Japan TPP Negotiations: From Protecting to Building

Prime Minister Shinzo Abe has announced Japan’s participation in negotiations over the Trans-Pacific Partnership Agreement. We commend his decision to steer the Japanese economy toward openness and revitalization over the conservative voices sputtering within the country.

Japan, with its shrinking population, must strike out on its own in the world to maintain economic growth. Japan can exert its natural strength when we deepen our ties with the U.S. and strengthen our integration in the center of global economic growth, East Asia.

What Are Japan’s National Interests?

The TPP is a framework most suited for our national interests. It is not easy to negotiate a unified commercial system when bringing together countries with disparate policies and commercial customs. There needs to be a strong will and energy to reach an agreement by overcoming individual national interests.

U.S. leadership is essential to this process. However, this is not an issue that can be solved by American strength alone. A system based on trust cannot expand if the all-powerful U.S. imposes its demands on the small South Asian and Central and South American states.

Progress will not speed up if Japan and the U.S., who aim for high-levels of liberalization, do not appeal to emerging economies. Only when Japan joins the negotiation as a member of East Asia will the TPP become a model for 21st century trade and investment regulations.

Abe announced his resolve at a press conference. However, activity inside the Democratic Party of Japan is cause for concern: In the just name of preserving the national interest, the debates have focused on the holy task of avoiding the repeal of tariffs. It is certainly not within the national interest to look inward and continue to protect a noncompetitive agricultural sector.

We must look outward if we are seriously contemplating the development of the Japanese economy. It is in the national interest to create a stage where Japanese products — not limited to industrial products and inclusive of agricultural products — Japanese talent and Japanese investments can freely move. Is it not time to shift our attention from protection to building?

Some worry that Japan will be handed unfavorable conditions because it is late to join negotiations. Yet others feel that the inclusion of Japan will slow an agreement. Going forward, Abe must meticulously prepare a negotiation stance and deepen mutual understandings with participating nations.

The abolition of tariffs on goods is not the only focal point of the negotiations. There are various [other] fields such as Internet Protocol rights, standards and certifications for technology, reform of state-owned enterprises, the service trade, competition policy, the environment and labor. These are the areas that the current trade system, the World Trade Organization, does not address.

Japan must rush to catch up in order to begin charting the new rules as soon as possible. The expansion of exports due to the elimination of tariffs will certainly have a major positive impact on the economy, but the creation of rules for a new system is even more meaningful.

As the Abe government engages the TPP process, it must keep in mind the rise of China. China is strengthening its influence over East Asian countries as it continues its economic and military expansion. China’s state capitalism, which favors self-aggrandizement over co-existence and co-prosperity, has acquired prominence through the domination of markets by state-owned enterprises or by placing limitations on rare earth exports.

Into the Age of Competitive Rule-Making

The ideas that China and emerging economies espouse could trump the free-market system that the developed economies of Japan, the U.S. and Europe established. However, the WTO agreement that came into effect 18 years ago cannot accommodate such selfish policies.

A major aim of the TPP is to create a high-standard trade system among participants and to pull China into this framework in the long term. Above all else, Japan cannot protect its national interests without creating security and order in East Asia, the stage on which Japan thrives.

Using Japan as leverage, the European Union will enter economic partnership negotiations with the U.S. in June. Japan and the E.U. will likely begin negotiations in April. Negotiations for the Regional Comprehensive Economic Partnership — for which China has laid bare its enthusiasm — will begin around the same time.

Negotiations for the service trade among 21 states and regions are set to begin as well. To meet the goal of regional economic integration by 2015, the Association of Southeast Asian Nations is rushing to plan a common market. The U.S., E.U. and China are trying to link up with ASEAN.

The world is entering the age of competitive rule-making. Abe was correct when he said that this is the “last chance.” Late to the negotiations, Japan can still have an impact on the creation of a trade system. In order to go ahead with TPP negotiations, the Abe government must also step forward with domestic reforms.