A setback for the TPP talks

The failure of trade ministers from the 12 countries in the Trans-Pacific Partnership free trade talks to reach a broad agreement in talks that were held in Maui, Hawaii, in late July may cast negotiations adrift for some time. Hopes that a deal could be reached had been strong because the talks will effectively be derailed once the campaigning for the 2016 U.S. presidential race gets into full swing later this year, making a deal under the administration of President Barack Obama difficult. It remains uncertain when the next ministerial talks will be held.

Still, the rupture of the talks may not be all bad news for Japan. According to some details of the negotiations that came to light, Japan appears to have been ready to make major concessions in order to strike a deal, including the creation of a new quota for rice imports as well as cuts to import tariffs on pork and beef — part of what has been called “sanctuary” farm trade areas that also include wheat, dairy products and agricultural foodstuffs for the manufacture of sugar.

Japan was reportedly also about to accept unsatisfactory terms for the opening of American car and vehicle parts markets, with the abolition of U.S. tariffs on Japanese cars taking a fairly long time to take effect and conditions for the elimination of tariffs on vehicle parts not matching Japanese demands.

If a deal had been struck at the Hawaii talks, there would inevitably have emerged a large gap between what benefits Japanese consumers would gain and what losses could be incurred by this country’s farmers. The Abe administration should use the latest turn of events at the TPP negotiations to reassess what Japan stands to gain and lose from the talks and carefully decide how to proceed.

A major obstacle to a deal at the Hawaii talks was the differences between the U.S. and other negotiating countries over the protection of pharmaceutical data. The U.S., which has a powerful pharmaceutical industry, called for the protection of such data for 12 years, while countries like New Zealand and Malaysia, which seek to promote the development of generic drugs to cut back on medical expenses, demanded that the protection period be five years or less. The U.S. reportedly would not budge because a compromise on the issue could have alienated the Republican Party, which controls the Congress and accorded Obama trade negotiation authority. A compromise offered by Japan to protect the drug data for eight years failed to bridge the gap between the U.S. and its opponents. A deal was also made difficult due to differences over the opening of dairy markets. New Zealand’s call for the elimination of tariffs on dairy products met with strong opposition from Canada and Mexico, which expect to suffer losses from the rise in imports.

Along with the cuts to trade tariffs, the TPP seeks to create common rules among its participants in a total of 21 fields ranging from finance to intellectual property, public works projects and investments. For the U.S., which has taken the lead in promoting the talks, a deal carries the significance of orchestrating a highly liberalized international trade regime in the Asia-Pacific region at a time when China’s economic presence there is growing.

The Abe administration’s pursuit of a TPP deal meanwhile has the aspect of aligning Japan’s position with the U.S. strategy vis-a-vis China. The administration, which emphasizes China’s growing threat in East Asia, views the TPP as a key component of deepening Japan’s alliance with the U.S. alongside closer bilateral security ties.

Participants in the TPP talks account for a combined 40 percent of the world’s GDP, and joining a free trade regime of such a scale in itself would be significant for Japan. But that and the strategic consideration of keeping in step with the U.S. should not lead Japan to make easy compromises for a deal. The government needs to make careful calculations on whether the concessions it would make and the benefits from a deal would on the whole promote Japan’s interests.

There is a related problem. The secrecy surrounding the TPP negotiations deprives ordinary citizens and lawmakers alike of the chance to know what are being discussed in concrete terms — making it extremely difficult to find out exactly how a final deal would affect people’s lives here.

Two years have passed since Japan joined the TPP negotiations in 2013. The prospect for an early conclusion of the talks has become more uncertain after the failure of the Hawaii talks to produce a broad agreement. The government has reportedly given up on its initial idea of seeking to hold the next ministerial talks by the end of this month. Japan should not solely concentrate on the TPP in its free trade agenda. The government should spend more energy on other ongoing free trade talks with East Asian countries and Europe, which might produce larger economic benefits than the TPP.