/

TPP challenges await Japan

by Benny Teh Cheng Guan

Special To The Japan Times

Japan is finally in. Last month marked the nation’s inaugural participation in the Trans-Pacific Partnership (TPP), a regional trade agreement billed as having high standards worthy of the 21st century. This month’s 19th round of negotiations in Brunei (Aug. 22-31) will test Japan’s negotiation skills as a full participant.

With Japan entering the TPP talks as the 12th member, several observations are worth mentioning.

First, domestic protests and debates have mellowed though interests in the issues may not have. Have the opposition parties reluctantly accepted the government’s decision to join the TPP or have the government managed to convince them that their interests will be protected?

The Asahi Shimbun poll published on March 18 indicated that 53 percent supported Japan’s participation while 23 percent objected. However, respondents were split between those who believe in the government’s capability to protect the agriculture and health insurance sectors (39 percent) compared to those who do not (40 percent).

This brings me to a second observation — the government’s ability to fully secure its interests. If negotiation is a process of making compromises, then it’s impossible to protect the interests and livelihood of every citizen.

One way to overcome or reduce the negative impacts of such trade deals is to seek for exemption in sensitive, i.e., uncompetitive, sectors from liberalization. Japan has entered the TPP with a proposal to exclude five items — rice, wheat, beef and pork, dairy and sugar — from the talks. This is reflective of the compromises achieved between the Abe administration and various powerful lobby groups such as the Japan Agricultural Cooperatives.

Third, will Japan succeed in having those items excluded from the talks? In February this year, the United States was reported to have said that all items, including rice, must be put up for negotiation. This does not necessarily imply that no special provisions can be provided but that the more items a member country wishes to protect, the more compromises it needs to make.

Considering that Japan is a latecomer, it will need to quickly build alliances with countries that have similar concerns to get as many sensitive items as it can off the negotiation table and so far reports have indicated that Malaysia is willing to cooperate. Japan may also find Australia to be a willing ally if the two-stage tariff system on certain farm products that the two countries broadly agreed on in their bilateral economic partnership agreement (EPA) in April can be adopted under the TPP framework.

There are, however, those who disagree. In May, Kazuhito Yamashita, an agricultural policy expert at the Canon Institute for Global Studies, mentioned that protecting domestic rice through high tariffs does not serve national interests. What needs to be done is to abolish the rice paddy reduction program by abolishing the high import tariffs, which will result in cheaper rice prices and benefit Japanese consumers.

“Nothing should be excluded, particularly rice should not be excluded,” says Masayoshi Honma, a professor of agriculture and resource economics at the University of Tokyo. He is of the opinion that the government should utilize the TPP as a commitment to push for internal reforms but extend the tariff reduction period for rice to 20 or 25 years, similar to what the U.S. is willing to do for auto tariffs on Japanese vehicles.

Fourth, will Japan be able to serve as a counterbalance to the perceived U.S. dominance in the negotiation process?

“No, no way … the ruling party will sign [the] TPP [agreement] as the U.S. wishes … scary,” says an IT office worker. While concerns for genuflection exist, the fact is that Japan is negotiating from a weaker position due in part to its late entry.

Taking sides will most likely be issue oriented. Tokyo may even side with Washington on certain issues such as the introduction of stringent regulations against intellectual property rights violations and the loosening of government procurement rules.

Fifth, contrary to popular belief, Japan should not face too much difficulty in dealing with the other TPP participants. Japan has already established bilateral EPAs with 7 of the 11 nations. It has made some progress with Australia on agricultural issues. The remaining two nations (New Zealand and the U.S.) are where Japan’s full attention is most required.

Finally, pundits have indicated that Japan could pull out of the TPP process should the going gets tough. While that option remains open to all participating countries, the current political stability under the Abe administration should ensure Japan’s commitment to the TPP process. Moreover, a sudden pullout will adversely affect its reputation as a regional economic power.

However, there is still the ratification hurdle. Depending on the compromises achieved and the political strength of the Abe administration to convince the Diet at the time of ratification, there could be delays and possible renegotiations.

It would not be surprising if the final TPP agreement is less ambitious than originally envisaged but should Japan succeed in putting it into effect, it would mark a great breakthrough from the time when, in 1987, U.S. ambassador to Japan Mike Mansfield proposed a study on a U.S.-Japan FTA.

Benny Teh Cheng Guan is a senior lecturer at the School of Social Sciences, Universiti Sains Malaysia, Penang, and a visiting research fellow at the Institute of Social Science, the University of Tokyo, Japan.