Legislation enacted in the Diet last week nearly completes the domestic procedure that Japan needs to take for the launch of the Trans-Pacific Partnership free trade pact, which was revised after the United States pulled out. On Sunday, a ministerial meeting in Tokyo of 16 countries negotiating the Regional Comprehensive Economic Partnership (RCEP), including Japan, China and members of the Association of Southeast Asian Nations, agreed to expedite the talks that are aimed at achieving a broad agreement by the end of the year.
It is significant that progress is being made for multinational free trade arrangements at a time when the global economic order is under threat from the protectionist moves by the administration of U.S. President Donald Trump. Japan, as a key U.S. ally whose economy thrives on the free trade architecture, should play a leadership role to facilitate the multilateral free trade agreements both to counter the unilateral trade actions by the Trump administration — which have led some U.S. trading partners to take retaliatory steps, raising the specter of a global trade war — and to press the U.S. to embrace once again a multinational approach to free trade.
The latest legislation includes support for livestock farmers, who will be exposed to greater foreign competition under the TPP, and extends intellectual property rights in line with the trade pact. Once the revisions to related ordinances are completed, the government will notify other participants in the pact, now formally called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Japan follows Mexico in completing the domestic procedures, and the pact will take effect when at least six of its 11 parties have done so.
Since the Trump administration withdrew the U.S. from the TPP early last year, Japan has taken a leadership role in revising the pact among its 11 participants, which together account for about 13 percent of the global economy — a figure that would have been 38 percent had the U.S. remained a member. The government estimates that the pact will potentially increase Japan’s gross domestic product by 1.5 percent, or some ¥7.8 trillion annually, and create 460,000 jobs — while critics charge that the negative impact on domestic agriculture from cuts to farm trade tariffs is underestimated.
The RCEP under negotiation comprises 16 countries that combined account for roughly 30 percent of the worldwide GDP and half the global population. During the ministerial meeting co-chaired by Japan and Singapore in Tokyo on Sunday, the participants said they would aim for “a package of year-end outcomes” as they expressed concerns over “the current global trade environment which faces serious risks from unilateral trade actions and reactions, as well as other debilitating implications on the multilateral trading system.”
Prime Minister Shinzo Abe told the meeting that “amid growing concerns about protectionism, RCEP negotiations are gathering more global attention than ever in terms of whether Asia can unite and hold up the banner of free trade.” Singapore’s trade minister, Chan Chun Sing, said the participants “hope that with the successful conclusion of RCEP we will send a strong and powerful signal to the world that the countries involved continue to believe in free and open trade.” Obviously unilateral trade action by the U.S., including its steep tariffs on steel and aluminum imports, were high on the minds of participants as they groped for ways to achieve a “substantive conclusion” to the RCEP talks by the end of the year.
In fact, progress in RCEP negotiations has been slow since they began in 2013, with participants having agreed on just two of 18 subjects of negotiation, including investment and electronic commerce. While some participants such as Japan and Australia call for high levels of liberalization in terms of tariff cuts and rules against violation of intellectual property, others, including China and India, are cautious. The gap remains wide on certain points of negotiations given the disparity in the economic development of the participating countries.
Japan, as a participant in both the CPTPP pact and the RCEP talks, should take the lead in bringing the talks to a prompt conclusion. Along with the CPTPP, a successful end to the RCEP negotiations would create another large multilateral free trade agreement based in the fast-growing Asia-Pacific region that does not include the U.S. The Asia-Pacific economies uniting on free trade would send a strong message to the Trump administration, which seeks to gain concessions from its trading partners in bilateral talks by imposing or threatening unilateral action such as punitive tariffs. That would not only counter the unilateral U.S. trade actions but could also put the U.S. at a disadvantage in its trade with Asian economies, possibly getting the Trump administration to rethink its policy. The stakes are high for the success of the RCEP negotiations.