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Tokyo’s success in bringing Pacific trade deal back to life marks challenge for Beijing, analysts say

by Reiji Yoshida, Kazuaki Nagata and Alex Martin

Staff Writers

A large-scale free trade pact once considered dead is now staging a comeback.

Despite the much-trumpeted withdrawal of the United States, the 11 remaining member countries agreed to sign an adjusted version of the pact on Tuesday in Tokyo.

The move marks a major victory for Tokyo’s diplomacy and will establish a strong foothold for member nations in trade negotiations with states preferring less liberalized trade — including China — Japan-based experts said Wednesday.

“TPP 11 can be a breakwater against protectionism in world trade, and will send an important message to American industries,” said Yorizumi Watanabe, professor of international politics and economics at Keio University. “The agreement is a victory for Japan’s economic diplomacy. Japan has never taken such an active initiative in trade negotiations.”

TPP negotiations were launched in 2010 by eight countries including the United States, with the aim of setting freer trade rules and reining in protectionism in the region.

Japanese diplomats unofficially say one of the key goals of the pact is to keep China in check, as Beijing is believed to prefer trade rules with lower standards to protect its domestic firms and industries.

But in January last year, U.S. President Donald Trump withdrew the U.S. from TPP negotiations, claiming the pact would only hurt American workers and that he prefers bilateral deals.

The withdrawal of the world’s largest economy seemingly killed the pact. But the remaining 11 countries relaunched negotiations and managed to reach an agreement excluding the U.S. only a year after Trump’s announcement. They are now set to sign it in March.

“Frankly, I did not expect an agreement to be reached this quickly,” said Junichi Sugawara, senior research officer at Mizuho Research Institute.

The pact without the U.S., formally called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, would still have a massive economic impact covering as much as 13 percent of the world’s total gross domestic product.

Among the 11 states, Japan has the largest economy and played a key role in leading the negotiations over the past year, experts said.

Sugawara pointed out that there was concern that the U.S. withdrawal could create a “vacuum” in the Asia-Pacific region’s free trade bloc and that China’s growing power could fill the void. But Tokyo took the initiative and helped form a new consensus quickly to set freer trade rules than those preferred by Beijing, he said.

To make the pact effective, the 11 countries still need to undergo domestic procedures to endorse the deal clinched by state governments. The pact is now expected to be signed by representatives from the 11 countries on March 8 in Chile.

Junji Nakagawa, a University of Tokyo professor who is an expert in international law and trade negotiations, said he expects none of the 11 states will find it difficult to formalize the pact and that the pact will eventually go into effect.

Nakagawa said China has pushed for lower-level trade liberalization and has been promoting economic talks on another pact called the Regional Comprehensive Economic Partnership.

But now that the revised TPP looks likely to go into effect, it will be more difficult for Beijing to push for the trade conditions it prefers, in part because some of the TPP members — including Japan, New Zealand and Australia — are also engaging in talks regarding the Regional Comprehensive Economic Partnership, Nakagawa said.

“The negotiation position of Japan will probably be strengthened” in RCEP talks, he said.

The 11 states in the new TPP say they would welcome the U.S. back if Washington had a change of heart.

Several experts interviewed by The Japan Times agreed that Trump’s administration is not likely to rejoin the framework given the president’s tough rhetoric and voter support during his 2016 presidential campaign.

Japan and the other 10 countries want the U.S. to come back to the deal, but it’s “a mid-to-long-term agenda, rather than a short-term one,” Sugawara said.

Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam have agreed to sign the deal in addition to Japan.

The government estimates the pact, if implemented, would give about an ¥8 trillion boost to Japan’s GDP.

The figure is significantly lower than the estimated ¥13.6 trillion increase from the original deal that included the United States, but is higher than the ¥5 trillion increase expected from the Japan-EU free trade pact.