Source – Financial Times (UK)
By Jonathan Soble and James Politi
Date – 15 March 2013
Website – www.ft.com
Shinzo Abe, Japan’s prime minister, has committed to joining talks on a proposed trade deal with the US and 10 other countries, in a big step for a nation where rice farmers and other groups have long blocked efforts to lower import barriers.
Japan would be the second-largest economy in the trans-Pacific Partnership, and its inclusion would enhance the impact of a deal that backers hope will set standards for trade across the Asia-Pacific region – including perhaps ultimately China, which is not part of the TPP talks.
Barack Obama, US president, has put trade agreements including TPP at the heart of his second-term agenda, and negotiators hope to seal a deal by September.
“This is our last chance,” Mr Abe said during a nationally televised news conference. “If we miss it, Japan will be left behind in the effort to create global rules.”
Japanese manufacturing groups had urged Mr Abe to join the talks, as had proponents of domestic economic reform, who see trade competition as a way to invigorate inefficient local industries.
TPP is one of a number of strategic initiatives promised by Mr Abe, who was elected in December on a promise to drag Japan’s economy out of years of sluggish growth and deflation. So far, he has ordered Y10tn ($104bn) of new stimulus spending and engineered a shift to more aggressive monetary policy at the Bank of Japan.
Structural changes such as the TPP are intended to have a deeper and more long-lasting impact than fiscal and monetary expansion, however, by improving Japan’s underlying potential for growth. Some economists believe joining TPP would add 0.5 per cent to Japan’s annual economic output.
Many members of Mr Abe’s own Liberal Democratic party oppose joining the TPP talks. The party, which has long relied on strong rural support, has demanded that Mr Abe secure exemptions for five kinds of agricultural goods: rice, wheat, beef and pork, dairy products and sugar.
Mr Abe promised to “firmly protect Japan’s national characteristics”, which he said included “beautiful” rice fields and “safe, delicious food”. But keeping agriculture protections untouched will be difficult under a deal that is envisioned as leaving fewer loopholes than other agreements, including the World Trade Organisation system.
An official from one country already involved in the TPP talks said “substantial” concessions would be expected from Japan, including on agriculture.
Japanese farmers are among the most protected in the world, with half of average incomes coming from subsidies and price supports, according to the OECD.
In Washington, Mr Abe’s announcement drew mixed responses. Demetrios Marantis, acting US trade representative, said the US “welcomes” Japan’s interest in joining TPP talks, but noted that there were “issues of concern” and “important work remains to be done” in bilateral consultations.
Agreement by all 11 TPP members is required for Japan to be formally accepted into the talks.
Dave Camp, of Michigan, the Republican chairman of the ways and means committee and a pivotal lawmaker on trade policy, was sceptical. Mr Camp said he was “concerned that Japan has not yet provided adequate assurances” as it related to market access for US car and insurance exports.
Mr Camp also warned that Japan’s interest in joining TPP should not “unravel the significant progress we have already made” or “delay the conclusion” by October.
Max Baucus, of Montana, the Democratic chairman of the Senate finance committee, which handles trade in the upper chamber, was more encouraging, saying Japan’s entry could open a “huge market” for US exports.
“I look forward to working with USTR to ensure Japan meets the high-level standards of this agreement in order to guarantee that it works for American workers, businesses, ranchers and farmers. I’m hopeful we can build on the progress we recently made when Japan began accepting more US beef exports.”
But some members of Mr Obama’s own Democratic party were clearly very wary. “The United States should not allow Japan to lock in an uncompetitive advantage over American companies and workers,” said Debbie Stabenow, who chairs the Senate agriculture committee from Michigan, calling on Mr Obama to bar entry to Japan into the TPP until it opens its car market.
US business groups cheered Mr Abe’s announcement, with Tom Donohue, president of the US Chamber of Commerce saying it would create “more opportunities for trade and investment”.
But Mr Donohue also cautioned: “It is vital that Prime Minister Abe’s positive announcement be followed by a strong and sustained commitment to market-opening reforms and a willingness to put all issues on the table in the negotiations, as the other TPP partners have done.”
Mr Abe is taking a risk by committing to TPP talks before an election for the upper house of parliament this summer. But other potential members – Australia, Chile, Malaysia and Vietnam are among them – have been negotiating for two years, and there is little time left for Japan to influence the final shape of a deal.
Channelling Franklin Roosevelt, Mr Abe said: “The biggest thing we have to fear is that, out of an excess of fear, we end up doing nothing.”