Regional Cooperation

Japan must join the Trans-Pacific Partnership Agreement talks

Japan must join the Trans-Pacific Partnership Agreement talksTime is running out for Japan to join the Trans-Pacific Partnership Agreement (TPP), as the negotiating countries aim to conclude the talks before the Asia-Pacific Economic Cooperation (APEC) meeting in October this year. Although former Japanese Prime Minister Yoshihiko Noda had expressed strong interest during his tenure in joining the TPP negotiations, his successor, Prime Minister Shinzo Abe, has not expressed similar sentiments as the Liberal Democratic Party (LDP) took a cautious stance on the TPP during Japan’s December 2012 general election.

The TPP is a high-standard and comprehensive trade agreement under negotiation by Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States (US), and Viet Nam. Canada, Japan, and Mexico expressed interest in joining the TPP talks in November 2011. Canada and Mexico have since been admitted to the talks. But Japan’s topsy-turvy politics and formidable lobby groups have kept it on the sidelines.

Abe’s LDP won a landslide victory in the 2012 general election, and several LDP members are eager to enter the TPP negotiations, pushing for the government to announce Japan’s participation during a visit by the newly elected prime minister to the US in February. However, others are cautious, calling for a decision to be delayed until after the House of Councilors election this summer out of fear that the LDP may lose the farm vote.

Considerable onus rests on Agriculture Minister Yoshimasa Hayashi. Abe has instructed the new minister to “work closely with related ministers and exercise comprehensive negotiating power to engage actively in strategically promoting economic partnerships while avoiding tariff elimination without sanctuary and protecting the national interest that needs to be protected.” Hayashi will work with newly-appointed trade minister, Toshimitsu Motegi, on a unified government cost–benefit calculation of TPP participation.

The relationship between business and the government was better under Abe’s leadership during his first tenure as prime minister from 2006 to 2007, compared to the relationship under the previous Democratic Party of Japan government. So the push by the business sector will increase the likelihood of Japan participating in TPP negotiations. However, the push is countered by the LDP’s traditional support for farmers. Japan’s farmers argue that opening the country to foreign competition will threaten agricultural production and increase dependence on foreign sources for food, which would damage the multi-functionality of agriculture, including protection of the environment and traditional rural culture.

Given Japan’s 20-year economic malaise, the country needs foreign competition. It would provide an opportunity for the aging agricultural sector to initiate land reforms and allow farmers to sell, or lease, idle land so that large-scale farming can be carried out to boost productivity. Foreign competition would also force other protected industries, such as the medical and pharmaceutical sectors, to improve efficiency of allocation of production, such as labor and capital in Japan, which would stimulate economic growth.

Although Abe has indicated he will make a decision before the election this summer, he will most likely decide on Japan’s participation in the TPP negotiations after the election. Abe’s decision depends on his views on the importance of the TPP for the recovery and growth of the Japanese economy. If he sees the importance, he and his ministers, especially Hayashi—backed by politicians, bureaucrats, and researchers who have studied the issues extensively—will be able to formulate appropriate policies, such as temporary income compensation for negatively affected farmers in order to handle opposition from the farm lobby.

Given that the US government must inform the US Congress 90 days prior to Japan’s participation in the June TPP negotiations, Japan does not have much time to influence the contents of the TPP. Abe should join the negotiations by accepting the condition that Japan must put everything on the negotiation table. If he cannot exclude sensitive products, such as rice, he can pull out of the talks; although I believe it is in Japan’s interest to eliminate tariffs on all products through a phase-in manner. In light of the fact that the US wants to exclude several items, such as sugar, Japan has a good chance to exclude a small number of items, including rice. Abe will not know if such exclusions would be acceptable unless Japan joins the talks.

Shujiro Urata

About the Author

Shujiro Urata is a professor of economics at the Graduate School of Asia–Pacific Studies, Waseda University, Tokyo, Japan; a research fellow at the Japan Center for Economic Research; and a faculty fellow at the Research Institute of Economy, Trade and Industry. Urata earned his MA and PhD in economics from Stanford University.
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