Media  Global Economy  2017.06.01

Japan should fairly go ahead with a TPP 11: My message to those in the Japanese government who fear putting off the US more than anything else

The article was originally posted on Webronza on April 25, 2017

The Japanese government's behavior regrettable

The Japanese government has reportedly decided to move forward with a Trans-Pacific Partnership without the US, called a "TPP 11," as it involves the remaining 11 signatories. It seems that what I have repeatedly proposed on WEBRONZA since last summer has eventually been accepted as a consensus within the government.

Let's Realize the TPP without the US!

U.S. President Trump's withdrawal from the TPP and Japan with no policy-Japanese government officials should take measures placing emphasis on the national interests rather than defending their own interests

Yet, there is something regrettable about the stance that the government took before they reached this consensus.

In the beginning, government officials were obviously reluctant to study what I had proposed. They cited an array of excuses, saying that a TPP without the US would be meaningless and that the TPP signatories who made concessions in one sector in exchange for greater access to the US market in another would demand renegotiations. These arguments were blindly echoed by a number of scholars and researchers. (I have already disproved such arguments in my earlier articles; I will not repeat those counterarguments here.)

What changed their stance?

The tide turned presumably when the new Trump administration withdrew from the TPP and clarified its stance to call for talks to reach a bilateral free trade agreement with Japan, or a Japan-US FTA.

In such talks, the US would likely pressure Japan to make further commitments than those Japan made in the TPP negotiations with regard to agricultural produce. Japanese government officials must have thought that a viable strategy in that case would be to launch a TPP 11 first and apply lower tariffs to agricultural imports from Australian and Canada, putting those from the US in a disadvantageous position. That would undermine the bargaining power of the US, preventing it from having an upper hand.

Regardless of whether or not the US intends to rejoin the TPP, all the US could do would be to humbly request that it be treated on a par with Australia and Canada.

Japanese officials dread offending the US

This logic did not provide a final push to Japan's decision to forge ahead with a TPP 11. The final push came when Japan confirmed that the US would not object to this move, according to a media report.

Something must be quite wrong here.

It is the US that took the liberty of pulling out of the TPP, a pact that had been reached after years of negotiations. The US is no position to raise objections to the actions of the other 11 signatories to the TPP, including Japan.

It is these 11 countries that are suffering. Is Japan, nevertheless, unable to decide what to do without gaining consent from the US?

If that is the case, Japan must be a vassal state of the US. Trump is not the only one who advocates "America First"; some officials in the Japanese government do so as well. They are afraid of ruffling the feathers of the US more than anything else.

How to proceed with a TPP 11

At any rate, the government has decided to go ahead with a TPP 11. The question now is how to reach a consensus among the 11 countries.

Skeptics argue that the TPP signatories that made concessions in one sector in exchange for greater access to the US market in another may show reluctance toward a TPP 11 or call for renegotiations.

A case in point is Vietnam. Vietnam reportedly made concessions in the state enterprise sector in exchange for tariff removal or greater access in textiles. US tariffs are high on textile products but low on other items.

The concessions Vietnam made may not be so great, however. The country secured many exemptions with regard to state enterprises in the TPP negations. In fact, it is questionable whether the Vietnamese government believes that it made concessions in the first place. Many Vietnamese officials advocate the reform of state-run firms.

If Vietnam insisted on staying away from a TPP 11, a TPP 10 that counts Vietnam out would be a viable option. The point, however, is that a TPP without the US provides a lever to persuade the US into rejoining the TPP, as I have long been arguing. If the US rejoins the TPP, Vietnam's concerns will be dissipated. This is the point that Tokyo should make to Vietnam.

What I am suggesting is that the Japanese government should opt for a TPP 11, which amounts to Tokyo making a commitment to the other TPP parties to stay away from a Japan-US FTA.

With a Japan-US FTA in place, there would be no way for the US to rejoin the TPP. If Tokyo does not want a Japan-US FTA, all it should do is to go ahead with a TPP 11 and tell the US that it has made a commitment to the other TPP signatories to call on the US to rejoin the TPP.

(This article was translated from the Japanese transcript of Dr. Yamashita's column in "Webronza" on April 25, 2017.)