Fat Chance Saloon: Japan Joining the TPP PTA

♠ Posted by Emmanuel in , at 2/07/2012 12:00:00 PM
This WSJ headline is somewhat misleading: the US government would dearly love Japan to join its effort to expand the Trans-Pacific Partnership (TPP) and in the process create bandwagon effects to persuade others to follow. Yet, at the same time, many American manufacturers remain leery about Japan joining. This grievance is a tale as old as time about how the Japanese auto market remains largely closed to foreign automobiles. It's as if it's the late 80s or early 90s all over again and the US automobile industry could survive without various government dole outs. They couldn't sell Yankee crapmobiles (which further insulted the Japanese by not even being right-hand drive) then, so I honestly don't see why they could sell them now even with a potential price advantage given the mighty yen.

What will Japan put on the table? Aforementioned market access to the Japanese automobile industry is one thing...
Japanese trade officials on Tuesday assured the United States they were prepared to discuss key U.S. trade demands if allowed to join talks on a regional free trade agreement in the Asia Pacific region, the U.S. Trade Representative's office said. "Japanese officials underscored the Japanese government's readiness to engage with the United States on a range of issues going forward," USTR spokeswoman Carol Guthrie said in a statement. "As a next step, both governments agreed to hold a follow-up meeting at the working level on February 21-22 in Washington, D.C., as the consultative process continues."

Japan is pressing to join the United States and other countries in talks on the proposed Trans-Pacific Partnership pact, but faces strong opposition from Detroit auto manufacturers who say they do not believe Tokyo is really prepared at this time to open its market to more car imports. The Obama administration is consulting with Congress, business and organized labor as it makes up its mind whether to support Japan, Canada and Mexico's bid to join the TPP talks, which now include the United States, Australia, New Zealand, Chile, Peru, Singapore, Malaysia, Vietnam and Brunei.

"We have to go through a very deliberative process," U.S. Trade Representative Ron Kirk told Reuters in a recent interview. The current TPP members are entertaining the three countries' interest "and frankly giving them the concerns of our stakeholders over the next several months...But we've also agreed we aren't going to slow down on our work to ... conclude this agreement this year, as our leaders have asked us to do," Kirk said, referring to a goal set in November by Obama and other heads of the TPP countries.

Some members of Congress - especially from auto-producing states such as Michigan - also share Detroit's concern about Japan joining the negotiations, since it could lead to an agreement requiring the United States to eliminate remaining tariffs on Japanese auto imports.
Supposedly, the Japanese are anxious about not further being left behind by Korea's trade pacts with the EU and the US allowing Korean manufacturers to face lower tariffs in those still-important export markets where they go head-to-head. While we await the actual results of KORUSFTA, the Korea-EU deal is already paying off dividends as evidenced by a nearly 4% boost in ROK-EU trade since it coming into effect in July.

However, the matter of overcoming domestic agricultural lobbies that remain very powerful in Japanese politics will probably spoil any notion of Japanese membership in the TPP. These interests remain strong, and it's unlikely that they will cave in to US pressure. Consider the various bilateral PTAs Japan has signed with countries in my region of Southeast Asia. Instead of having just a single deal with ASEAN to be done with it, the Japanese have signed individual deals with nearly every Southeast Asian nation. Why? Each Southeast Asian nation has different agricultural export profiles that must be accounted for as to not upset Japanese farm lobbies, necessitating this proliferation of bilateral deals. Given this reality, how likely is it that Japan will sign up to a plutilateral deal with any number of countries without various exceptions and opt-outs that seemingly defeat the entire purpose of trade liberalization?

The WSJ again describes some of the two-level games going on with respect to the TPP and agriculture:
Trade officials and analysts say Japan's success at this week's bilateral meeting with Washington depends largely on how flexible Tokyo can be on liberalizing its agricultural sector. In past trade negotiations, Japan has made so many exceptions for items—nearly all agricultural products like rice, dairy products and meat—it weakened the effectiveness of such pacts. Japan's existing agreements usually cover 85% of all items, compared with well over 95% for similar agreements among other countries.

"This time, Japan needs to be able to say it's ready to put all items, including agricultural products, on the table for trade liberalization," said Shujiro Urata, professor of economics at Waseda University.

It won't be easy to overcome the domestic opposition. Prime Minister Noda, already facing shrinking popular support and a divided parliament, is using most of his political capital to push through an equally unpopular sales-tax increase. He hasn't been able to lock in support for the TPP talks even within his own party.

When a national association of farmers gathered petitions against the pact last fall, some 350 members of parliament participated, including 120 from the ruling party. The agriculture minister has never expressed support for the prime minister's push. "We don't have a situation where we can have coolheaded discussions," one government official said.
They haven't done so before and I simply cannot see why they will do so now. Noda faces slim support that may get even slimmer if he offends the Japanese farm lobby some more with TPP blathering. In which case the LDP will come back into power which is, if anything else, even more beholden to agricultural interests.

As I said, it's a fat chance saloon, this idea of Japan entering the TPP.