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Govt shifts TPP course due to concerns over bilateral talks / Trade pact without U.S. targeted

The Yomiuri Shimbun

The Yomiuri ShimbunThe government has decided to aim for effectuation of the Trans-Pacific Partnership free trade agreement without the United States. With this new direction set, the government aims to contain the U.S. demand for bilateral talks.

However, there are issues yet to be resolved among the remaining 11 participating countries in order for the TPP to take effect, leaving the future of the treaty unclear.

‘Thing of the past’

At a press conference after Tuesday’s Japan-U.S. economic dialogue, U.S. Vice President Mike Pence described the TPP as “a thing of the past for the United States.”

To come into effect, the TPP needs to be approved by at least six countries among the 12, including the United States, together representing 85 percent or more of the combined gross domestic product of the member nations.

At the moment, the pact cannot come into effect because the United States, which accounts for more than 60 percent of the combined GDP, has announced its withdrawal.

Under such circumstances, some countries, including Australia and New Zealand, proposed the idea of putting the TPP into force with the remaining 11 nations only, leaving out the United States.

Japan, out of consideration for the United States, refrained from taking a clear position on the proposal.

Harsh demands, lower standards

The government, however, changed course to aim toward the idea of “TPP 11” — a name referring to the 11 nations other than the United States — due to two concerns it currently has.

First, the administration of U.S. President Donald Trump has indicated that Washington will shift its focus to bilateral trade talks. If the two countries enter bilateral negotiations, Japan may face more severe demands than under the TPP over tariffs on agricultural products and other areas.

Meanwhile, if the 11 nations proceed with trade liberalization, U.S. producers and companies will be at a disadvantage regarding exports to these countries, including Japan.

Within the Liberal Democratic Party, some have demanded the TPP come into effect with just the remaining countries so that “Japan will not be dragged into bilateral negotiations wanted by the United States,” according to an LDP lawmaker lobbying for farming organizations.

Secondly, the government is wary of the progress being made in negotiations for a free-trade bloc in Asia.

In negotiations for the Regional Comprehensive Economic Partnership (RCEP), in which 16 nations including Japan, China and South Korea are participating, China and the members of the Association of Southeast Asian Nations are keen to conclude it at an early stage.

China has increased its presence in the RCEP. If the Asian treaty comes into effect before the TPP — setting lower standards for trade and investment rules than the TPP would — it would make it quite likely that the rules promised under the TPP, such as for the protection of intellectual property rights and reforms of state-owned enterprises, may fizzle out.

However, it is not easy to bring the TPP into effect without the huge market of the United States.

For the 11 nations to make it happen, they need to agree on changes to the content of the current pact. In addition, if they renegotiate tariffs, they cannot avoid facing prolonged talks.

If they also revise the treaty statement, they will have to go through a domestic process of obtaining approval from the Diet, or its equivalent, in each participating state.

Vietnam and Malaysia, which eased domestic regulations to prepare to enter the U.S. market, are said to feel negatively toward effecting the TPP with only 11 countries.

Some of the participating nations have shown interest in forming a new framework that includes China.

Among Japanese officials involved in TPP negotiations, some call for setting measures that make it possible for the United States to return.

Japan’s GDP growth will be boosted by 1.37 percent if the TPP comes into effect with all 12 nations, while the figure stands at 1.11 percent with an 11-nation effectuation, according to an estimate by Kenichi Kawasaki, a professor on special assignment at the National Graduate Institute for Policy Studies.Speech

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