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Japan’s early decision on the TPP: Pie in the sky or credible commitment?

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In Brief

Given that Prime Minister Kan has survived the vote of no confidence in his government on Thursday, he may be in a position to make good on the commitment he made at the recent G8 summit to decide Japan’s possible participation in the Trans-Pacific Strategic Economic Partnership (TPP) at an early date.

The subject came up in the conversation between Prime Minister Kan and President Obama.

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The subtext of the Kan-Obama discussion was US anxiety that in the wake of the disaster, Japan would adopt an inward-looking attitude to international issues such as the TPP. Another unspoken concern was that for the prime minister, who has a weak government, the most difficult issues will be those that take time and require domestic adjustment, such as the TPP.

This made Prime Minister Kan’s comments about the TPP all the more surprising. He said: ‘Although the deadline for the decision on whether we would participate in the TPP negotiations was delayed because of the earthquake, I would like to make a decision as soon as possible after comprehensive discussions.’ The president responded positively: ‘I believe that the TPP will contribute to development in the Asia-Pacific region. I appreciate that Japan is considering participation in spite of the earthquake.’ Obama adopted the same tone as US Trade Representative Ron Kirk in offering encouragement rather than pressuring Japan to join the TPP.

It would be a different story in the negotiations. Japan could expect strong US gaiatsu (external pressure) from the United States on market access issues, particularly for agriculture. Gaiatsu has been a consistent feature of US-Japan trade negotiations for decades, and has been credited with varying degrees of success in opening Japanese markets.

One could argue that both Japan and the United States view the TPP through a similar lens, aiming to revive their own economies by trading more with the fast-growing economies in Asia, thus engineering economic growth through expanded exports.

Beyond this common goal, the question is to what extent US and Japanese economic and trading interests would align in the negotiations. The TPP naysayers in Japan warn that because the United States will become the major power in the TPP, it will influence the negotiations to suit its own interests. Not only will the United States dominate the TPP agenda, including the timing of any final agreement and thereby risking a premature outcome that potentially allows many sensitive sectors to remain protected — but also, for Japan, US pressure would inevitably mean an inability to negotiate favourable terms for its own entry. As Akira Kojima, Senior Fellow of the Japan Center for Economic Research, observes, ever since the ‘TPP was thrust into the Asia-Pacific limelight by the United States’ announcement in November 2009 that it would seek to join this partnership and strengthen its involvement in the dynamically growing economies of Asia … the TPP talks have proceeded at Washington’s pace.’

One of the most outspoken anti-TPP voices in Japan is Assistant Professor Takeshi Nakano of Kyoto University. He argues, ‘if Tokyo’s hastening of Japan’s participation in the TPP is motivated by a diplomatic stance underscored by the nation’s growing dependence on Washington, negotiating rules beneficial to it would be next to impossible.’ The import of this comment is that Japan could not stand up to the United States in the TPP negotiations.

If Japan joined the TPP, it would be tantamount to signing an FTA with the United States. In fact, the United States has made it clear that its TPP goals ‘exceed’ those of past FTAs. The political arm of Japan’s agricultural cooperative organisation, the Zenkoku Noseiren, reports that information leaked from the 5th round of negotiations amongst existing and prospective TPP members in Chile in February 2011 suggests that the United States is proposing to include all items without exception on their list of liberalisation of trade in goods. This considerably alarms Japan’s agricultural lobby.

Japanese economic analyst, Mitsuhashi Takaaki, argues that America’s TPP goals amount to an ‘an extreme Japan-US FTA’ that extends well beyond issues of agricultural market access. As he writes, ‘I think an increasing number of readers might be starting to realise that the TPP issue in Japan is not an agriculture issue or an issue for exporting industries such as electronics and cars….The US has a reason for wanting Japan to participate in the TPP. It is very simple and clear. The US wants Japan to abolish non-tariff barriers for the benefit of US domestic employment. That is, the US wants [Japanese] deregulation’. This would amount to gaiatsu for Japanese structural reform, reminiscent of the Japan-US Structural Impediments Initiative of 1989, the 1993 Japan-United States Framework for a New Economic Partnership and subsequent to that, the US-Japan Regulatory Reform and Competition Policy Initiative. In Mitsuhashi’s words, ‘“extreme structural reform” is the real spectre of the TPP’.

The import of Mitsuhashi’s comments is that what the United States is really targeting is access to Japan’s markets for financial and insurance services, made more difficult because of the pending government bill reversing the privatisation of postal operations, which raises the spectre of unfair competition in these markets posed by the government-backed Japan Post Holdings Co. Even more alarming is that the United States is also trying to make liberalisation of investment part of an expanded TPP with a view to participating in the Japanese government’s procurement market. In Mitsuhashi’s view, this would bring about the ‘Heisei collapse of Japan’ rather than the ‘Heisei opening of Japan.’

Aurelia George Mulgan is Professor of Politics at the University of New South Wales, Australian Defence Force Academy.

3 responses to “Japan’s early decision on the TPP: Pie in the sky or credible commitment?”

  1. Thanks for a rather insightful post!
    I think an equally breathtaking development is Japan’s recent willingness to do an FTA with the EU. So I wondered, in particular, why it has been so difficult for Japan to decide on the TPP and so easy to seek an FTA with the EU.

  2. Great article!

    Regarding the FTA with EU, Japan has been interested in the agreement for sometime now, however the EU side has remained reluctant. One of the key problems has been the EU-Japan Regulatory reform dialogue, that has been running in circles without any visible progress. The Japanese side became more aggressive (awakened) after the EU started negotiating the FTA with South Korea in 2007.

  3. My point is that the key problems in Japan-EU and Japan-US (and, hence, Japan-TPP) economic relations have been essentially the same and regulatory in nature. However, Japan’s consideration of an FTA with the EU is much more favourable that of an FTA with the TPP (and, hence, the US). I guess the reason lies beyond economics.

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