Japan reverses course on TPP

What should we make of Japan’s apparent U-turn on pursuing a Trans Pacific Partnership (TPP) agreement without the US? Has Japan changed its previous view that the TPP is meaningless without the US, or was its recent change in attitude a strategic ploy in advance of potentially difficult trade talks with visiting US Vice President Mike Pence? Or maybe Japan believes that, as the Trump Administration slowly adjusts to a complex world, this might extend to a change in trade policies? Or is that just wishful thinking?

Whatever the reason, Japan does appear to have changed its attitude on a TPP sans the US. When Donald Trump withdrew the US from the TPP in January, Japan quickly rejected suggestions by Australia and others that there might be merit in maintaining momentum on the TPP notwithstanding Trump’s decision. Japan’s Deputy Cabinet Secretary, Koichi Hagiuda, said ‘Without the US, the TPP is meaningless, as Prime Minister Shinzo Abe has clearly said.’ Mr Hagiuda went on to say that Japan was ‘Not thinking about an action with 11 countries at the present time’.

Things have changed, with headlines in recent days claiming Japan wanted to revive the TPP without the US. As the Straits Times recently reported, ‘The ambitious Trans Pacific Partnership free trade pact that seemed dead in the water after the US withdrawal could get a second wind with Japan prepared to take the lead in an 11 country agreement sans the US’.

While Japan appears to have had a change of mind, the other members of the TPP were continuing to discuss the possibility of the trade pact being implemented, albeit without much progress. The most recent meeting of TPP members was in Chile on the sidelines of an APEC meeting in March. Interestingly, China and South Korea, who are not TPP signatories, sent representatives. There was little by way of substantive outcomes. Nevertheless, Australia and New Zealand remain staunch backers of continuing to pursue the TPP, as evidenced when their prime ministers expressed joint support for the deal in February. While the remaining TPP member countries acknowledged that progressing the TPP without US involvement was difficult, there appeared to be a view among some that there was merit in keeping the TPP on the table in the hope that there would eventually be a change in the US position.

One of the main difficulties in pursuing the TPP without US participation is that signatories wouldn't get the benefit of access to the large US market. A number of countries, particularly Japan and Vietnam, agreed to some significant and controversial changes to their domestic policies as part of the TPP negotiations, but the trade-off was that their exporters would gain improved access to the US market.

In commenting on Japan’s TPP U-turn, Japan’s Chief Cabinet Secretary Yoshihidie Suga said ‘We have a feeling that the 11 nation framework should be given weight’. A number of reasons have been sighted as to why Japan now had a ‘feeling’ that a TPP without the US ‘should be given weight’. In some reports it is presented in the context of Japan wanting to push back against rising protectionist pressures. Alternatively, it was seen as part of Japan’s desire to create a common set of trade rules that could be adopted by countries across the Asia Pacific and that Japan’s Finance Minister, Tara Aso, wanted this to be the focus of bilateral trade talks with US Vice-President Pence today. Minister Aso told the Japanese Diet, 'I want Japan and the US to take the lead in creating rules that other nations in the region can adopt’. Perhaps a focus on establishing high-standard regional trade rules was considered preferable to bilateral talks which would be dominated by Washington emphasising Japan’s trade surplus with the US and putting pressure on Japan to open its farming, services and car markets to US imports.

Regardless of Japan’s motivation, its U-turn on the TPP is welcome. It would be unfortunate if all the work that went into establishing what can be a model for trade agreements in the 21st century was lost due to Trump’s narrow and inward-looking views. Hopefully his views on trade and the TPP are evolving as he gets more on-the-job experience. The TPP is a high quality trade pact that sets high standards in many areas such as labour, the environment, state-owned enterprises, intellectual property and the digital economy. If implemented, it will help drive major domestic reforms in many countries.

Let's hope an 11-nation TPP will not involve re-opening negotiations and result in a weakening of current TPP standards. But in any case Japan’s change of mind does not necessarily mean that it is now smooth sailing for the TPP. Other countries will have difficulty implementing the TPP without the benefit of greater access to US markets. But all 11 nations should seek to progress the TPP and the good news is that Japan has now signalled it will take a leadership role in this cause.

Photo by Flickr user Dean Hochman.

Mike Callaghan