Nothing peaceful about TPP talks

By according the warmest possible welcome toUS President Barack Obama on his threeday visit to Japan from Wednesday, Japanese PrimeMinister Shinzo Abe is aiming to expedite the Trans-Pacific Partnership negotiations in order to end the frictions between Washington and Tokyo. Also, Abe thinks that progress on the trade front can, to some extent, ease tensions between theUS and Japan after he ignoredWashington’s caution to visit Yasukuni Shrine, which honors 14 Class-A war criminals, and angered Japan’s neighbors, especially China and the Republic of Korea.

Tokyo andWashington are still at loggerheads over a number of issues, especially on reduction of subsidies and import tariffs, in the TPP free trade negotiations. To be more specific, Tokyo andWashington have been at loggerheads over what Japan describes as its five “sacred sectors”— rice, wheat, sugar, dairy products, and beef and pork. Japan wants to protect these sectors, but theUS demands full access to the Japanese market for its agricultural goods. Also, Washington insists that Japan lift some technical barriers — like the huge tariff on automobile imports— that prevent someUS-made cars from being sold in Japan.

During his talks with Japanese TPP minister Akira Amari on April 9, US Trade RepresentativeMichael Froman reaffirmed that TPP is an organization for economic cooperation with “high ambitions”, which include elimination of import tariffs on all products. This means the two sides can reach an agreement only if both make huge concessions.

But if theUS makes concessions on tariffs on agricultural products, the ruling Democratic Party could lose many seats in Congress during the upcoming mid-term election because the agriculture sector will not support its candidates. And since theUS Congress has not yet granted Obama the Trade Promotion Authority and garnering more votes in the mid-term election is much more important for the Democratic Party than reaching a TPP agreement with Japan, Froman will not easily compromise in this round of negotiations.

Since February Japan has adopted a newstrategy, that is, expediting negotiations on tariffs on agriculture products with other countries. Apart from theUS and Japan, the TPP negotiations also involve Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The TPP, if finalized, will account for 40 percent of global GDP and more than 30 percent of global trade.

According to its newstrategy, Japan has already reached an agreement (called the Economic Partnership Agreement) with Australia, which includes a deal on the tariff to be imposed on beef imported from Australia. Besides, Japan plans to accelerate its tariff negotiations withNew Zealand on dairy products, withMexico on pork, withMalaysia on plywood and with Vietnam on rice. If Japan succeeds in signing agreements with these countries, it could force theUS to make concessions in the TPP negotiations.

But whether Japan and theUS can reach an agreement this year is still uncertain because the two sides are yet to sort out their differences on a number of issues. For Obama, handicapped as he is without the Trade Promotion Authority, it is quite difficult to succeed in this round of TPP negotiations. And for the Abe administration, it wouldn’t make sense to make concessions on tariffs because it could pay a heavy political price— losing the support of the agriculture sector— at home for that.

With theUS and Japan both adopting a tough approach, it seems that their TPP negotiations will be tougher. The author is a researcher at the Chinese Academy of International Trade and Economic Cooperation, affiliated to the Ministry of Commerce.