged as one of Mongolia’s largest donors, providing extensive support through Official Development Assistance (ODA). This aid included substantial financial assistance, technical expertise, and development projects, all aimed at stabilizing and revitalizing Mongolia’s economy. It is noteworthy that the representative office of the Japan International Cooperation Agency (JICA) was inaugurated in Ulaanbaatar in 1996, a period marked by the nascent development of the private sector and constrained foreign economic engagements. This strategic establishment served as a pivotal milestone in the deepening of bilateral relations between the two nations, facilitating successful collaboration across various domains. In this way, the relations between the two countries have deepened and they have successfully cooperated in many fields, reaching an unprecedented level of “Comprehensive Partnership.”

The first decade of the twenty-first century marked a period of remarkable growth and deepening of the relationship between Mongolia and Japan. High-level diplomatic engagements and increasing economic exchanges reflected a mutual dedication to foster a strategic partnership. Mongolia’s exports of vital raw materials to Japan and the reciprocal flow of advanced Japanese goods and investments highlighted the complementary nature of their economic relationship. The surge in Japanese investment, particularly in Mongolia’s critical mining and infrastructure sectors, underscored Japan’s role in supporting Mongolia’s economic transformation. This decade set a strong foundation for continued collaboration, positioning both countries to navigate future challenges and opportunities together.

4 Negotiation Process Between Mongolia and Japan on the Establishment of the Economic Partnership Agreement (EPA)

The evolving economic and diplomatic relationship between Mongolia and Japan set the stage for deeper economic collaboration. Over the years, both nations recognized the mutual benefits of enhanced economic integration, driven by Japan’s role as one of Mongolia’s largest trading partners and key foreign investors. The growing bilateral trade and investment, especially in sectors such as mining, agriculture, and manufacturing, highlighted the potential for more formalized economic partnership. These dynamics underscored the need for a structured agreement to further facilitate trade, investment, and economic cooperation, leading to discussions on establishing an Economic Partnership Agreement (EPA). This section will delve into the origins, negotiation processes, and far-reaching implications of the EPA, scrutinizing its impact on the economic policies of the two nations.

The establishment of EPA between Mongolia and Japan has been a focal point of intensive discussions since 2009. In December of that year, during a meeting with Japan’s Minister of Foreign Affairs and Economy, Trade, and Industry, Mongolia’s Minister of Foreign Affairs proposed the formation of a joint governmental research working group to explore this initiative. Consequently, a joint research working group was established in June 2010. This group convened multiple meetings to assess the bilateral trade and investment landscape, identify goods with comparative advantages and vulnerabilities, and define the scope and sectors for the forthcoming negotiations.

Following the deliberations of the working group, a significant milestone was reached during the state visit of the President of Mongolia to Japan from November 15 to November 19, 2010. During this visit, a joint statement was signed by the leaders of Mongolia and Japan, signaling the intent to forge a “Strategic Partnership” between the two nations. As articulated in the statement, both parties committed to advancing the process of establishing an EPA and pledged to commence official negotiations by 2011, building on the findings of the joint research team’s report. The primary objective of this initiative was to deepen bilateral trade, investment, and economic relations. Furthermore, both parties expressed their resolve to bolster collaborative efforts in this regard.

In November 2010, the Government of Japan promulgated the Basic Policy on Comprehensive Economic Partnership. Within this policy framework, a notable emphasis was placed on the initiation of negotiations for the establishment of an EPA with Mongolia. The explicit inclusion of Mongolia in this policy directive underscores the significance accorded to fostering economic ties with the nation. This assertion is reinforced by the stated commitment to expedite the negotiation process, indicating a keen interest in advancing bilateral economic relations with Mongolia.

During the latest convening of the joint research team, the involved parties engaged in thorough discussions regarding market access impediments for goods and services within their respective jurisdictions, mirroring topics commonly addressed in conventional Free Trade Agreements (FTAs). Moreover, deliberations encompassed investment facilitation, enhancement of the business environment, intellectual property rights protection, migration policies, competition regulations, and transparency measures. A comprehensive array of economic matters was exchanged, underscoring the breadth of their discourse. This encompassed collaborative initiatives spanning government procurement, agricultural cooperation, support for small and medium-sized enterprises (SMEs), financial services collaboration, e-commerce facilitation, environmental stewardship, tourism promotion, and advancements in science and technology. Consequently, the content and scope of the envisaged agreement are suitably grounded in these multifaceted discussions, providing a robust foundation for further negotiations.

