Media  Global Economy  2016.12.19

Let's Realize the TPP without the US!

The article was originally posted on Webronza on November 17,2016

New proposals by Mexico, Peru, and Australia

After Trump won the presidential election, there is hardly any possibility that the TPP (Trans-Pacific Partnership) will come into force. Although the Japanese Government will try to persuade Trump, if he accepts the persuasion, he will lose the support of many US people who voted for him.

Other TPP member countries responded differently from Japan. New movements appeared when the US withdrawal from the TPP was disclosed.

According to some reports, Guajardo, Mexico's Secretary of Economy, stated on November 10 that he will propose the revision of some clauses so that the TPP agreement can be effectuated by 11 countries, excluding the US.

On November 11, President Kuczynski of Peru stated to some media that "a new economic cooperation treaty should be established by Pacific Rim countries, excluding the US." It was reported that he mentioned the participation of China and Russia.

Bishop, the Australian Minister for Foreign Affairs, stated, "Unless the TPP makes progress, the vacuum will be filled by the Regional Comprehensive Economic Partnership (RCEP), which is under the leadership of China."

Concept of a TPP without the US

I already mentioned the concept of a TPP without the US in my article entitled "The TPP spoiled by foolish America," which was posted on WEBRONZA on September 13.

In that article, I described the following:

"We should make a new TPP agreement without the US. A good idea would be to make an offer to the UK who has left the EU. Someday the US who has been left out of the Asian Pacific Ocean area may request to join the new TPP agreements."

"In this case, new countries should not be able to make requests to existing member countries. It will be a negotiation where the US needs to accept the demands of existing member countries. Australia would request 5 years as the period of protection of the data regarding new bio-medicine, and Japan, who had to accept a period of 25 years to abolish the US tariff on cars, will be able to request the immediate abolition of tariff on cars.

It would be the most miserable negotiation that the US has ever experienced. Then the US will surely realize how foolish they were."

My article on WEBRONZA created a sensation

The article created a considerable sensation partly because it was translated into English.

An ex-government official in Japan who was engaged in trade negotiations recommended that I should contribute the article to a well-known English newspaper. A senior staff writer for a major newspaper told me that when the writer explained the gist of the article to an existing high-level official in the Japanese Government, the high-level official showed a great deal of interest in the article.

Some civilized Diet members who have promoted the TPP have said, "It will work, Mr. Yamashita." A negotiating official who once worked for the Office of the United States Trade Representative evaluated my article, saying that the US will not wake up unless it is criticized to such an extent.

The new TPP agreement will differ from the existing one

I will give a more detailed explanation.

The final chapter of the TPP includes the provision that the TPP cannot come into force unless it is ratified by six countries or more that account for 85% of the total GDP of the member countries. Mexico's Secretary of Economy recommended that after the deletion or revision of this provision, the 11 remaining TPP member countries except the US should conclude a new TPP agreement.

In addition, those provisions that reflect the interests of the US should be deleted or revised.

For example, they include the ISDS clauses, provisions related to the period of protection of the data regarding new bio-medicine, provisions related to food safety, and other provisions advantageous to the US. Regarding market access, the Japanese special quota of 70,000 tons approved for the US rice should also be deleted. This is only natural because the US is not a TPP member.

In addition, if the US applies for participation, it would not be necessary to approve any special quota for the US as described in the above-mentioned article. Legally speaking, the new TPP agreement will be totally different from the existing one.

Japan does not have any reason to object to the new TPP agreement

In Japan, because the US is now excluded, the Democratic Party and other opposition parties would hardly have any reason to be against the new TPP agreement.

Regarding agriculture, the additional concessions for the US will disappear. The reduction or elimination of customs duties on farm products will not be applied to the US. There will be no grounds for the assertion that US companies will use the ISDS clauses to bring an action against the Japanese Government and regulations for medical care and food safety will also be revised.

