LAHAINA, HAWAII – The lack of a deal on the Trans-Pacific Partnership at the end of key ministerial talks in Hawaii comes as a harsh blow to Prime Minister Shinzo Abe, who has promoted free trade as key to his growth strategy for shoring up Japan’s economy after years of deflation.
And further delays in the already prolonged negotiations on the TPP — touted as the most ambitious trade pact in a generation — is likely to adversely affect Japan’s efforts to secure other large-scale free trade agreements, trade observers say.
The tariff-cutting TPP, if realized, will bind together some 40 percent of global output in the fast-growing Asia-Pacific region.
According to a study by the Peterson Institute for International Economics, the pact will add a combined $285 billion to the member countries’ gross domestic product by 2025 compared to 2007 levels, with Japan projected to be the biggest winner with $105 billion.
While Japan’s priority is on the U.S.-led TPP, it is has also been in talks with the European Union since 2013 for a bilateral free trade deal that will cover some 40 percent of total global trade. Tokyo and the 28-nation bloc are aiming to end their talks by the end of this year.
“Japan-EU free trade talks have been encouraged by (European countries’) concern that they will fall behind in rule-making for global trade if a mega FTA like the TPP is concluded in the growing Asia-Pacific region,” said Takaaki Asano, research fellow at Japanese think tank Tokyo Foundation.
“There would be no need of rushing” to cut a Japan-EU deal within 2015 if the TPP will not see a successful conclusion anytime soon, he said.
Japanese negotiation sources also said prolonged TPP negotiations will have a negative impact on the Japan-EU talks.
“The United States (which leads the TPP) is a close ally for Japan, so we have a political incentive to liberalize our sensitive farm products by breaking our back,” said one source.
“But there may not be such a strong motivation for a trade pact with the European Union. If the TPP ends up unsuccessful, it is unlikely that Japan will easily open up (its sensitive industries) to Europe.”
Japan is also involved in a massive free trade initiative known as a Regional Comprehensive Economic Partnership (RCEP), comprising 16 countries from the Association of Southeast Asian Nations including China and India.
The RCEP nations, whose levels of economic development differ considerably, are also seeking to strike a deal by the end of the year, but that goal is seen as unrealistic given remaining gaps over tariff elimination targets, a basis for entering full-fledged tariff negotiations.
China, which is not a TPP member, could be motivated to push the RCEP forward if the TPP is realized, but the 16-nation talks are not likely to accelerate drastically in the current situation, the observers said.
Tokyo Foundation’s Asano said stalled trade talks will definitely affect Japan’s attempt to incorporate the power of economic growth in Asia, which would be the foundation of the economic growth in the depopulating and graying country.
At a four-day gathering on the Hawaiian island of Maui through Friday, which had been seen as the final opportunity to secure a TPP deal, trade ministers from the 12 TPP countries could not bridge their differences over thorny issues, including intellectual property and liberalization of dairy and auto tariffs.
Akira Amari, the minister in charge of Japan’s TPP negotiations, said the 12 countries were now looking to reconvene a ministerial meeting in late August.
The outlook, however, remains uncertain. A government official said Abe’s economic policy mix, dubbed “Abenomics,” will lack strength without the successful TPP.
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