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Abe's pursuit of 11-party TPP likely to benefit Japan

by Tomoyuki Tachikawa

Kyodo

Prime Minister Shinzo Abe’s renewed pursuit of the Trans-Pacific Partnership may eventually benefit Japan as the likely accompanying trade expansion would provide a boost to Japan’s economic growth.

At their meeting in Hanoi on Sunday, ministers from the 11 TPP countries agreed to complete preparatory work by November to put the free trade deal quickly into force, moving a step closer to implementing the pact.

While it remains to be seen whether they can bring the TPP to fruition without the United States, analysts say Abe should continue to patiently move the negotiations forward.

Unless the TPP becomes effective in the absence of the world’s biggest economy, “high-level” rules on trade agreed to under the original 12-nation deal would be dead, possibly allowing China to take the lead in setting the economic tone in the region.

Should the Japan-led 11-party trade pact stimulate business activity and enhance investment in the region, the U.S. could be motivated to return to the TPP and capitalize on the burgeoning economic growth.

Echoing such views, Japan’s point man on the TPP, Nobuteru Ishihara, has said the enactment of the free trade deal is “strategically and economically” important, whether Washington joins or not.

Covering around 40 percent of the global economy, the TPP was signed in February 2016 by 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

Donald Trump, however, killed the pact immediately after he took office in January. The new U.S. president, who has pursued an “America First” policy, pledged on the campaign trail to pull Washington out of what he called the “job-killing” TPP.

The U.S. withdrawal means the deal would be dead under the current rules given the scale of the country’s economy.

Japan had been previously unwilling to have the TPP come into force without Washington’s involvement, but it has recently decided to make efforts to realize it amid lingering fears about China’s regional economic assertiveness.

Earlier this month, China hosted a two-day international forum on its “One Belt, One Road” initiative, a program under which Beijing is trying to further entrench its economic influence in Europe and Africa. Beijing was not invited to join the TPP.

“If Japan does nothing, China will grab a leading role in setting free trade rules, in turn putting Japan at a disadvantageous position in the trade field in the region,” Political commentator Norio Toyoshima said.

“Japan should not stop seeking overseas market development for economic growth,” Toyoshima said.

Tsuyoshi Kawase, a law professor at Sophia University in Tokyo said that “the TPP was initially designed to counter the economic order in the Asia-Pacific dominated by China.”

Even excluding the United States, implementation of the “U.S.-friendly” and “free-market-oriented framework” would be “beneficial” to Japan, Kawase said.

On Sunday, the 11 TPP ministers said in a statement that they “underlined their vision for the TPP to expand to include other economies that can accept the high standards of the TPP.”

“Fortunately, more trade and investment are required for economic growth in Asia, where the anti-globalization movement has not spread,” said Tatsuhiko Yoshizaki, chief economist at the Sojitz Research Institute. “If the 11-member TPP functions well, the number of countries that are interested in participating in the pact may increase in the future.”

A TPP of increased value could “attract the United States back” to the free trade deal, said Junichi Sugawara, a trade policy expert at Mizuho Research Institute.

Still, Japan would face difficulties in striking a deal as the remaining TPP nations have been divided over whether to proceed with talks with Washington on the sidelines.

Australia and New Zealand have aligned with Japan, but Vietnam and Malaysia have indicated they disagree with Tokyo’s proposal as their main aim is to boost exports to the United States to expand their economies.

Mexico and Canada are believed to be reluctant to irritate Trump by joining the 11-party TPP, as they have been urged by Washington to renegotiate the trilateral North American Free Trade Agreement, or NAFTA.

“The Japanese government is aiming to establish the TPP 11 and eventually persuade the United States to return to the TPP,” said Naohiko Baba, chief economist at Goldman Sachs Japan Co. “Getting the TPP 11 off the ground will be no easy matter, though. There is a risk that the remaining signatories will be unable to reach consensus.”

Moreover, Robert Lighthizer, the new U.S. Trade Representative, completely ruled out the possibility of Washington re-entering the TPP.

“The United States pulled out of the TPP and it’s not going to change that decision,” Lighthizer told a news conference Sunday. “Bilateral negotiations are better for the United States than multilateral negotiations.”