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Japan seeks to bring Pacific trade deal back from the dead

TOKYO — Japan is ready to relaunch the Trans-Pacific Partnership (TPP) minus the United States in a dramatic shift of position that could bring the huge trade deal back from the dead.

A port in Tokyo, Japan. The revised TPP will cement Japan’s relations with regional partners, such as Australia. Photo: REUTERS

A port in Tokyo, Japan. The revised TPP will cement Japan’s relations with regional partners, such as Australia. Photo: REUTERS

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TOKYO — Japan is ready to relaunch the Trans-Pacific Partnership (TPP) minus the United States in a dramatic shift of position that could bring the huge trade deal back from the dead.

According to officials who work on trade, Tokyo is now ready to proceed without much change to the existing TPP text, a big departure from its previous reluctance to expose Japanese farmers to a surge of agricultural imports without offsetting ease of access to the US auto market.

The decision could be a huge boon to non-US food exporters such as Australia and change the dynamics for trade deals in Asia by offering an alternative to the Regional Comprehensive Economic Partnership (RCEP).

“We will start talks on an 11-member TPP, minus the US, at the (Asia-Pacific Economic Cooperation) meeting in May,” said Finance Minister Taro Aso at a recent event in New York. Australian Trade Minister Steven Ciobo visited Japan earlier this month to discuss a revived TPP.

One of Mr Donald Trump’s first acts as US President was to withdraw from the unratified TPP deal. Minus the US, Japan will be the largest remaining economy. The other 10 members are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Australia earlier said it was keen to go ahead with the pact regardless, but Japanese Prime Minister Shinzo Abe said that TPP was “meaningless” without the US, reflecting the loss of a big market for Japan’s industrial products.

However, several factors have caused Tokyo to rethink. First, said Mr Kenichi Kawasaki, senior fellow at the National Graduate Institute for Policy Studies, is the realisation that TPP still has economic benefits without the US — and Japan needs them.

“We cannot expect economic revitalisation without any free-trade agreements,” said Mr Kawasaki. Most of Japan’s putative gains from tariff reduction were due to the US, he said, but those from non-tariff barriers mainly relate to Asian trading partners.

There is also a geopolitical aspect: TPP will cement Japan’s relations with important regional partners such as Australia and Vietnam. Furthermore, it will keep alive TPP’s tough rules in areas such as intellectual property and government procurement, creating pressure for higher standards in the RCEP deal, which covers a different set of Asian countries including Japan, China, Indonesia and the Philippines.

When US Vice-President Mike Pence visited Tokyo earlier this month, he declared that “the TPP is a thing of the past for the United States of America”. Despite that, however, another motivation for Tokyo is to lure the US back.

“The US may lose from TPP11 (a TPP without the US) because of trade diversion effects,” said Mr Kawasaki. Australian beef and Chilean wine, for example, will be better placed in the Japanese market than their US competitors.

Officials in Japan hope that business interests in the US will therefore encourage Washington to come back to the TPP eventually, even if that proves impossible while Mr Trump is in office. Mr Kawasaki notes that the US gains less from a bilateral deal with Tokyo, which Mr Trump prefers, because Japan does not take a large share of US exports.

The viability of the TPP without the US remains unclear. Vietnam, in particular, was set to enjoy significant benefits from US tariff reductions on products such as textiles. Without them, it may be reluctant to sign up to onerous rules in areas such as e-commerce and state-owned enterprises. FINANCIAL TIMES

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