Abe declares Japan will join TPP free-trade process

Government predicts 0.66% GDP bump; farmers to take ¥3 trillion hit

by Reiji Yoshida

Staff Writer

After taking time to lay the groundwork amid pressure from lobby groups and lawmakers from rural constituencies, Prime Minister Shinzo Abe formally announced Friday that Japan will join the Trans-Pacific Partnership free-trade talks.

Abe’s government also unveiled its estimate of the possible economic impacts of joining the trade initiative, showing Japan’s participation would drive up its gross domestic product by 0.66 percent, or around ¥3.2 trillion, but that production in the farm, fishery and forestry sectors could decrease by ¥3 trillion annually if all tariffs are abolished unconditionally.

“The TPP is turning the Pacific Ocean into an inland sea and a huge economic zone,” Abe told reporters at his office.

As 11 member countries have already spent the last three years deciding rules to free up trade, services and investment in the Pacific Rim, Japan needs to actively engage in the talks to make them as advantageous as possible for the country, Abe said.

“This is the last chance. If we miss this opportunity, it would immediately mean that we would be left out of setting global regulations” on free trade, he said. “If Japan becomes only inward-looking, there will no longer be a chance of economic growth.”

At the same time, Abe admitted that “it will be difficult to overturn rules already set” by the 11 TPP member countries in past rounds of talks. But he also stressed that he will defend the nation’s interests throughout the discussions, which are scheduled to end by December, in particular by mitigating the negative impact on the domestic agriculture and fisheries industries.

He declined to answer whether Japan would withdraw from the discussions if it fails to persuade the other TPP members to allow existing tariffs on rice, pork, beef, wheat, dairy products and sugar to continue, as demanded earlier by Abe’s own Liberal Democratic Party.

“We will negotiate based on the national interests. Commenting on whether to withdraw (from the TPP) at this point won’t serve that purpose,” he said.

Still, Abe’s LDP administration faces an uphill battle with time running out for Japan to negotiate any exemptions — especially in the key areas of rice, sugar and dairy products — with the other 11 TPP member states, making it more difficult for Tokyo to exert much leverage and ensure the minimum damage to the domestic agriculture industry.

The founding members of the TPP talks have been hammering out a framework for the regional accord since 2010, and their number has swelled to 11 countries, including the United States, Canada, Australia, Mexico, Singapore, New Zealand and Peru.

With little information available to nonmember nations, many are worried that Japan is taking its place at the table far too late if it hopes to amend agreements already settled by the current TPP participants.

“If (Japan) wants to take part in the talks, it needs to obey our ‘dress code,’ which has been already decided,” an official of one of the 11 countries reportedly said.

Led by the United States, the TTP members finished the 16th round of talks covering 21 trade and service areas Thursday in Singapore, and aim to reach a final agreement by the end of the year.

Japan’s participation requires the prior approval of every other TPP member, a process that is expected to take until mid-June to complete. That means the earliest opportunity for Japan to enter the fray could be a round of talks eyed for July, giving Abe’s government less than six months to negotiate any tariff exemptions before the final accord is inked.

But failing to join the regional trade zone would still be too big a risk for Japan to run, according to Abe and many experts. The combined gross domestic product of the 11 TPP countries comes to around $21 trillion (around ¥2 quadrillion) and if Japan’s nearly $6 trillion (roughly ¥575 trillion) GDP is included, the bloc would account for 40 percent of total global economic output.

Yorizumi Watanabe, a former trade negotiator at the Foreign Ministry who is now a professor at Keio University, said Japan’s accession to the TPP is critical because it is likely to become a key platform for Asia-Pacific countries in setting rules for cross-border trade and services.

The Doha Round of tariff elimination talks at the World Trade Organization has remained stalled for years, he said, making it even more likely the TPP framework will serve as a template for future free-trade accords.

And with China and a number of other key economies showing interest in joining the TPP, Japan’s presence will be essential not only for its firms that are trying to tap overseas markets but also for those seeking to build production bases abroad, Watanabe said, adding, “It’s a big opportunity. Japan has wasted the past three years (by not joining the TPP talks).”

That said, the damage to Japan’s agricultural sector is likely to be equally substantial.

Prompted by farm lobbies, the LDP on Thursday adopted a resolution demanding Abe’s government prioritize the exclusion of rice, wheat, beef, pork and sugar from tariff exemptions in the TPP discussions.

Farmers argue that maintaining the current level of output is vital to ensure the nation can produce the minimum food supply that would be necessary in times of severe emergencies, such as wars or global food shortages.

Opening up rice and other sectors to foreign imports would devastate rural economies and communities, but Japan’s agricultural industry already seems to be dying a slow death despite the current protections against foreign products.

According to the Agriculture, Forestry and Fisheries Ministry, the average age of the nation’s 2.6 million farmers stood at 65.9 as of 2011, and most of them lacked successors. The farm industry, meanwhile, accounted for just 1 percent of Japan’s GDP that year.

“Rice consumption came to 12 million tons in 1994, but it has shrunk to 8 million tons at present,” said Kazuhito Yamashita, a former farm ministry official who now serves as research director of the Canon Institute for Global Studies. “(Agricultural) production will further shrink because of the aging society and decreasing population numbers.