Most objections against the TPP by the opposition parties were based on "US phobia." The new TPP agreement will be unanimously approved by the Diet without any objection.

What will happen worldwide?

First, let's imagine a world where there is neither the existing TPP nor the new TPP without the US.

Australian Minister for Foreign Affairs has stated that "Without the TPP, the vacuum will be filled by the RCEP (which is an agreement between the ASEAN countries and six other countries - Japan, China, South Korea, India, Australia, and New Zealand - and is now under negotiation)." This is just a mere threat against the US.

Because Japan expressed the intention to participate in the TPP, China grew worried that it would be alienated from the Asia-Pacific region. As a result, China withdrew the insistence that the RCEP should consist of the ASEAN countries plus Japan, China, and South Korea, and conceded that it should consist of ASEAN+6, which Japan has advocated.

If there is neither the existing TPP nor the new TPP, negotiations on the RCEP would not make any progress.

Even if the RCEP becomes established, high-level provisions like those in the TPP would not be enacted if China and India participate.

Both countries would not be able to approve these high-level provisions, not only in the chapters newly added to the TPP, such as state-owned enterprises, trade and the environment, and trade and labor, but also in the chapters concerning services, investments, intellectual property, government procurement, etc. It would not be easy for China to legally guarantee their workers the three basic labor rights (the right to organize, the right to bargain collectively, and the right to act collectively).

Because the TPP would result in a massive reduction in customs duties on cheese, spaghetti, pork, etc., the EU worried that it might be deprived of the Japanese market by the US, Canada, Australia, New Zealand, etc. As a result, the EU assumed a positive attitude toward the Japan-EU Economic Partnership Agreement negotiations. If there is neither the existing TPP nor the new TPP, negotiations on the Agreement would not make any progress.

If the new TPP agreement is established, the US will have no other way to accept Japan's demand

What will happen if the new TPP is established?

First, because China and the EU will worry that they might be influenced by the new TPP, negotiations on both the RCEP and the Japan-EU Economic Partnership Agreement will make progress.

The new TPP will influence the US more than any other country.

Regarding beef, while Australia and New Zealand can export their beef to Japan with a tariff of 9%, the US would have to pay a tariff of 38%. This is true for other farm products.

The US will be deprived of the Japanese market mainly by Australia in the case of beef, by Canada and Denmark (under the Japan-EU Economic Partnership Agreement) in the case of pork, by Canada and Australia in the case of wheat, and by Australia, New Zealand, and France (under the Japan-EU Economic Partnership Agreement) in the case of dairy goods. Similar things will happen in the other member countries of the new TPP.

The US will have to apply to participate in the new TPP agreement, even if it has to throw itself on the ground.

It will not be necessary for the new TPP member countries to consider the US request at all. The US will have to accept all the clauses of the new TPP agreement as they are.

On the other hand, the US will have to accept the demands of Japan, Canada, Australia, and any other new TPP member countries (such as the immediate abolition of customs duties on Japanese cars). This is not an unreasonable negotiation. During accession negotiationsto the WTO, the US made similar demands of the countries that wished toaccede.

The US, which showed an overbearing attitude toward us during negotiations, will kneel down before us. I think that the Japanese negotiating officials would like to conduct such negotiations. They would feel excited during the negotiations.

Advice for active negotiating officials

As a man of experience in trade negotiations, I would like to give some advice to the active negotiating officials.

"When Japan applied to accede to GATT, Japan was not able to meet the excessive demands from the UK, France and other European countries. Because of this, the US lowered its customs duties on behalf of Japan to meet these countries' demands."

"The US gratuitously lowered customs duties on behalf of Japan. This made it possible for Japan to participate in GATT. The US is an ally of Japan. It is wrong to go too far. Do not drive the US too far into a corner, but reconcile with the US at the appropriate opportunity."

(Titles have been omitted in the body of the article above)

(This article was translated from the Japanese transcript of Dr. Yamashita's column in "Webronza" on November 17,2016.)