Based on the cumulative efforts undertaken by both parties over a span of more than three years, an accord was reached during the official visit of the Prime Minister of Mongolia to Japan in March 2012 to initiate discussions regarding the establishment of an EPA between the two nations. Official negotiations for the establishment of the EPA between Mongolia and Japan commenced in June 2012, with both negotiating teams engaging in seven stages of discussions until July 2014. Consequently, during the visit of the President of Mongolia to Japan, a fundamental consensus was reached by both parties regarding the establishment of the EPA. The draft agreement, which had been negotiated with the Japanese counterpart, underwent thorough scrutiny at the meeting of the Government of Mongolia on January 7, 2015, subsequently garnering approval from the Standing Committee on Security and Foreign Policy of the Parliament.

On February 10, 2015, the Economic Partnership Agreement (EPA) between Japan and Mongolia was signed by both countries during the visit of the Mongolian prime minister to Japan.^[7] In the “Joint Statement” issued upon the signing of the Agreement on Economic Partnership between Mongolia and Japan, it was articulated that the agreement was anticipated to enhance the flow of investments, services, and goods between the two nations. Additionally, it aimed to facilitate mutual exchanges among the populace, thereby enabling the private sector to expand both business operations and capital.

The EPA stipulated that “This Agreement shall enter into force on the 30th day following the exchange of diplomatic notes by the Governments of the countries, confirming that they have satisfied the requisite legal and regulatory requirements necessary for the Agreement’s implementation.” During this period, Mongolia enacted revisions to certain pertinent legal statutes. For instance, within the provisions pertaining to the general rules of trade in goods under the EPA, it was mandated that the principle of “national treatment,” as delineated by the GATT, be reciprocally observed. Nonetheless, due to the excise tax law of Mongolia, which imposed disparate tax rates on domestically produced versus imported alcoholic beverages and wine (Otgonsaikhan and Enkhbayar 2020, 101–117), Japan insisted on the application of national treatment to these commodities.

In February 2016, to fulfill its obligations to the WTO and implement the EPA, Mongolia amended the Law on Excise Taxes to impose equal taxes on imported and domestic alcohol and wine. This legislative modification aimed to harmonize the tax regime by instituting equal tax rates for both imported and domestic alcohol and wine, thereby ensuring compliance with the principle of national treatment as required by international trade agreements. This adjustment not only facilitated Mongolia’s adherence to WTO guidelines but also advanced its commitment to fostering a more equitable and competitive market environment (Otgonsaikhan et al 2022, 12–21).

In addition, although Mongolia acceded to the World Trade Organization (WTO) in 1997, it did not enter into a Free Trade Agreement (FTA) with any country until 2016. Consequently, the most-favored-nation (MFN) treatment, characterized by the application of standard customs tariffs and the prevailing rates of normal customs duties, was applied to imported goods. With the establishment of an FTA with Japan, Mongolia was obligated to extend preferential tariff conditions to goods originating from Japan, necessitating the application of “preferential tariffs.” This policy shift was formalized through amendments to the Law on Customs Tariffs and Customs Taxes,^[8] reflecting Mongolia’s commitment to enhance bilateral trade relations and adhere to the preferential trade stipulations of the FTA.

Thus, by meticulously fulfilling the stipulated requirements of the pertinent laws and regulations, the agreement reached its official implementation^[9] on June 7, 2016. This milestone was preceded by a formal exchange of diplomatic notes between the Foreign Ministries of Mongolia and Japan on May 8, 2016, in Ulaanbaatar. The exchange symbolized the culmination of rigorous legal and diplomatic efforts, underscoring the commitment of both nations to the principles and provisions outlined in the agreement.

The Parties concurred on the establishment of a Joint Committee accompanied by 13 specialized sub-committees dedicated to overseeing the trade and investment of goods and services, thereby ensuring the comprehensive implementation of the EPA. This structure is intended to create a permanent consultation mechanism, which is anticipated to enhance trade and investment flows, as well as to broaden economic cooperation between the two countries. Through this institutional framework, the Parties aim to facilitate continuous dialogue, address emerging trade issues, and foster a more robust and integrated economic partnership.

The Parties are committed to the effective and sustained implementation of the agreement. During the official visit of the Speaker of the Mongolian Parliament to Japan in March 2017, the foreign ministers of both countries signed and approved the “Medium-term Program of Strategic Partnership between Mongolia and Japan (2017–2021).”^[10] This strategic program outlines a series of measures aimed at enhancing Mongolia’s investment and business environment, alongside the implementation of the Mongolia-Japan Economic Partnership Agreement. The program focuses on stabilizing Mongolia’s macroeconomic framework, thereby fostering a more conducive climate for economic cooperation and mutual development. It includes:

1. The governments of Mongolia and Japan will continue their efforts to ensure the successful implementation of international agreements, such as the EPA between the two countries. The Mongolian government will focus on establishing the necessary legal framework to facilitate the effective execution of this agreement.

