Japan Wants To Join TPP Free-Trade Talks, Some Don’t Want Them There

As expected, Japan’s new prime minister Shinzo Abe announced today that his country will be joining the U.S.-led Trans-Pacific Partnership trade talks.  The objective of the talks is to eliminate trade barriers (specifically, tariffs).  The Japanese government estimates that if all tariffs were scrapped, ¥3.2 trillion ($33.3 billion) could be added to Japan’s economy, which would equate to about 0.8 percent of the country’s current GDP.  That’s a pretty big chunk.

However, for those who remember the debate over NAFTA about 20 years ago (I was a freshman in college at the time taking Economics 101, and we paid close attention to the debate), some groups strongly support the initiative and some strongly oppose it.

For Mr. Abe domestically in Japan, his country’s automakers could not be more excited about the prospects of tariff-free trade with the United States and other Pacific nations.  Balancing Japan’s exporters’ desires to further open the flow of goods from their country is the country’s agricultural sector which, like Canada’s, is heavily dependent upon subsidies and tariffs that run contrary to the concept of true free trade.  For his part, Mr. Abe has promised to protect his country’s agricultural industry.

This morning, my inbox was barraged by dueling press releases.  This one came from JAMA (Japanese Automobile Manufacturing Association:

JAMA welcomes today’s announcement by the Government of Japan to participate in negotiations toward a Trans-Pacific Partnership (TPP) Agreement.

For decades the Japanese automobile industry has engaged in constructive and extensive business activities in the Asia-Pacific region.

JAMA believes that the establishment of high level economic partnership would, among other benefits, promote free trade and provide common rules across a variety of sectors such as investment, trade facilitation and intellectual property rights which generally advance business opportunities in the region.

Then this one from the AAPC (American Automotive Policy Council), a lobbying group funded by GM, Ford, and Chrysler refuted

WASHINGTON, D.C. – American Automotive Policy Council President Matt Blunt issued the following statement today on Prime Minister Abe’s statement that Japan intends to participate in the Trans-Pacific Partnership negotiations:

“AAPC member companies have supported every free trade agreement the United States has joined, but because Japan is the most closed auto market among developed nations and helps accomplish that through non-tariff measures, including manipulating its currency, Japan cannot be treated like other U.S. trade partners. By artificially weakening its currency, Japan enjoys a huge unfair advantage for their exports while impairing U.S. exports to Japan. That translates into lost jobs for American workers. We’re for free trade, but it must be fair trade too.

“Japan’s weakening of the yen by 23 percent since last October 1, 2012 has consequences beyond the U.S. economy. This is why Japan’s actions have been widely criticized by independent groups and world leaders internationally, and threaten to spark a currency war. This is why allowing Japan to join the TPP at this time risks unraveling the entire free trade agreement and will certainly delay its completion.

“After all the sacrifices made by taxpayers, autoworkers, dealers, suppliers, and other stakeholders that resulted in a necessary restructuring of the American auto industry, it is stunning that the U.S. government would endorse a trade policy that puts the industry at a competitive disadvantage and comes at the cost of American auto jobs. Furthermore, that policy undermines the fundamental goal of the TPP to create a standard for fair and open trade for all partners. Japan is clearly not interested in adhering to those standards, and we urge the Administration to not welcome Japan into the TPP at this time.”

Prior to Japan’s announcement that it will joint the TPP talks, eleven other countries were taking part in them:  Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, United States, Singapore, and Vietnam.

The next round of talks begin on May 15 in Lima, Peru.  TPP negotiations are not a new phenomenon, but this will be Japan’s first official foray into them.  The round of talks commencing on May 15 will be the 17th round.

The final outcome of the negotiations remains to be seen, but U.S. President Barack Obama has prioritized reaching a deal in order to grow the U.S. economy and open additional markets to U.S.-produced goods.  Obama’s support of the initiative is seen by many analysts as a likely attempt to counter the growing economic might and influence of China (who you’ll note was not in the list of 11 or 12 countries participating in the talks).

It’s also worth noting that Japan was not invited into the talks; as the AAPC press release infers, there is an opportunity for the other parties to close the door on Japan’s participation.  But really, how likely does that sound?  Japan, despite its two decades of economic doldrums, remains a formidable economic power, and its inclusion in the agreement could be seen as boosting the bloc’s credibility, while giving the other participants an opportunity to press Japan on some of its most-controversial issues such as blatant currency manipulation.