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Japan Seeks to Join Pacific Trade Pact Japan Seeks to Join Pacific Trade Pact
(about 2 hours later)
TOKYO — Japan will seek to join negotiations for a wide-ranging, multilateral free trade pact with the United States and other Pacific nations, Prime Minister Shinzo Abe said Friday, giving heft to trade talks that could now encompass two-fifths of the world economy but also bringing on board a country with special demands and reservations that some participants fear will delay a final agreement.TOKYO — Japan will seek to join negotiations for a wide-ranging, multilateral free trade pact with the United States and other Pacific nations, Prime Minister Shinzo Abe said Friday, giving heft to trade talks that could now encompass two-fifths of the world economy but also bringing on board a country with special demands and reservations that some participants fear will delay a final agreement.
In an impassioned televised address, Mr. Abe portrayed the Trans-Pacific Partnership as Japan’s “last chance” to remain an economic power in Asia and shape the fast-growing region’s economic future.In an impassioned televised address, Mr. Abe portrayed the Trans-Pacific Partnership as Japan’s “last chance” to remain an economic power in Asia and shape the fast-growing region’s economic future.
“Japan must remain at the center of the Asian-Pacific century,” Mr. Abe said. “The emerging economies of Asia are also opening up their economies.”“Japan must remain at the center of the Asian-Pacific century,” Mr. Abe said. “The emerging economies of Asia are also opening up their economies.”
“If Japan alone continues to look inward, we will have no hope for growth,” he added. “This is our last chance. If we don’t seize it, Japan will be left out.”“If Japan alone continues to look inward, we will have no hope for growth,” he added. “This is our last chance. If we don’t seize it, Japan will be left out.”
But with strong opposition from Japan’s farming lobby and other powerful interest groups, Mr. Abe takes a big political risk in embracing the free trade talks. Japan’s largest agricultural cooperative has actively campaigned against trade liberalization, saying such a change would decimate the nation’s farms, a plea that has found support among the wider public. But with strong opposition from Japan’s farming lobby and other powerful interest groups, Mr. Abe takes a big political risk in embracing the free trade talks. Japan’s largest agricultural cooperative has actively campaigned against trade liberalization, saying such a change would decimate the nation’s farms, a plea that has resonated among the wider public. Within his own Liberal Democratic Party, a majority of lawmakers depend on the rural vote and object to the free trade deal.
Mr. Abe is betting, however, that his strong popularity ratings will help him ride out the furor that has erupted among opponents. He will face his first test at the polls this summer, when national elections for Parliament’s upper house are due.Mr. Abe is betting, however, that his strong popularity ratings will help him ride out the furor that has erupted among opponents. He will face his first test at the polls this summer, when national elections for Parliament’s upper house are due.
“I promise to take the best path forward for Japan’s national interest,” he said. “I will protect what we must protect, and demand what we must demand.”
To soften the blow of a more open economy, Mr. Abe has secured vague support from the United States that some Japanese agricultural products — like rice, which is protected by a 778 percent tariff — would be exempt from the free trade negotiations.To soften the blow of a more open economy, Mr. Abe has secured vague support from the United States that some Japanese agricultural products — like rice, which is protected by a 778 percent tariff — would be exempt from the free trade negotiations.
But insisting on these “sacred cows” could hurt Japan’s hand in negotiations elsewhere, especially in gaining further access to foreign markets for its manufacturers, which produce three- quarters of the country’s exports. But insisting on these “sacred cows” could hurt Japan’s hand in negotiations elsewhere, especially in gaining further access to foreign markets for its manufacturers, which account for three- quarters of the country’s exports. Meanwhile, some participating countries worry that Japanese demands will slow the talks.
Meanwhile, it is unclear how much Mr. Abe is willing to commit to other structural changes the pact might demand of Japan’s economy. The agreement seeks not only to eliminate tariffs, but also to do away with other barriers to foreign trade, like cumbersome regulations and government subsidies, for which Japan is notorious. The lead negotiator for Singapore, Ng Bee Kim, said this past week at the latest round of Trans-Pacific Partnership talks that Japan would be allowed to participate only if existing members agreed it could “keep up the good momentum” at the talks.
Proponents of free trade say such changes would ultimately be a shot in the arm for the Japanese economy, making insular industries more competitive. Joining the Trans-Pacific Partnership would expand Japan’s economy by at least ¥3.2 trillion, or $33 billion — about 0.66 percent — the government estimated Friday. It is unclear how much Mr. Abe is willing to commit to other structural changes the pact might demand of Japan’s economy.
