TPP free trade talks make strides forward as sensitive issues still remain

Ministers and representatives pose for group photos during the opening ceremony of the Trans-Pacific Partnership (TPP) Ministerial Meeting at the International Convention Center in Bandar Seri Begawan, Brunei, Aug. 22, 2013. (Photo : Xinhua/James Goh)

Japan, as one of the 12 countries involved in the U.S.-led Trans-Pacific Partnership (TPP) free trade talks, wrapped up the 19th round of talks in Brunei on Friday, while advances seemingly have been made on mutually- acceptable trade packages between the members, some pertinent issues still remain.

Last month marked Japan, the world’s third-largest economy’s belated entry into the negotiations, but discussions in Brunei did not see the member countries reach a landmark agreement.

In a joint statement made by the attending ministers at the culmination of the latest round of talks, it is clear that while strides forward have been made, with sensitive issues being traversed and highlighted for further talks, particular focus has also been paid to areas including market accessibility, intellectual property, financial services and government procurement.

The ministers said that prior to the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting in Bali, Indonesia, in October, the members will continue to keep open the channels of communication, with an aim to solidifying some of the outstanding issues, on the fringes of the forthcoming APEC leaders’ meeting.

Japan’s economic and fiscal policy minister Akira Amari, who takes charge on the TPP now, and a delegation of 120 Japanese representatives met with other member countries’ officials at the talks and discussed issues traversing 10 out of the final 21 fields covering the final envisioned TPP pact.

Amari and his colleagues, however, are walking a tightrope as Japan is still seeking to protect its fragile rice and other farm products by maintaining disproportionately high tariffs, while seeking to eliminate those imposed by other countries on its manufactured goods.

Currently, Japan has floated tariff-free items in a range of 70 to 90 percent of total tariff lines, with an aim to later raising this percentage, pending favorable reactions from other countries. The United States, however, is currently still assessing the impact of eliminating tariffs on Japan’s products, due to Japan’s late entry into the talks, although Amari said Japan was ready to table their offer.

But according to Mexican Economy Minister Ildefonso Guajardo, Japan’s tabled offers did not include rice and farm products, which are a political maelstrom for Amari, Prime Minister Shinzo Abe and the ruling Liberal Democratic Party (LDP).

The consensus among the TPP countries, according to Guajardo, is that Japan’s so-called sensitive goods fall under the umbrella of the TPP and thus cannot be excluded, although Japan may be granted a longer timeframe to adhere to this accord.

The TPP partners have set a target of making their offers covering 90 percent of their tariff lines by Aug. 30, before raising the level to 95 percent by Sep. 20 and 100 percent by October, sources with knowledge of the matter said, adding pressure on Japan as to its next moves.

“Japan, specifically, is seeking to exclude five items from the TPP negotiating table — rice, wheat, beef and pork, dairy and sugar,” political analyst and expert on the matter Hirohisa Suzuki told Xinhua.

“This is based on long and drawn-out negotiations between Abe’s administration and a number of powerful farming and agricultural lobby groups. These groups hold sway over a number of key constituencies that Abe and his party have relied on for crucial electoral backing,” Suzuki said.

Suzuki went on to say that while it would not be entirely impossible for Japan to safeguard its sensitive sectors, it would mean that Japan would have to make wholesale compromises in other areas to balance the equation.

But the difficulty lies in the timeframe and the fact that Japan was late to sit down at the negotiating table means that it has less time to forge all-important alliances with other TPP countries, who have similar interests, although Japan has already established bilateral economic partnership agreements (EPAs) with seven of the 11 nations, which some experts believe could work in Japan’s favor.

Initial reports indicate that Japan has found an ally in Malaysia, who is willing to cooperate with Japan’s requests and indeed Australia, according to some analysts, will back Japan as an ally, if the two-stage tariff system on some farm products can be implemented under the TPP umbrella.

Japan and Australia agreed in theory on such a bilateral EPA in April and may look to infuse this arrangement into the current TPP framework, analysts said. They added, however, that the United States and New Zealand may prove to be a thorn in Japan’s size and insist on an “all-or-nothing” commitment from Japan.

To this end, some experts on the matter have said that Japan is still in a position to pull out of the negotiations, although the implications here could have a lasting influence on Japan’s economic reputation.

Indeed, the TPP Committee of the LDP have in theory adopted a resolution that, if rice, wheat, beef and pork, dairy products, and sweetening resources cannot be exempted from tariff elimination, Japan should withdraw from the talks.

“If Japan were to pull out, having been so slow to get in, in the first place, serious doubts would be cast over Japan’s economic integrity and this could have serious trade implications in the future,” said Suzuki.

“Added to this, despite serious opposition from farm lobbies and such like, recent polls have shown that the public are more in favor of joining the TPP than opposed to it, by a ratio of about 60:30. A pullout now would mean a loss of faith in Abe’s long-term plans for economic revival,” he added.

With this in mind, there are those who believe that Japan should give up its protectionist ways and not try and have its cake and eat it too, as such an attitude runs contrary to the fundamental designs and potential benefits for participating TPP members.

“Nothing should be excluded, particularly rice should not be excluded,” Masayoshi Honma, a professor of agriculture and resource economics at the University of Tokyo, said in a recent editorial on the matter.

Honma believes that the Japanese government should harness the potential of the TPP as a “commitment to push for internal reforms and extend the tariff reduction period for rice to 20 or 25 years. ” This is in line with the United States’ strategy for its auto tariffs on Japanese vehicles.

Pundits seem to be in agreement that the likely scenario will see Japan involved in a final TPP pact that is slightly less ambitious, or diluted, than originally conceived, with concessions being made to hold onto some tariffs in its sensitive sectors, in favor of new sector openings that are of more advantage than agriculture, particularly to the United States, regarding Japan’s auto and insurance markets.

Ministers and representatives attend the Trans-Pacific Partnership (TPP) Ministerial Meeting at the International Convention Center in Bandar Seri Begawan, Brunei, Aug. 22, 2013. (Photo : Xinhua/James Goh)

The TPP member countries together account for nearly 40 percent of global economic output and about a third of world trade, and the successful conclusion of the pact will create one of the world ‘s largest free trade areas.

The 12 TPP countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan is expected by other TPP members to fully-conclude its negotiations by the end of the year.<Xinhua/NEWSis>