The Trans-Pacific Standoff: Japan and the TPP

Disagreements between Japan and the United States have brought negotiations to create an overly ambitious tariff-free trade zone to a standstill. Differences between the two largest players in the Trans-Pacific Partnership (TPP) has held up efforts to create closer economic ties between 12 Pacific Rim countries.

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Membership in the Trans-Pacific Partnership is an important part of Prime Minister, Shinzo Abe’s, “third-arrow” of structural domestic reform, but creating an open market for what Japan considers sacred agricultural products has been met with strong opposition. The two countries are at odds as the United States fights for absolute tariff elimination while Japan remains unyielding on retaining duties on key agricultural products – rice, wheat, meat, dairy, and sugar.

Shinzo Abe is determined to reform Japan’s agricultural sector through trade liberalization but has been met with resistance by industrial and political groups. Japan’s Agricultural Cooperatives Group (JA) is a major opponent to the TPP and has proved to be a main hurdle in the negotiations regarding agricultural trade barriers. The JA wields strong political influence through force of numbers and ties with the Liberal Democratic Party (LDP) and the agricultural ministry.

Japan’s adamancy under these domestic pressures to exempt its five major products from tariff elimination would leave Japan at an 89% trade liberalization rate. However, under the initial conditions of the TPP agreement, member countries are required to pledge a minimum of 95% trade liberalization before a final agreement can be met – a goal that was set for the end of 2013.

Abe’s determination for economic revival through trade liberalization has put Japan’s sacred products under review in an effort to raise its liberalization rate. However, Akira Amari, state minister in charge of TPP negotiations, warns that the Abe administration would not survive if it gave in. According to a Japanese lawmaker for the agricultural industry in Japan, that the Japanese government would even consider lowering tariffs on sacred products is considered unacceptable.

Japan’s obstinacy has been taking its toll on the other 10 negotiating countries – Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Conversations of moving forward without Japan has risen but was implicitly dismissed by the United States. According to the United States Trade Representative, Michael Froman, “Our focus is on achieving an agreement among all 12 of us…and that agreement needs to be that ambitious, comprehensive, high-standard agreement”.

The proposed trade agreement including all 12 members began in August 2013. Together, the 12 countries contribute to 40% of the world’s GDP and account for one-third of its total trade. It is obvious that such an agreement is no small deal and as overly ambitious is the overall partnership agreement, more so was the target of finalizing such negotiations between all countries by the end of last year.

Trade experts predict that the next major opportunity for progress will come when United States President Barack Obama visits Japan in April. However, Obama’s position is also seeing push-back as Congress refuses to grant him fast-track authority to negotiate trade deals.

With such a complex agreement in the works, it is difficult to see an end to the negotiations in sight. Until Japan and the United States are able to come to an agreement, it will be impossible for the other member countries to move forward with their own issues.

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