Mr. Abe has made such changes one of the three pillars of his economic growth strategy, together with an aggressive monetary policy and government spending. Japan’s levies, which average 6.5 percent for its trading partners on most goods, are in line with those set by other industrialized nations. The exception is agricultural produce, on which Japan slaps an average 25 percent tariff.
But the partnership seeks not only to eliminate tariffs, but also to do away with other barriers to foreign trade, like cumbersome regulations — for which Japan is notorious — in fields including retail, health and autos that shut out foreign competitors.
Proponents of free trade say such overhauls could transform the Japanese economy for the better, making insular industries more competitive. Joining the Trans-Pacific Partnership would expand the Japanese economy by at least ¥3.2 trillion, or $33 billion — about 0.66 percent — the government estimated Friday.
Mr. Abe has made such structural reforms one of the three pillars of his economic growth strategy, together with an aggressive monetary policy and government spending.
“It’s a start, but a very welcome step for economic growth,” Ryutaro Kono, Japan economist for BNP Paribas, said in a note to clients.“It’s a start, but a very welcome step for economic growth,” Ryutaro Kono, Japan economist for BNP Paribas, said in a note to clients.
But Japan’s agricultural cooperatives have teamed up with other interest groups to present the Trans-Pacific Partnership as a threat to the Japanese lifestyle. A nationwide association of doctors opposes the pact because they argue that it will erode Japan’s universal insurance system. But Japan’s agricultural cooperatives have teamed up with other interest groups to present the partnership as a threat to the Japanese lifestyle. A nationwide association of doctors opposes the pact, arguing that it will force Japan to open up its state-controlled health sector to American-style health insurance, eroding its universal insurance system.
An overrepresentation of farming interests in Japan’s electoral system — and the deep pockets of doctors — have won them considerable political clout. Even within Mr. Abe’s own Liberal Democratic Party, a majority of lawmakers object to the free trade deal. “In America, the first thing they ask you in hospital is ‘What insurance plan are you on?”’ warned a full-page ad placed in major newspapers Friday by the Tokyo Medical Association.
With its origins in a 2006 trade pact between Singapore, New Zealand, Chile and Brunei, the Trans-Pacific Partnership has grown into a major free trade initiative that accounts for almost 40 percent of the world’s gross domestic product — a larger share of the global economy than the European Union.
Participating nations aim to sign a comprehensive pact that covers not just trade in goods and services, but also foreign investment, government procurement, intellectual property rights and environmental and labor protections.
Such a pact would be a big step forward for free trade at a time global trade negotiations have stalled, giving way to bilateral and regional talks, of which the Trans-Pacific Partnership is shaping up to be the largest.
For Japan, the agreement would be a way to catch up with burgeoning rivals like South Korea, which has signed free trade agreements with the United States and the European Union, and has opened free trade talks with China. Tokyo, meanwhile, has no trade agreements with such major trading partners, except for a recent pact with India.
Tokyo also sees a leadership role in the partnership as a way to return to the center stage after being eclipsed in the region by the rise of China, which many in Tokyo see as jeopardizing Japan’s economic interests, and security, in the region. And Tokyo worries that unless it joins the partnership talks now, it will have less say later as rules and conditions are decided.
China, which is also pursuing its own bilateral and multilateral trade agreements in the region, is unlikely to join the agreement soon, because of the various concessions on state-owned enterprises, intellectual property and labor that the pact would require. That has in effect made the partnership a vehicle of sorts for the United States, and now Japan, to counter China’s influence.
Meanwhile, the partnership, which would also amount to a de facto U.S.-Japanese free trade agreement if realized, could force Washington and Tokyo to address longstanding trade quarrels that have long marred otherwise close economic ties between the world’s largest and third-largest economies.
For the United States, the Trans-Pacific Partnership has become a major part of President Barack Obama’s promise to increase U.S. exports, as well as the vehicle for his so-called pivot of U.S. foreign policy toward Asia.
Still, many of the issues that have made a U.S.-Japanese agreement elusive could again prove tricky for both sides to resolve in a broader pact. U.S. carmakers oppose Japan’s participation in the talks unless Japan commits to changing what the big three in Detroit charge are unfair domestic regulations that shut foreign carmakers out of the Japanese market.
“Japan has shown no willingness to change their unfair trade practices, and without significant reform, we remain concerned about inviting their negotiators to join the talks,” Matt Blunt, president of the American Automotive Policy Council, said in a statement last month. “We are dedicated to free trade, but it should be fair trade too.”