Embarking on difficult talks

Prime Minister Yoshihiko Noda on Friday announced that Japan will take part in talks on the Trans-Pacific Partnership agreement, a multilateral scheme for abolishing tariffs in principle and for liberalizing a wide range of economic activities, including investment and services. He will convey his decision to U.S. President Barack Obama and other leaders concerned during the Asia-Pacific Economic Cooperation forum summit being held in Hawaii this weekend.

Chile, New Zealand, Singapore and Brunei signed the original TPP accord in 2005. The United States, Australia, Malaysia, Peru and Vietnam are negotiating to enlarge the TPP. Because of procedures in the U.S., Japan is expected be able to officially take part in the talks early next year or later.

Mr. Noda has said that as a country for which trade is important, Japan must “take in” the growth potential of the Asia-Pacific region and push high-level economic partnership with a large number of countries strategically and in a multisided way through the TPP.

He may fear that as the hollowing out of industry continues in the midst of a population drop and the strong yen, Japan may fall into economic decline. The industrial lobby thinks that a freer trade environment will enable Japanese manufacturers to regain competitiveness against economies like South Korea.

But Mr. Noda had to make the decision under rather odd circumstances. He did not receive the endorsement of his Democratic Party of Japan. In its report Wednesday, the DPJ’s project team on economic partnership urged him to “make judgment carefully” on the TPP issue because, within the party, more members seem to express opposition to the announcement of Japan’s participation in the TPP talks during the APEC summit than those who speak for it.

Not only is the ruling party divided over the TPP issue; a recent Kyodo News poll points to a nearly even split among people in general. While 38.7 percent of those polled support Japan’s participation in the TPP, 36.1 percent oppose it.

Mr. Noda should pay particular attention to the fact that 78.2 percent of those polled think that the government has failed to explain how participating in the TPP will affect Japan. This means that Mr. Noda made the decision to join the talks while people were deprived of information about the TPP’s merits and demerits.

Japan’s participation in writing trade and business rules among participating countries may help enhance its economic position in the region. But Japan should not forget that Japan and the U.S. will account for more than 90 percent of the gross domestic product of the 10 countries in future TPP talks.

Thus the TPP talks will turn into a venue where the economic interests of both countries are expected to clash fiercely. Clearly the U.S. hopes to utilize the TPP as a means of achieving its goal of doubling its total exports, including financial services, within five years. The TPP talks will be anything but easy. Japanese negotiators have to prepare themselves for hard negotiations. The TPP’s 24 working groups cover areas such as access to agriculture markets, investment, financial services, intellectual property, government procurement, nontariff barriers, labor and the environment.

Japan’s farming lobby has expressed the fear that the TPP may lead to the destruction of Japanese agriculture. The farm ministry has estimated that if Japan joins the TPP, its food self-sufficiency rate would fall from the current 39 percent to 13 percent. This estimate may be exaggerated, but the Japanese must carefully think about whether it is desirable to let their country’s food self-sufficiency rate decline further.

The possibility also should not be ruled out that foreign business enterprises will seek control over portions of Japanese agricultural production, processing or product exports. The Japanese must consider whether such a situation for a nation is desirable. Apart from the issue of whether Japan should take part in the TPP, it is imperative that Japan strengthen its agricultural sector.

If Japan is allowed to take part in the TPP talks, the U.S. will make strenuous efforts to gain a strong presence in Japan in such areas as financial services, insurance and investment, in addition to the agricultural market. Some Japanese consumers fear that regulations on food labeling could be loosened.

There is also the fear that TPP participation may undermine Japan’s public health insurance system by encouraging more so-called “mixed medical treatments” and may allow business firms to run hospitals, thus leading to lower safety standards and withdrawal from areas where easy profits cannot be expected.

The U.S. will try to have Japan accept as many U.S. business rules and standards as possible. Maximizing corporate profits does not necessarily lead to the betterment of people’s lives.

As the TPP could force heavy burdens and drastic changes on Japanese society and the economy, Japan should conduct talks from the viewpoint of protecting and maximizing people’s well-being. It should not allow moves to let business enterprises undermine public services and lifelines, including city water.

While trade is important, it accounts for only about 15 percent of Japan’s economy. The government should realize that increasing domestic demand is the authentic way to strengthen the economy. It should especially take steps to improve local economies.