Media  Global Economy  2012.07.10

Current Status of the TPP Negotiations

English translated version of "Business Prospect" on NHK Radio Channel 1 on June 12, 2012

1. It was expected last year that the Trans-Pacific Partnership ("TPP") free-trade agreement would be signed this year. Has this changed?

People who are against the TPP agreement argued that it was too late for Japan to join talks because US President Obama announced that the United States would conclude the agreement in 2012. However, all of the foreign-trade experts in universities and think-tanks whom I met in Washington mentioned that the agreement would be impossible to be concluded in 2012. Now, even within the US government, no one says that it will be settled this year. I would think that there is no chance that the TPP negotiations will be completed between now and September when the leaders of nine negotiating countries meet at the APEC (Asia-Pacific Economic Cooperation) summit. After September, it will still be impossible to conclude the TPP agreement before the end of the year due to the presidential election campaign. So we should expect that there will be no further developments in the TPP negotiations before March of next year.

There are several reasons why TPP negotiations cannot be completed before September. The US could not have presented its own proposal on labor and the environment, state-owned enterprises, and intellectual property rights to partner countries any earlier. The US has spent a lot of time settling conflicting domestic interests and harmonizing different views and opinions within the country, suggesting that it has been overly ambitious about formulating a high-standard free-trade agreement worthy of a 21st century trade pact. The US has just completed its own proposal, provided that the details of some issues remain to be finalized. Now it's time to start negotiations. This means that there is still a long way to go before reaching an agreement among member countries. In particular, they have not made any progress in negotiating tariff liberalization for sensitive products for the US such as sugar, dairy products and textiles. In addition, it would be impossible for the Obama administration to accept unfavorable conditions for the US as he will soon be entering the presidential election campaign.

2. Would you give me a more detailed overview of the current status of the TPP negotiations?

As far as I know, in recent negotiations initiated based on the complete US proposal, the marginal issues that no country opposes have been agreed upon, while discussions on the much more important core issues have just begun. The more substantial the issues the parties come to negotiate, the more serious the conflicts that arise among them.

At the moment, America's newly-formed proposal has met with strong opposition from other countries, from whom the US proposal requires a very high level of commitment. Regarding labor and environmental provisions, for example, the United States is concerned about losing domestic employment due to importation of cheap products manufactured in developing countries under lower or less stringent labor or environmental standards. Therefore, the United States proposes that a member country be legally required to take corrective measures to rectify labor or environmental standards which are not compatible with international norms or standards. Many countries, including developed countries, are opposed to this proposal.

Conversely, proposals made by countries that export agricultural products, such as Australia and New Zealand, put the United States in a difficult position. Although the United States does not give export subsidies directly to farmers or their organizations to improve the competitiveness of its domestic agricultural products, it does have a system to facilitate payment from developing countries when they import US agricultural products. This is called export credit. According to US rhetoric, the system aims to aid developing countries. But in reality, applying this system to all payments for imports of US agricultural products can work in the same way as an export subsidy. In the past, the United States has boosted food aid to developing countries to offload surplus agricultural products. To deal with this, we should have rules in place to distinguish between real food aid and disguised one which subsidizes exports. This is one of the issues to be dealt with in the WTO's Doha Round negotiations, which are now virtually suspended and do not appear as if they will make much headway in the foreseeable future. Instead of negotiating within the WTO framework, Australia and New Zealand intend to discipline the US's system of exporting agricultural products through the TPP negotiations.

Some people claim that the United States will deal Japan a one-sided defeat if Japan joins the TPP negotiations. But if you take a closer look at recent negotiations, you will see that the US does not always win and is sometimes isolated from partner countries.

3. What about the countries that have recently announced they will participate in the negotiations?

Japan, Canada and Mexico have recently announced their intention to participate in the TPP agreement. While Japan has taken a vague stance, the prime minister of Canada and the president of Mexico have unambiguously expressed their intention to join the TPP negotiations. Moreover, top leaders from both countries are actively approaching member countries to obtain their consent. Meanwhile, the Japanese parliament has adopted an amendment to water down privatization of the postal system, which has sparked serious doubts in the US that Japan really wants to join the TPP agreement.

In the United States, respectively for Canada and Mexico, about 30 members of the House of Representatives request the government to accept their participation. But there is no such support for Japan. Among the three countries, I thought that Mexico would be the first to be accepted, followed by Canada, and then Japan a distant third. The Mexican government has said that all three countries do not need to be accepted all at once, and that Mexico should be given priority. By the same token, US officials say that a country should be accepted only if it eliminates all obstacles to joining and that it should not be kept waiting until other countries are ready. Finally, the US and the other TPP members accepted the request by Canada and Mexico. In addition, countries such as Thailand, the Philippines, Laos and Costa Rica have also shown interest in the TPP agreement.

Despite arguments by Japanese opponents to the TPP agreement, US officials have clearly stated that neither government-provided national health insurance nor immigration of unskilled workers will be covered by the agreement. These are two of many factors that would arguably destroy the Japanese systems completely. If Japan fails to make a decision whether to join the TPP agreement, it will be left behind in the broad free-trade zone in the Asia-Pacific region that the TPP agreement will create.

(This article was translated from the Japanese transcript of Mr. Yamashita's speech in the "Business Prospect" session of the radio program "First in the Morning News" broadcast by NHK Radio Channel1 on June 12, 2012.)