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U.S. welcomes latecomer Japan to trans-Pacific trade talks

- The Washington Times - Friday, April 12, 2013

Economists say the long-awaited addition of Japan to a pending trade agreement between the U.S. and the Asia-Pacific region was worth the wait, and the benefits will outweigh any slowdown in negotiations.

"Adding Japan will make it very difficult to complete the deal by the end of the year — and is a good excuse for negotiators to delay a bit," said Barbara R. Kotschwar, a research fellow at the Peterson Institute for International Economics. "It is generally recognized that a good deal is more important than a deal that meets a pre-set deadline."

The Obama administration on Friday officially welcomed Japan to the negotiating table for the Trans-Pacific Partnership, even as member countries neared the year-end deadline.

The United States joined the Trans-Pacific Partnership negotiations in 2008, but Japan has been noticeably absent from discussions taking place in its own backyard. The addition of the world's third-largest economy, behind the U.S. and China, is expected to give the deal much greater significance.

"Since November 2011, the United States has been engaged in consultations with Japan focused on Japan's readiness to meet the TPP's high standards for liberalizing trade and investment," Demetrios Marantis, acting U.S. trade representative, said in a statement.

"The United States and Japan have successfully completed these consultations by concluding a robust package of actions and agreements with Japan in the automotive and insurance sectors, as well as other non-tariff measures," he said.

The multilateral trade agreement will focus on removing trade barriers between the Asia-Pacific region and the Americas, as well as non-tariff measures such as insurance, investment, intellectual property rights, standards, government procurement, competition policy, express delivery and sanitary measures.

"As two of the largest and most advanced economies in the region, Japan and the United States will work together to further enhance economic growth, expand bilateral trade and strengthen the rule of law," Japanese Prime Minister Shinzo Abe said in a statement.

The Trans-Pacific Partnership does not include China, which has the world's biggest trade surplus with the United States. Some Chinese news outlets have expressed alarm over the pact, saying it is intended to contain China's economic rise and trading prospects in the region.

Others say the addition of Japan could persuade South Korea, which has opted against joining negotiations, to reverse course. Seoul has a separate free-trade deal with the U.S.

"South Korea is now likely to feel compelled to take another serious look at joining TPP," according to the Center for Strategic & International Studies.

Ms. Kotschwar agreed, saying that "if Japan joins the TPP, as it looks likely to do, and if Korea follows suit, which seems a reasonable expectation, this will add about 10 percentage points" to the share of world gross domestic product the pact would cover — from 30 percent to 40 percent.

The downside: Negotiators may miss their self-imposed, year-end deadline, because there are "many outstanding issues on which consensus has not yet been reached" with Japan, Ms. Kotschwar said.

"Adding the Japanese market to the mix will certainly make actors, who have to date ignored these talks, sit up and notice," Ms. Kotschwar said. "Sensitive sectors will have to be addressed — autos, of course, come to mind."

But U.S. lawmakers may be willing to make that compromise for access to the world's third-largest economy, which would be much more significant than any of the other Asia-Pacific countries with which they have been negotiating, Ms. Kotschwar said.

"This means that TPP can no longer be dismissed as a relatively limited undertaking between the United States and a number of smaller Asia-Pacific economies," according to the Center for Strategic & International Studies.

In the U.S., business groups and congressional Republicans hotly debated the addition of Japan to TPP negotiations.

"Japan is a vital U.S. trading partner and strategic ally, and its participation should greatly expand the TPP's potential benefits," U.S. Chamber of Commerce President and CEO Thomas J. Donohue said in a statement. "We are pleased that Japan has agreed to put all issues on the table in the negotiations and work hard to ensure its late entrance does not unduly delay the negotiations."

Sen. Bob Corker, Tennessee Republican and ranking member of the Foreign Relations Committee, which oversees such trade agreements, said he is a "strong advocate" of the addition of Japan to Trans-Pacific Partnership negotiations.

"Japanese investment in Tennessee has created good-paying jobs and growth for a long time, so tearing down barriers to further trade and foreign investment is key to strengthening our economy for the future," he said in a statement.

The National Association of Manufacturers also seems optimistic about the deal.

"The commitments that Japan has made to address long-standing challenges are encouraging, and we will continue to work vigorously with the U.S. government to ensure a level playing field for all manufacturers in the United States," said a statement by Linda Dempsey, the association's vice president of international economic affairs.

But other U.S. manufacturers have expressed fears that a broad deal with lower-cost Asian economies could cut into their profits and cost jobs while leaving in place long-standing barriers to U.S. goods.

"Including Japan in the TPP without ironclad assurances that it will open its markets and stop manipulating its currency is incredibly irresponsible," Alliance for American Manufacturing President Scott Paul said in a statement.

"You can add this to the list of threats that stand in the way of a true American manufacturing resurgence. What makes matters worse is that this would be a self-inflicted wound."

House Ways and Means Committee Chairman Dave Camp, Michigan Republican, said he worried that adding Japan to the talks could slow progress toward a deal.

"I will not support Japan's entry into TPP unless we obtain airtight assurances that Japan's participation in the TPP negotiations will neither diminish the comprehensive and ambitious nature of these negotiations nor delay the goal of concluding the negotiations this year," Mr. Camp said in a statement.

Among the other 10 countries negotiating the regional pact are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. Canada and Mexico joined negotiations last fall.

The countries completed the 16th round of negotiations in March, and the next meetings are scheduled for May.

The pact is a spinoff of the 2005 Trans-Pacific Strategic Economic Partnership Agreement among Brunei, Chile, New Zealand and Singapore.

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