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TPP talks present golden opportunity for Japan

Update: March, 22/2013 - 10:28

by Mai Phuong

Better late than never: Japan's deci-sion to join negotiations for the Trans-Pacific Partnership (TPP) would be a wise step for both Japan and the TPP in opening up regional competition and would be integral to the country's strategy.

For the TPP, Japan's participation is important. It would add a bigger vision and bigger economy to the partnership.

Despite facing big challenges after the tsunami which added to existing problems in agriculture, the Japanese economy still ranks third in the world after the US and China and is bigger than the 10 non-US members of the TPP.

Experts said that Japan's joining the TPP hails the formation of a giant trans-Pacific free-trade zone. If TPP increases its members to 13, it would account for more than 40 per cent of global output and about one-third of world trade.

Negotiators have said that they are structuring the agreement in such a way that would allow more countries to join, so that the TPP could eventually include all twenty-one APEC nations.

TPP government officials describe the TPP as a vehicle for greater economic integration in the Asia Pacific region. Japan's joining will help make this goal become reality.

Japan's participation in the TPP will also boost the agreement's economic and strategic significance. The TPP aims to be the significant 21st century trade agreement that sets the rules for trade and investment in the Asia-Pacific region.

"Achieving this goal will require other major economies in the Asia-Pacific region to join the agreement with the intention of the TPP ultimately becoming a Free Trade Agreement of the Asia-Pacific (FTAAP). Japan's participation in the TPP will push the region towards this goal. With the addition of Japan, the TPP will cover 8.6 per cent of global trade and almost 40 per cent of global GDP," said Joshua Meltzer, a fellow in Global Economy and Development at the Brookings Institute.

In a recent analysis, Joshua , who focuses on the intersection between climate change and international trade , offered his views on both the achievement and consequences for the TPP and Japan when they join together.

He said Japan's entry into the TPP will likely motivate other countries to join the partnership. In particular, South Korea , which already has an FTA with the US , should now see the TPP as a key opportunity to negotiate new market access opportunities with Japan, with which it has a US$108 billion trading relationship.

The benefits for Japan itself would be large, too.With the Doha Round of multilateral trade talks all but dead, many agree that the TPP has become the best chance for liberal international trade to advance.

As the partners themselves stress, this is an opportunity for like-minded countries to set a new benchmark for 21st century trade agreements – one that goes beyond earlier deals by including cross-border investment, competition policy, intellectual property and the role of state-owned enterprises. Japan has grasped this advance.

Despite rising controversy in Japan about whether the national economy can overcome slow economic growth, the nation is still strong enough to join the TPP to take a pioneering role in building a development bloc.

While experts say it is a bit late for Japan, they agree that it is better late than never.

Do Son Hai from the Vietnamese Diplomatic Academy of Viet Nam, Ministry of Foreign Affairs, said that if Japan halted its TPP membership, it could lose a big chance to boost its economy in competition with the emerging economies in the region.

Moreover, by joining the TPP, Prime Minister Shinzo Abe's government would benefit from more powerful support from Asia-Pacific countries and the US in solving national and regional security problems, said Hai.

"The TPP will not only help recover the Japanese economy after its devastation by the tsunami but also help the country boost relationships with more countries to reap more support in solving security issues. A further close economic alliance with the US or Australia... is obviously essential for Japan," said Hai.

The TPP is currently being negotiated between eleven countries of the Asia-Pacific region but its scope is potentially much broader than the current members.

Supporters of the TPP say it would give Japan's flagging economy a boost and increase consumer choice. Joining the TPP would boost Japan's gross domestic product by 0.66 per cent, or 3.2 trillion yen ($33 billion), according to government estimates.

With Japan, the TPP would constitute one of the most advanced and complete trade agreements ever negotiated, said Hai. It would include not only chapters on goods and services, but also provisions on regulatory issues, public procurement, competitiveness and business facilitation, environmental protection and development.

Yet Japan's previous participation in similar fora suggests that the negotiations will be thorny. In the past, Japan's interest groups – particularly those representing the agricultural and pharmaceutical industries – have blocked the concessions needed for such far-reaching trade agreements.

Hai said the biggest challenges that Japanese investors faced related to competition with the TPP partners. If tariff barriers were lifted, Japanese consumers could buy cheaper imported items. Agriculture is one of the sectors most concerned about this issue.

TPP participation could also lead to a more risky "inflection" of the crisis.

"No one can be sure whether a financial crisis like those that occurred in Southeast Asia in 1997 or in the United States in 2008 will return. If this happened to the TPP, Japan – one of the biggest countries in the bloc, but not the most healthy – would suffer the most," he said.

Hai warned that joining the TPP, Japan could face challenges in solving social issues as it could crack a deep hole in Japanese society, particularly in the inner Japanese government. Prime Minister Abe's reputation may be threatened due to opposition not only from other parties but also from members of his own Liberal Democratic Party. — VNS


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