National / Politics

Actions of 'TPP 11' likely to influence Japan-U.S. trade talks

by Ko Hirano

Kyodo

With U.S. President Donald Trump tapping into populist anger at globalization and withdrawing from the Trans-Pacific Partnership trade deal, Japan has been exploring ways to move the pact forward with the 10 remaining members.

Calling the TPP “a thing of the past” for the United States, Vice President Mike Pence signaled an eagerness to start negotiations on a bilateral free trade agreement with Japan, given Trump’s preference to handle trade issues bilaterally to better reflect the interests of U.S. industry and workers.

The trade ministers of the now 11 TPP countries are planning to meet later this month in Vietnam in a test of their resolve to bring the high-standard agreement into force amid concerns about protectionist sentiment being fanned by Trump’s “America First” policy and Britain’s decision to exit the European Union.

Preceding that meeting, the Group of Seven finance chiefs apparently failed to narrow the gap between the Trump administration’s call for “fair” and “reciprocal” trade and other members’ concerns about its stance, which is widely viewed as protectionist.

“We don’t want to be protectionist, but we reserve our right to be protectionist to the extent that we believe trade is not free and fair,” U.S. Treasury Secretary Steven Mnuchin told reporters Saturday after two days of talks with his counterparts from Britain, Canada, France, Germany, Italy and Japan in Bari, Italy.

Given Washington’s stance, discussions among the “TPP 11” will be closely watched because they could affect dealings between Japan and the United States on trade, especially as Tokyo is cautious about the Trump administration’s call for a bilateral FTA.

Trump administration officials have criticized Japan’s import tariffs on farm products and accused Tokyo of maintaining nontariff barriers in its automobile market, in an effort to reduce the hefty U.S. trade deficit with Japan.

Citing Japan’s fear that a two-way deal would expose it to U.S. pressure to further open politically sensitive sectors such as agriculture, James Schoff, a senior fellow at the Carnegie Endowment for International Peace, a Washington think tank, said, “I don’t think a bilateral FTA is feasible in the near term, but perhaps the U.S. and Japan can quietly negotiate elements of the TPP at a bilateral level and implement them.”

“A lot depends on how TPP 11 proceeds,” Schoff said. “If it gains momentum, that will put pressure on the U.S. to deal with Japan more along the lines of the original deal.”

Finance Minister Taro Aso has expressed hope the United States will return to the TPP, saying there is “no guarantee” that the Trump administration would win better terms under a bilateral pact with Japan because a multilateral framework like the TPP allows members to offset concessions made with one country with advantages gained from another.

Referring to Japan’s efforts to implement an 11-member TPP, create an Asian FTA called the Regional Comprehensive Economic Partnership and reach an early conclusion in FTA negotiations with the European Union, a ruling Liberal Democratic Party lawmaker said the U.S. absence from these initiatives would generate “a certain degree of pressure” on Washington in light of a possible loss in U.S. competitiveness in the Japanese market.

“With the expectation that (increased goods and services) will enter Japan from Asia, Europe or Australia and New Zealand, the United States appears to be wondering if it is alright to just maintain its current policy,” LDP Deputy Secretary-General Yasutoshi Nishimura told a recent Brookings Institution forum in Washington.

Already, a Japan-Australia FTA, which took effect in 2015, lifted exports of Australian beef and wine to Japan by 30 percent and 12 percent, respectively, in the January-September period of 2016 from the same period in 2014, according to the Australian government.

Of the 11 TPP members, Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam are among the 16 nations negotiating the RCEP.

Nishimura, a former trade ministry official, said it will be virtually impossible for Japan to make further concessions to the United States on farm products and automobiles beyond what it accepted in the TPP negotiations under Trump’s predecessor Barack Obama.

Schoff commented that bilateral talks going forward “could create friction as the U.S. negotiators might feel pressured by Japan’s tactics.”

Speaking at the Brookings forum, former Foreign Minister Seiji Maehara urged the Trump administration to reconsider the strategic significance of the TPP because its failure would allow China — a non-TPP party that has been building its clout through the Beijing-led Asian Infrastructure Investment Bank — to write the trade rules for the Asia-Pacific region.

“What is important is who leads the rule-making,” said Maehara, a member of the opposition Democratic Party, citing the treatment of state-owned enterprises and other areas covered by the TPP that China is apparently reluctant to take up. “I think it’s vital to make sure that China will follow our rules.”

Similarly, U.S. lawmakers such as John McCain, chairman of the Senate Committee on Armed Services, have warned that withdrawing from the TPP — a major campaign pledge by Trump — would create a leadership vacuum China would be quick to fill and would rattle the confidence of U.S. allies in the region.