WASHINGTON, March 5, 2014 - There was little movement on the multilateral Trans-Pacific Partnership (TPP) during the talks that concluded last week in Singapore, and experts say a deal isn’t expected until after the congressional midterm elections. But that doesn’t mean there won’t be behind-the-scenes action, as U.S. trade negotiators weigh whether to exclude what they see as an intransigent Japan from the final trade agreement.
At issue is Japan’s insistence upon protecting its domestic “sacred five” products - rice, wheat, beef and pork, dairy products and sugar. Allowing the Asian country to maintain its tariffs on those items would be disastrous for U.S. agriculture, said Nick Giordano, vice president and counsel for international affairs at the National Pork Producers Council (NPPC).
“I can’t say it enough times – this is a colossal issue,” he said in an interview. “It’s not just about Japan, not just about 12 [countries involved in TPP]. Japan’s requests are unprecedented and (they) open the door for other countries to request trade exemptions or exclusions.”
According to the Congressional Research Service, two-way U.S. agricultural trade with TPP countries totaled $108 billion in 2012, 44 percent of all U.S. farm exports and imports. Total U.S. merchandise trade with TPP countries was $1.5 trillion for that year. A more liberalized Trans-Pacific trade regime would mean even more trade flowing between the U.S. and its participating partners: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Other issues involving agricultural products – most notably, sanitary and phytosanitary (SPS) measures – have been resolved, said Bob McCan, president of the National Cattlemen’s Beef Association. “All of the other (TPP) countries have agreed to that,” he said.
And U.S. Trade Representative (USTR) Michael Froman also sounded a hopeful note, even after the negotiations in Singapore ended with no apparent progress.
“TPP ministers came to the meeting, they pulled up their sleeves and took off their ties and came to the table with a problem-solving mindset,” he said. “And we’ve come a long way over the last several months.”
But the problem with Japan is a tricky one. The U.S. – and its agriculture industry – had applauded when Japan first entered the trade negotiations last spring. Suddenly forcing the country out, then, might be construed as a sign of American weakness.
It’s made trickier by Japan’s recent efforts to enter into bilateral trade negotiations with countries that are already part of TPP. The Japanese trade minister’s recent overtures in Australia, for example, threaten to give to Australian beef and dairy industries what the U.S. hoped would be expanded market share for its own products.
American agriculture, for its part, does not seem too worried about Japan’s moves. “It would be good to have the Japanese (in the trade agreement) going forward,” McCan said. “If not, I think all the other countries involved – and certainly the ag folks in this country – are willing to go forward without them.”
Though the beef industry does not enjoy paying higher tariffs to Japan, McCan explained – almost 80 percent for some products – he points out that the U.S. still manages to sell lots of beef products to Japan. USDA data show the U.S. exported almost 450 million pounds of beef and veal to Japan in 2013.
Conceding on the tariff issue, McCan said, is not an option for the U.S. agriculture sector. “We feel like if we do give on this special kind of carve-out for one country, it kind of hurts the integrity of the whole trade pact,” he said.
Others say the Japan’s overtures toward Australia, for instance, should be treated as a grand bluff. “The Japanese talks with Australia are more a tactical move to pressure the U.S. than Japan giving up on TPP,” said Jordan Schneider, a trade analyst with the political risk firm Eurasia Group.
"It would be hugely damaging geopolitically for the U.S. to kick Japan out of the trade deal,” he said. "It’s more likely that the TPP falls apart than the U.S. kicks Japan out.”
The good news is that U.S. trade negotiators – and U.S. agricultural industry leaders hoping for market access – still have time. Most don’t see any final deal being approved by Congress until after the November midterm elections, when it’s less politically dangerous to do so.
Schneider says that means we won’t know how the market access issue resolves itself until late 2014 – perhaps even the first quarter of 2015. Congress also has yet to approve the president’s Trade Promotion Authority (TPA), meaning lawmakers could currently amend or filibuster any TPP agreement. At this point, “other countries don’t want to make concessions that could be leaked before they know TPP can be ratified in the U.S.,” Schneider said.
Giordano disagrees. “It’s possible this market access issue could be resolved by late April,” he said, just in time for President Obama’s planned trip to Japan.
Though TPP most probably will not come up for a vote before the midterm election, he said, an agreement that’s better for agriculture would be more likely to pass. “The better the agreement, the more the votes,” he said.
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