Incomprehensible Objection to the Trans-Pacific Partnership (TPP)

Senior Fellow, RIETI

Is free trade not necessary? It is predicted that by 2020, Korea and Taiwan will surpass Japan in Gross Domestic Product (GDP) per capita. Therefore, it is essential to incorporate foreign technologies and dynamism into Japan through trade and investment, and drive technological innovation necessary for achieving high economic growth once again. If tariffs are eliminated, pushing down the prices of agricultural and food products, it will be good news to people who have either lost jobs or have suffered from a reduction in their incomes following the economic slowdown or the Great East Japan Earthquake.

If the Japanese government decides to follow the lead of the U.S. and the European Union (EU) and make direct payments to farmers as subsidies, agricultural producers will no longer be at a disadvantage. In a shrinking domestic market due to an aging and shrinking population, agriculture is destined to decline unless the Japanese government abolishes tariffs imposed on Japanese agricultural products by its trade partners and promotes exports. Thus, negotiations seeking to liberalize trade will be inevitable, even for the agricultural sector.

The Trans-Pacific Partnership (TPP) is an agreement to promote the liberalization of trade and investment among different countries. Currently nine nations, including the U.S., Australia, Chile, and Malaysia, have ongoing negotiations for concluding this global trade agreement. Participating countries in the TPP are attempting to promote trade liberalization, including the elimination of tariffs and expansion of service trades, beyond the existing framework of the World Trade Organization (WTO). They also are aiming to establish new rules for investment, competition, trade and labor, and trade and the environment, areas previously not covered by the WTO.

Moreover, all advanced countries in the Asia-Pacific region, such as the U.S. and Australia, have joined the TPP, except for Japan, and the TPP is expected to become a high-level trade agreement. The TPP is also seen to extend eventually to the entire Asia-Pacific region in the future. This new high-quality trade agreement, participated in by many advanced countries, will undoubtedly become a global model whenever the WTO considers establishing any new rules.

If Japan joins the ongoing trade negotiations through the TPP, it can make its national interests reflected in the rules of the TPP and present these to the WTO. Hence, Japan can incorporate its national interests into a set of global disciplines and rules as well. To this end, it is necessary to join the TPP at an early stage in the negotiations. Even if Japan joins the TPP immediately before the participating countries reach an agreement, it will not be able to derive much benefit from the new trade agreement.

However, we are now seeing strong objections to the TPP. Some argue that the TPP will push down the prices of farm products, causing consumers to withhold purchases, and furthering deflation. But even though food prices will drop next year, is it reasonable to expect us to survive this year without eating anything? Besides, under the framework of the TPP, participating countries will jointly and equally assume their obligations. It is thus unlikely that Japan, which has already opened up its market to foreign countries more so than others, will be pressured to open up even more, while the U.S. still refuses to open up its domestic market to protect its local public works.

Those who disagree with Japan's participation in the TPP have also voiced their objections in such areas as medical services, labor, and investment from ideology out of their imaginations and without sufficient knowledge on global trade negotiations (See "TPP Study Group Report" published by The Canon Institute for Global Studies for details). Furthermore, if they argue that the TPP will have grave adverse impacts on the Japanese domestic market, Japan should instead try to participate actively in the debates through the TPP, which is likely to set both Asia-Pacific and global standards on trade and investment in the future, and eliminate any potential problems.

Meanwhile, some even argue that Japan should not participate in the TPP because they lack any understanding of the new trade agreement. It is natural that they have no such understanding. In my opinion, people who publicly oppose the TPP based on ideology from their own imaginations are far more unreasonable. The objective of the TPP is to iron out the opposing views of the participating countries. Countries participating in the negotiations through the TPP will not disclose details of their negotiations to Japan, a non-participating country, and no one knows the future course of the TPP until the end of the negotiations. Even participating countries have no idea at this point. When the negotiations on the Uruguay Round started in 1986, no nation could have foreseen the final results of the agreement reached in 1993. There is no businessperson in this world who will hesitate to negotiate with his/her trade partner merely because he/she is unaware of the final outcome of the negotiation.

If Japan, a major economy, participates in the TPP, it is highly unlikely that other participating countries will ignore its opinions and push the negotiation forward without it. If Japan participates in the negotiations with a strong will and discusses issues related to its important national interests, other participating countries will have to respond. For example, in the negotiations on the U.S.-Korea Free Trade Agreement, the Korean government agreed to deregulate the sanitary and phytosanitary measures of beef products produced in the U.S. However, in 2008, the Korean people lodged massive protests opposing the agreement. In response to this move, the Korean government resumed negotiations with the U.S. and succeeded in withdrawing it from the agreement.

If the Japanese government determines that an agreement it reached through negotiations is not beneficial to Japan, it will not have to sign it, or even if it decides to sign the agreement, the Diet may decline to approve it. After joining an agreement, the Japanese government will still be able to call for negotiations to either amend it or to withdraw from it simply by giving a written notice. For these reasons, all objections to the TPP that are made based on ideology from their imaginations and all the arguments that they will not participate in it because of their lack of knowledge of it are incomprehensible to me.

>> Original text in Japanese

* Translated by RIETI.

September 24, 2011 Niigata Nippo

October 24, 2011

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