Outcome of Japan-U.S. Talks Vague
May Influence TPP Free-Trade Initiative

April 30, 2014

Video: Japanese Only

Masahiro KawaiMasahiro Kawai,Specially Appointed Professor of the Graduate School of Public Policy, Tokyo University, Formerly Dean of the Asian Development Bank Institute.

Junichi SugawaraJunichi Sugawara, Senior Research Officer, the Mizuho Research Institute

Yorizumi WatanabeYorizumi Watanabe, Professor of the Faculty of Policy Management, Keio University

Yasushi KudoYasushi Kudo, President of The Genron NPO

The nature of the Trans-Pacific Partnership free-trade initiative may be influenced by the apparently unsuccessful talks between Japan and the United States in April on removing tariffs in key trade areas, according to noted Japanese trade policy experts.

U.S. President Barack Obama visited Japan as a state guest and met with Prime Minister Shinzo Abe in late April. Top TPP negotiators from the two countries took the occasion to thrash out their differences on liberalizing sensitive farm trade markets. But a joint statement issued at the end of Obama's visit lacked wording indicating that there had been any agreement on TPP-related problems between the two countries. The statement only mentioned that the two countries "have identified a path forward on important bilateral TPP issues."

Media reports varied widely about the outcome of the bilateral trade talks: Some reports on the part of the U.S. described the talks as a failure while reports by the Japanese media included rather positive slants emphasizing that a basic agreement has been reached on the pending issues.

It is uncertain whether a basic agreement has been truly struck between the two countries and even if there was a deal as reported, the two sides will have to address detailed problems, said Masahiro Kawai, a specially appointed professor of the Graduate School of Public Policy, Tokyo University.

The latest negotiations focused on liberalizing Japan's imports of five key farm products, particularly beef and pork, but there remain more problems that must be discussed between the two countries, among them the alleged exclusiveness of Japan's automobile market, Kawai said. It is unlikely to be seen immediately specifically what kind of agreement can be reached on the outstanding problems between the two countries, he said.

Actually, details remain to be thrashed out on important trade items, but it can be said that Japan and the U.S. have moved closer to an agreement, said Junichi Sugawara, a senior research officer of the Mizuho Research Institute.

According to media reports before Obama's visit to Japan, the U.S. appeared ready to partially accept Japan's hopes of maintaining import tariffs in the five areas, noted Yorizumi Watanabe, a professor of the Faculty of Policy Management, Keio University. The reports cannot be verified, but if true, they indicate that Washington was willing to see Japan maintain some of the tariffs involved, if necessary, hoping to strike an agreement by any means to push forward their TPP negotiations, Watanabe said. But this may be taken as a "considerable concession" on the part of the U.S. in view of the foremost TPP principle of seeking a near total tariff removal, he said.

The three experts were discussing the implications of Japan-U.S. TPP negotiations on the global trade and economic situation at a Genron NPO-organized debate on the Internet. Their discussion was joined by Genron NPO President Yasushi Kudo as the moderator.

The bottom line is that TPP partner countries should completely liberalize their trade markets to each other and therefore, if some agreement was actually reached at the latest negotiations, the results can be seen as a "message" that some market areas can be treated as exceptions to the principle, said Kawai, who formerly served as dean of the Asian Development Bank Institute.

As far as the overall TPP negotiations are concerned, the U.S. or other developed countries involved will have to continue talks with such countries as Vietnam and Malaysia on different problems about trade and investment rules, he said. If Japan and the U.S. had truly struck a deal with many areas left as exceptions to the liberalization process, developing countries may be tempted to anticipate that exceptional treatment could be given to their demands, too, Kawai said.

Following the latest Japan-U.S. negotiations, developing countries should come up with a harder stance for protecting their interests while the U.S. will have to be more flexible and patient in trying to persuade developing countries to liberalize their markets, he said.

Watanabe noted that Japan and the U.S. account for 80 percent of the combined value of gross domestic product for the 12 TPP participating countries. Developing countries have been urged to minimize trade areas under protection as much as possible, but the results of the latest negotiations between the two trade powers indicate that they have mutually agreed to exempt some of their markets from the liberalization process, he said.

If the situation is poorly addressed, the nature of the TPP initiative itself may change, Watanabe warned.

Thus far, Japan has been busy protecting its agricultural sector in bilateral and multilateral trade talks, but from now on, Japan should make efforts to export its internationally competitive farm products, he said. Japanese rice brands, and products such as strawberries and apples have caught on well with consumers in foreign markets, he said, stressing Japan should call on the countries involved to, for example, ease quarantine and other import rules for these products. Japan should use the TPP initiative to improve the export environment for these competitive products, he said.

The TPP initiative has become an "engine" to drive forward various trade-related policies, specifically for reforming Japan's domestic trade systems and promoting talks on concluding a multilateral free-trade agreement for Asian countries, Sugawara said. If these policies are successfully introduced, the stalled Doha Round of global free-trade negotiations sponsored by the World Trade Organization will also be facilitated, he said. The TPP endeavor is important as a "doorway" to this end, he said.

Japan's participation in the TPP process represents an "extremely bold action" in terms of its external trade policy, Watanabe said. Japan should maintain a "strong political will" to this end and make further efforts to change the status quo, he said.

Noting that producers are organized, but consumers are not, Watanabe said that free- trade negotiations must be aimed at protecting or promoting their interests. From the point of view of better protecting consumers, Japan's active role in pushing for the TPP initiative is very important as it is a top priority in the country's growth strategy, he said.

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