TPP Talks Provide Opportunity for Japan to Rise to the Occasion

As negotiations move forward, will Japan be able to muster the political will needed to capitalize on the opportunities that The Trans-Pacific Partnership (or TPP) has to offer?

The TPP is a free-trade agreement that promotes economic integration among participating economies across the Pacific It is comprehensive in scope and covers all goods and services, and it addresses cross-cutting issues and new emerging trade issues (such as ensuring fair competition with state-owned enterprises, enhancing regulatory coherence across borders, and promoting and protecting investment).

The current negotiating partners include nine “like-minded” countries which have all committed to work together to achieve the highest standard of trade liberalization. These include the four countries who forged the original agreement in 2005 (BruneiChileNew Zealand and Singapore), as well as five countries who joined the process from 2008 through 2010 (AustraliaMalaysia, Vietnam, the United States and Peru).

The 11th Round of negotiations for TPP was held in March in Melbourne, Australia, to discuss financial services, sanitary and phytosanitary measures, legal issues, rules of origin, environment, telecommunications, competition, non-conforming measures, government procurement, and intellectual property rights. Further discussions will be held in April in Los Angeles, D.C., Hanoi and Santiago in preparation for the 12th Round, to be held in Dallas, Texas in May, 2012.

Much progress has been made between the currently-negotiating nine countries, with a goal of having the basic language agreed upon for the APEC meeting in September, 2012. It is important to keep in mind that TPP has the potential to revolutionize and super-charge global trade, and it is almost certain that those countries who are not involved will be left behind.

Japan (along with Mexico and Canada) has expressed interest in joining TPP negotiations, and has now had consultations with all nine negotiating countries to discuss its participation. While six of those countries have welcomed Japan’s participation, consultations with Australia, New Zealand and the United States are still ongoing. It remains to be seen as to whether Japan will be able to demonstrate its readiness to meet the high standards that will be required.

Joining the TPP will require domestic policy and structural reforms, which could be part of the transformational agenda that Japan needs in order to actively address long-standing issues such as its aging and shrinking population, and enormous public debt. Given the tough political choices that it will require, whether Japan decides to join the group of like-minded TPP negotiating countries is a decision that only Japan can make.

Considering the timeframe for preparation for APEC, it is not likely that Japan or other non-negotiating countries will be able to join the negotiations until the next stage of discussions in 2013, at the earliest. However, time would seem to be of the essence, since the tenets of the agreement are becoming more and more solidified with every round of negotiations.

Overall, joining the TPP negotiations offers a key opportunity for Japan to “step up” and demonstrate that it continues to be an important global player. This is important not only for Japan’s economic growth overall, but also in light of the fact that other Asian nations are aggressively forging trade agreements with Japan’s key trading partners. For example, in 2010, South Korea completed free-trade agreements with both the U.S. and the European Union (EU), which have ultimately given its electronic and automobile industries better access to those markets.

Challenges with building consensus on trade liberalization notwithstanding, it would be a shame for Japan not to muster the political will required to take advantage of the potential benefits of joining in TPP negotiations.

Debbie Howard is Chairman of CarterJMRN KK, and President Emeritus of the American Chamber of Commerce in Japan. She is also a Visiting Professor of marketing at Sophia University.

Originally Published in the Nikkei Weekly, 9th April 2012

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