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Anxious Abe eager to strike while TPP iron is hot

by Tomoyuki Tachikawa

Kyodo

While several Trans-Pacific Partnership countries have taken a cautious approach ahead of Tuesday’s U.S. presidential election, which could alter the fate of the free trade pact, Japan has instead been stepping up its efforts toward ratifying the deal.

Prime Minister Shinzo Abe is in a hurry to ratify the TPP as he is eager to take the lead in setting free trade rules in the Asia-Pacific region, with an eye on China’s rising assertiveness, political experts say. Beijing is not part of the TPP.

Economists also say Abe, who has been promoting free trade as the key to growth under his sputtering Abenomics policy mix, wants to conclude the TPP as soon as possible to start free trade talks with other countries in Asia and further afield.

“Prime Minister Abe is serious about accelerating the economic growth of export-oriented Japan by expanding free trade,” as the domestic market has been shrinking due to depopulation, said Junichi Sugawara, a trade policy expert at Mizuho Research Institute.

“For that purpose, he has been willing to play a leading role in setting fair trade rules in Asia and to give a boost to free trade negotiations with broader areas while tackling growing protectionism,” Sugawara said.

The House of Representatives, controlled by the ruling bloc of Abe’s Liberal Democratic Party and junior coalition partner Komeito, is expected next week to approve the TPP, signed in February.

The opposition has lambasted the move as “steamrolling,” arguing that more deliberation is needed to address lingering concerns that the TPP could threaten food safety and other consumer interests in Japan.

Offhand remarks by Agriculture, Forestry and Fisheries Minister Yuji Yamamoto about bulldozing the TPP through the Diet have led to the opposition parties taking a tougher stance on the issue. But Abe has stuck to early ratification.

The Constitution stipulates international treaties that clear the more powerful Lower House will be automatically enacted after 30 days, even without the approval of the House of Councilors.

Covering around 40 percent of the global economy, the TPP groups Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Indonesia, Thailand and South Korea are reportedly interested in participating in the deal.

The TPP will take effect 60 days after all 12 countries ratify it. If all the nations have not ratified it in two years, it will take effect 60 days after at least six countries accounting for 85 percent of the combined gross domestic product of the 12 signatories do so.

Thus, the pact will not take effect without ratification by the United States and Japan, which represent nearly 80 percent of the trade bloc’s GDP.

The U.S. Congress, however, has shown little sign of passing the TPP soon, as both major candidates for the U.S. presidency — Republican Donald Trump and Democrat Hillary Clinton — have criticized the pact, the latter publicly flipping her position after having earlier championed it.

“The TPP was initially supposed to be a pillar of U.S. strategy in the Asia-Pacific region to take up the challenge of making new international rules,” said Tatsuhiko Yoshizaki, chief economist at the Sojitz Research Institute.

“As the United States has dragged its feet, Japan’s early ratification would give the impression to other TPP members that Tokyo is working hard, which could raise Japan’s reputation in the region,” he added.

Toru Nishihama, chief economist at the Dai-ichi Life Research Institute, echoed the view, saying Tokyo now has a chance of grabbing a leadership position to establish free trade rules in the region, a move that could help contain China’s regional rise.

As President Xi Jinping has propounded the idea of a “Chinese dream,” Beijing has been trying to “build hegemony by imposing its rules in the Asia-Pacific region,” Nishihama said, referring to China’s launch last year of the Asian Infrastructure Investment Bank.

“It would be difficult to completely stave off China’s bid, but Japan might be able to do that if Japan’s efforts successfully lead to adoption of the TPP and enhance free trade rules in the region,” he added.

Looking ahead, analysts say the TPP is likely to affect talks on the Regional Comprehensive Economic Partnership — a mega-trade agreement among the 10-member Association of Southeast Asian Nations plus Australia, China, India, Japan, New Zealand and South Korea.

Given that RCEP includes the new emerging powers of China and India, tough negotiations are expected.

“If the TPP sets trade rules in Asia, Japan can take the initiative in advancing talks on the wider free trade deal,” commentator Norio Toyoshima said.

“The TPP is an important milestone of Japan’s free trade policy. Prime Minister Abe strongly hopes the TPP will take effect, believing it would become a legacy created by Abe’s government,” he said.

In addition to free trade talks across the Asia-Pacific, Japan is aiming to reach a broad deal with the European Union on free trade by the end of this year.

TPP ratification could also pave the way to sealing the the Japan-EU deal, a senior Foreign Ministry official said, signalling Japan may use the Pacific Rim deal as a bargaining chip.

“We have no intention of renegotiating the TPP. If we tell Europe that we are proceeding with structural reforms at home in line with the TPP, Europe could make concessions,” the official said.

As Britain’s talks to leave the European Union may begin and major elections scheduled in France and Germany next year, Europe could have little room to concentrate on free trade with Japan after the turn of the year.

“Japan should ratify the TPP soon in order to speed up free trade negotiations with the European Union,” Sugawara said.

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