“Japan will no longer be able to maintain its farm industry (at its current level). Everybody is aware of that.”

Yamashita also argued that Japan, if necessary, could still protect its farmers by providing them with direct payments if tariffs against foreign produce are scrapped. A similar policy has been adopted by many other major industrialized countries and is widely considered acceptable in a free-trade agreement like the TPP, he said.

To survive, some domestic farmers will need to begin exporting high-quality produce overseas, Yamashita argued, adding that in that sense, Japan’s participation in the TPP is essential.

  • ring of fire

    Professor Watanabe’s comments make sense. Japan’s economy has been stagnating with slow growth for decades due, in part, to it’s failure to participate in international and bi-lateral trade agreements. Opening up and reforming is clearly necessary and participation in the TPP is way overdue.

  • itoshima2012

    Very good news!

  • itoshima2012

    TPP will not devastate the rice farming sector, because a) Japanese will always consume Japanese rice (look at Italy, pasta is 100% Italian, imported pasta has a ridiculous market share) but it might open new markets for Japanese high quality an delicious rice so it’s a win win. No question about that. Milk producers might feel the pinch at the beginning but only at the beginning because imports are already high so no big change there – and than, as an importer, don’t get carried away, japan I awesome in finding indirect trade barriers….

    • http://twitter.com/lioneltokyo Lionel Dersot

      Considerable amounts of 100% Italian pasta are made with imported durum wheat starting from Canada. Same goes for standard olive oil stamped Made in Italy once arrived from Spain, Tunisia, etc. All this country branding is legal. Who will replace the aging Japanese farmers is an open question. In the meantime, koshihikari will be cultivated in Asia in part to cater for the Japanese market. It will be as delicious as it is, only cheaper.

  • tomo

    This is a very good news.Japan has a few row materials ,so to play a leading role in making the trade rule is the only way to survive.

  • RMMStaInes

    “If we miss this opportunity, it would immediately mean that we would be left out of setting global regulations” on free trade, he said. “If Japan becomes only inward-looking, there will no longer be a chance of economic growth.” Prime Minister Shinzo Abe is right and did the best decision in protecting the situation of the country and not just one sector of the industry. Withdrawing will only hurt Japan more as other countries will implement trade embargo. Knowing the Japanese people are resilient, patriotic, and they love their own products everyone is in a win-win situation.The only profit greedy companies are against the TPP as they will not enjoy the luxury of their overpriced products. This time the consumers will enjoy various selections and the value of their pockets.

    • NemesisPrimev4

      “The only profit greedy companies are against the TPP as they will not enjoy the luxury of their overpriced products.”

      Swap against with for around and take out not and you’ll have it correct.

  • http://twitter.com/jinginakiliam Liam

    They are joking if they think they will get tariffs left on meat, dairy etc. These are key product categories that the other countries want prohibitively-high tariffs removed from. The whole point of the agreement is to remove tariffs.

    You can’t have your cake and eat it too. Unfortunately Japan is a bit too late in joining in to be in any position to negotiate effectively.

  • FeudalSerf

    The short-sightedness of Abe and his supporters is beyond my comprehension. First of all, what will happen to food self-sufficiency? Japan already imports a far higher-than-safe percentage of food. If there are world-wide shortages of staple foods, who do you think is going to feed the Japanese people when food is short in their own country?

    Next thing to consider, food safety itself. One only needs to look at the BSE issue. By law, every cow slaughtered for beef was required to undergo BSE inspection. Then along comes the USA and forces Japan to open its door to uninspected, unsafe beef. And this was BEFORE TPP. We can expect the situation to be much worse once TPP takes effect.

    And then there are all the non-trade issues. Insurance, banking and investment laws will have to conform to US dictates. Remember the Wall Street meltdown of 2008? And people want Kabutocho to play by the same rules as Wall Street? Give me a break.

    Drugs. The US drug cartels (the legal ones: Pfizer, J&J, Eli Lilly and ilk) have a captive market in the US. School kids are being drugged dumb often against their will, and maybe even against the parents’s will. Does anyone want to see Japanese kids walking around like zombies? Because that is what is going to happen.

    Don’t say you were never warned.

  • EQ

    Frankly, Japan has no choice but to join the TPP. Time for Japan’s farm industry to stop hiding behind tariffs and subventions as it has done for years to avoid taking care of its problems. Prime Minister Abe says he wants Japan to join the TPP. That’s the right move but participation in the TPP requires the prior approval of every other TPP member and, by now, the current members are probably asking themselves “Is it worth it to allow Japan to join the TPP so late?” Especially if Japan wants to exclude rice, wheat, beef, pork and sugar from tariff exemptions.

  • irairaneko

    I worry first and foremost about food safety. I hope the Japanese shopper will continue to be astute and
    careful. The U.S. has a very hollowed out manufacturing sector, but
    bio-ag is making enormous profits. The U.S. is very much in this for
    themselves to find new markets outside their ailing domestic one. Japan
    should take part but make play very tough. No U.S. style crap food+big pharma+ “health” insurance nightmare. No way.