2. Based on Article 15 of the Economic Partnership Agreement (EPA) between Mongolia and Japan, the governments of both countries have committed to fostering profitable and efficient cooperation in several key areas. These areas include agriculture, forestry, and fisheries; industry; small and medium-sized enterprises; trade and investment; infrastructure, construction, and urban development; science, technology, and intellectual property; financial services; education and human resource development; tourism; environment; mining and energy; health; competition; and information and communication technology. Additionally, they will cooperate in other mutually agreed-upon areas.

At the invitation of the Government of Japan, the President of Mongolia conducted a state visit in November 2022, during which a joint statement was issued, signaling the establishment and advancement of the “Special Strategic Partnership for Peace and Prosperity between Mongolia and Japan.” This development involved a revision of the medium-term program. In the announced statement, the governments of both countries outlined their intention to enhance flexible and mutually beneficial trade and economic ties through the Mongolia-Japan Economic Partnership Agreement. They also emphasized the importance of joint consultations between government entities and the private sector in furthering this objective.

The EPA between Mongolia and Japan, marking Mongolia’s first FTA and Japan’s fifteenth, is poised to significantly influence the economic policies of both nations. This landmark agreement is expected to enhance bilateral trade, stimulate investment, and boost industrial value-added exports and foreign exchange earnings. For Japan, the EPA will reduce tariff and non-tariff barriers, streamline trade flows, and simplify customs procedures, which aligns with its broader economic strategy of expanding and diversifying trade partnerships. For Mongolia, this agreement is a strategic move to integrate more deeply into the global economy, attract Japanese investments, and enhance its export capabilities.

Despite the challenges posed by the global pandemic, which make it difficult to fully assess the implementation and impact of the agreement, there are clear indications that the EPA is strengthening economic cooperation and relations between the two countries. The agreement represents a significant step in deepening economic ties, fostering mutual economic growth, and contributing to the long-term strategic economic policies of both Mongolia and Japan.

5 Conclusions

The historical relationship between Mongolia and Japan is a testament to the enduring bonds forged through centuries of interaction and exchange. From ancient trade routes to modern diplomatic engagements, their relationship has evolved through a long and complex journey marked by mutual respect, cooperation, and shared aspirations for peace and prosperity.

Throughout different eras, trade has been a significant component of the economic interactions between Mongolia and Japan. Both countries have exchanged goods such as minerals, agricultural products, and manufactured items, leveraging their respective comparative advantages and meeting the demands of their markets. These exchanges have not only facilitated economic growth but also fostered a deeper understanding between the two nations.

Government initiatives have played a crucial role in promoting trade relations between Mongolia and Japan over the years. Various policies and programs, including trade missions, agreements, and business incentives, have been implemented to support and enhance cross-border trade. These efforts have paved the way for more structured and beneficial economic engagements.

This deep-rooted history has laid a solid foundation for current trade cooperation, exemplified by the recent Economic Partnership Agreement (EPA). This landmark agreement signifies a major milestone in their bilateral relations, reflecting their ongoing commitment to economic collaboration and mutual growth. The EPA is projected to generate new investment opportunities, elevating the economic relationship between the two complementary countries to an unprecedented level. Beyond its economic benefits, the EPA with Japan symbolizes Mongolia’s commitment to regional economic integration and cooperation. By deepening its ties with Japan, Mongolia aims to leverage the economic opportunities offered by one of the world’s largest economies while strengthening its position in the Asia-Pacific region. The agreement represents a strategic effort by Mongolia to harness the potential of international trade for sustainable economic development and prosperity. Simultaneously, Mongolia’s rich resources and strategic geographic location will significantly contribute to Japan’s larger economic dynamics in East Asia.

To ensure the effective implementation of the EPA, Mongolia and Japan may need to harmonize their regulatory frameworks in areas such as trade in services, intellectual property rights, competition policy, and environmental standards. This harmonization may require updates to existing laws and regulations, as well as the establishment of new regulatory bodies or mechanisms to oversee compliance with the agreement.

As both countries continue to build on their historical ties, the future of Mongolia and Japan’s trade cooperation looks promising. Driven by a shared vision for economic development and stability, this partnership is set to foster long-term prosperity and reinforce the strong, enduring bonds between Mongolia and Japan.