Despite TPP agreement, Japan under pressure to make free trade deal with U.S.

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By remaining a champion of the Trans-Pacific Partnership free trade deal after the withdrawal of the United States, Japan is hoping that Washington will soften its demands in future bilateral trade negotiations.

Japan has lobbied hard in recent days on the sidelines of the Asia-Pacific Economic Cooperation forum summit in the central Vietnamese city of Danang to reach a ministerial agreement on “core elements” of a new trade pact to be implemented without Washington, as differences among the 11 remaining members have proved surmountable.

But the chances of bringing Washington back to the pact, originally signed by all 12 countries in February 2016, look slim given U.S. President Donald Trump’s “America First” mantra, which is leading him on a quest for bilateral deals with countries running large trade surpluses with the United States.

A last-minute challenge by Canada also raised doubts about the unity of the 11 remaining members, casting a shadow over the prospects for their smooth domestic ratification and eventual signing of the deal.

A weaker TPP means lower leverage for the Japanese side in trade negotiations with the United States, political analysts said.

The TPP leaders’ meeting, initially scheduled for Friday afternoon to endorse and announce the TPP ministerial agreement, was canceled despite Prime Minister Shinzo Abe’s push during his meeting with his Canadian counterpart, Justin Trudeau.

Abe said Canada was not at a stage to confirm the ministerial agreement. Francois-Philippe Champagne, minister of international trade, said in a statement Ottawa “will not be rushed into an agreement that is not in the interest of Canada.”

Japanese leaders want to shield its politically powerful agricultural sector from liberalization demands that are potentially harsher than those agreed under the TPP, but political analysts say the Trump administration is likely to step up calls for a bilateral free trade agreement, and the tough demands it will bring, regardless of the TPP’s future.

“There is no vision in Mr. Trump’s trade negotiations. For him, what matters are jobs,” said Keisuke Hanyuda, partner at Deloitte Tohmatsu Consulting and a former trade ministry official involved in discussions on free trade talks.

Trump’s trade policy is one of the tools he hopes will create more jobs and satisfy campaign promises important to his base, Hanyuda added.

Japan stresses that trade issues related to the United States will be left to a high-level economic dialogue overseen by Deputy Prime Minister Taro Aso and U.S. Vice President Mike Pence, in an apparent bid to avoid open confrontation between the countries’ leaders.

“In the dialogue, Japan will try not to take trade issues at face value even if requests are made by the United States, but at the same time, Japan also needs to show that some progress is being made,” Hanyuda said.

Junichi Sugawara, a trade policy expert at the Mizuho Research Institute, said, “Realistically speaking, I think it will be quite hard for Japan to fend off requests to start negotiations on a bilateral free trade agreement, although it depends on how hard the United States pushes.”

Rejecting U.S. demands will risk inviting unilateral measures such as anti-dumping duties to address trade deficits, he says.

“In such a case, Japan may be better off accepting U.S. requests to start negotiations for a bilateral FTA,” Sugawara said, but added Japan should not be pressured into signing on.

“Japan needs to continue saying that the TPP is a better deal, creating an environment where the United States will want to come back,” he said, adding, “It’s important not to make the United States take a hard stance on Japan but to keep the dialogue going.”

In announcing the 11-party deal on Saturday, Toshimitsu Motegi, the minister in charge of Trans-Pacific Partnership free trade negotiations, said the agreement “sends a very strong message to the United States and other countries in the Asia-Pacific region” and expressed hope for the United States’ return.

The TPP, comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, now covers 13 percent of the global economy, compared with 40 percent prior to the withdrawal of the United States.

Trump criticized multilateral free trade agreements like the TPP, saying in a speech Friday, “What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty and make meaningful enforcement practically impossible.”