The Trans Pacific Partnership - with Japan, or without Japan
Commentary by Ambassador Clayton Yeutter
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Washington, Nov. 29 - With the Doha Round languishing, the only action on the trade front these days emanates from the Trans Pacific Partnership (TPP) negotiations. And, until recently, that exercise was a yawner to most trade aficionados. But then Japan came along, sort of!
At mid-year the TPP participants were the U.S., Singapore, Brunei, Australia, New Zealand, Chile, and Peru. Among that group of countries the U.S. already had free trade agreements with all but Brunei and New Zealand. Hence, TPP was essentially a bilateral FTA negotiation with New Zealand, a splendid ally but not one where a negotiation is likely to produce many new American (or New Zealand for matter) jobs.
So why was the U.S. interested in the TPP? In all likelihood the appeal was partially economic, primarily political. By mid-2010 the Administration had gone 18 months with no successes of any kind on trade. Fearful that they would be rejected by Congress, it chose not to send forward three FTAs (South Korea, Colombia and Panama) that had been negotiated by the prior administration. So it needed to do something that would demonstrate U.S. leadership on trade, while also generating support (hopefully) from the American business community. The only available vehicle was TPP.
In addition, the U.S. is scheduled to chair the broader Asia Pacific (APEC) meeting in Hawaii in November 2011, so it would be at least a minor coup if President Obama could announce at that meeting the successful conclusion of TPP. Finally, amid all the frustrations of negotiating with 150 countries or thereabouts in the Doha Round, engaging with only a few nations in TPP was mighty appealing.
So what's not to like in this scenario? With just seven countries involved, there isn't much in TPP for the U.S. Announcing a seven country agreement in Hawaii next November would ring hollow. And the Congress might even reject such an accord, since it would provide so few economic benefits to the U.S. There would be little support for such an agreement from the American business community, and essentially no support from American agriculture. Such an agreement could border on being an embarrassment for the Administration.
Fortunately, this situation has changed for the better since mid-year. Just a few weeks ago Malaysia evidenced a desire to join the negotiations and was accepted as a full participant. Soon thereafter so did Vietnam, and it too was accepted. Vietnam had been participating as an observer, and ultimately concluded that it wanted to participate. Malaysia and the U.S. had tried unsuccessfully to negotiate a bilateral FTA a few years ago, but Malaysia has apparently concluded that it can resolve those contentious issues within TPP, thereby gaining additional benefits through negotiations with the U.S. and other participants.
Adding those two countries to the mix was a major improvement, but still not enough to garner enthusiastic interest here in the U.S. Until November TPP still meant nothing to most Americans. But then Japan came along - maybe not a 600 pound gorilla, with China now in the background, but still at least a 500 pound gorilla!
Japan's new leader, Prime Minister Kan, courageously announced his desire to begin TPP discussions with the nine (the mid-year seven plus Malaysia and Vietnam) participants, his objective being to seriously assess whether Japan should join, and whether Japan would be invited to join. Those discussions are now underway. Where should they lead?
Japan should join, and the other nine should eagerly welcome Japan's participation. In my view, Japan needs the TPP and the TPP needs Japan.
The Japanese economy has been essentially stagnant for two decades. It needs a jump start, and TPP can provide that spark. With a little additional motivation, Japan can boost its international competitiveness, especially in high technology products and services. A TPP agreement will require Japan to reform its obsolete agricultural policies, but that's something it needs to do in any case. Why not do it in the context of a negotiation, and receive credit for doing so? In addition, the reforms can be spread over a period of years, so they'll not be nearly as painful as perceived by Japan's agricultural leaders. Overall Japan has a lot to gain from TPP, so it needs to take the domestic political risk of joining, and joining soon.
As to the U.S., having Japan as a participant has its complications. Even without Japan it would be very difficult to conclude this negotiation by the time of the 2011 APEC meetings. With Japan in the act there is no chance of reaching agreement in that time frame. Hence, there would be no Obama announcement of a TPP success next November.
But the Administration should put aside domestic political considerations and enthusiastically support the addition of Japan to TPP. The economic benefits are self-evident. Having Japan as a participant will awaken the interest of U.S. businesses and their agricultural counterparts. Our exports to Japan are still impeded by high tariffs and numerous non-tariff barriers. Phasing out all of those will be enormously beneficial to us. Other TPP countries will likewise benefit, though to a lesser degree simply because they are so much smaller than the U.S. In the end, having Japan as a TPP participant will be truly a win/win in economic terms.
Finally, one must also evaluate what Japanese participation will mean in foreign policy/national security terms. That is extremely critical for the U.S., perhaps somewhat less so for the other TPP countries, but not much! And it may be critical for Japan as well. This is an additional “bonus” for adding Japan to the group, and should be appreciated as such. There is no need for embellishment of that point. So let's welcome Japan with open arms, and the sooner the better.
Ambassador Clayton Yeutter is Senior Advisor, International Trade at Hogan Lovells, LLP. He served as U.S. Trade Representative from 1985-89 and as U.S. Secretary of Agriculture from 1989-91.
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