Media  Global Economy  2014.12.04

US mid-term election: the direction of the TPP negotiations determined by the Republican Party's victory

The article was originally posted on Webronza on November 8, 2014

In the US mid-term election, the Republicans won the majority of seats in the US Senate. As a result, the Republicans now occupy the majority in both Houses, and the twist in the Congress is now resolved.

Unlike the Democrats, the Republicans are positive about free trade. During the election campaign, the leader of the Republicans in the Senate, Senate Whip Mitch McConnell said that the Republicans would cooperate in liberalising trade.

While the US government was facing difficulties before the election, they will now finally be able to obtain TPA, where the Congress gives the government authority regarding trade negotiations.

The TPP negotiations, which the Obama administration is trying to promote, will move forward because of the opposition party's victory. The Democrats have rarely been positive about trade liberalisation negotiations, and the TPP negotiations were not an exception. The Democrats, whose power base comprises labour unions, have been negative about free trade based on the claim that the inflow of cheap foreign products will harm employment.

The TPP negotiations are speculated to be concluded in the first half of next year, after the US government obtains TPA. The Presidential election will be held the year after that, in 2016. Since there are no elections next year, the US can conclude a free trade agreement that disadvantages certain industries without worrying about elections. Furthermore, since the Republicans occupy the majority of the Congress, it will not be difficult to win congressional approval. At the same time, however, the US [President] will have to be prepared for increased influence exercised by free trade advocates in the Congress controlled by the Republicans.

On the other hand, the Japanese government is bound by the resolutions adopted by the LDP and the Diet Agricultural, Forestry and Fishery Committees that demand that rice, wheat, beef and pork, dairy products and sugar be treated as exceptions to tariff abolition and that the government be prepared to withdraw from the TPP negotiations if that cannot be realised.

The following media report has been published in terms of the contents of the Japan-US consultations that have been carried out so far on the basis of the Japanese government's policy:

"The two countries agreed to maintain the current tariffs for rice, wheat and sugar and to increase the import quota for American produce for rice and wheat. The US withdrew their demand for tariff abolition in regard to beef and pork, but they are still demanding significant reductions, while Japan is demanding a system that allows them to increase the tariff rate with ease if imports increase."

However, the above has not been confirmed in writing. Under the new Republican-centered Congress, it is possible for the USTR to completely reject the negotiating policy that they have adopted so far; in fact they are likely to do so.

The American agricultural industry centered on pork is fiercely opposed to not abolishing the tariff. The biggest agricultural organisation in the US supports the Republicans, not the Democrats. Even before the mid-term election was held, 140 members of the House of Representatives - that is one third of the members - sent a letter to President Obama claiming that the negotiations should be concluded without Japan, which is demanding many exceptions from tariff abolition.

The USTR will probably write off the negotiations that have happened so far and urge Japan to abolish their tariffs - the high tariffs that were necessary to protect the [domestic] prices that were higher than international prices.

While Japanese politics views the regressive nature of the consumption tax as a problem, the deceitful claim that protecting agricultural administration involving high tariffs and high prices - the very embodiments of 'regressivity' that forces consumers to pay high prices - is in the national interest still goes unchallenged. Shouldn't the people and the consumers raise their voice to criticise this claim?

Even if tariffs were abolished, agriculture can still be protected based on direct payments made out of the national finance. In fact, that will actually be in the consumers' interest. Why are high tariffs and high prices accepted while direct payments are deemed inappropriate?

While we may have been prompted by external pressure, I think that we have arrived at a point where the people and consumers should question the "agriculture village" made up of the industry, academia and bureaucracy.

(This article was translated from the Japanese transcript of Mr. Yamashita's column in "Webronza" on November 8, 2014.)