Stalled TPP talks may hamper Japan’s other FTA deals

Tokyo — A failure to secure a Pacific Rim trade deal at the just-ended ministerial meeting comes as a blow to Japanese Prime Minister Shinzo Abe, who is promoting free trade as key to his growth strategy for shoring up the country’s economy and fighting chronic deflation.

The further delay in the already prolonged negotiations for the Trans-Pacific Partnership (TPP) — touted as the most ambitious and high-standard pact in a generation — is likely to adversely affect Japan’s efforts to get other mega free-trade agreements (FTA), trade observers say.

The tariff-cutting TPP, if realised, would bind together about 40 per cent of the global output in the fast-growing Asia-Pacific region.

According to a study by the Peterson Institute for International Economics, the pact would add a combined US$285 billion (S$391 billion) to the member countries’ gross domestic product by 2025 compared with 2007 levels, with Japan projected to be the largest gainer, with US$105 billion.

While Japan’s priority is on the US-led TPP, it is also in talks with the European Union since 2013 for a bilateral free-trade deal that would cover about 40 per cent of global trade.

Tokyo and the 28-nation bloc are aiming to end their talks by the end of this year.

“Japan-EU free-trade talks have been encouraged by (European countries’) concern that they will fall behind in rulemaking for global trade if a mega FTA like the TPP is concluded in the growing Asia-Pacific region,” said Mr Takaaki Asano, a research fellow at the Tokyo Foundation, a Japanese think-tank.

There would be no need to rush to cut a Japan-EU deal within this year if the TPP will not see a successful conclusion anytime soon, Mr Asano said.

Japanese negotiation sources also said a long-elusive TPP deal has a negative impact on the Japan-EU talks.

“The United States is a close ally for Japan, so we have a political incentive to liberalise our sensitive farm products by breaking our back,” said one source.

“But there may not be such a strong motivation for a trade pact with the European Union. If the TPP ends up unsuccessful, it is unlikely that Japan will easily open up (its sensitive industries) to Europe,” the source said.

Japan is also involved in a massive free-trade initiative known as a Regional Comprehensive Economic Partnership, or RCEP, comprising a total of as many as 16 Asia-Pacific countries, including China and India.

The RCEP nations, whose levels of economic development differ considerably, are also seeking to strike a deal by the end of the year, but that goal is seen as unrealistic given remaining gaps over tariff-elimination targets, a basis for entering full-fledged tariff negotiations.

China, which is not a TPP member, could be motivated to push the RCEP forward if the TPP is realised, but the 16-country talks are not likely to accelerate drastically under the current situation, the observers said.

Mr Asano said stalled trade talks would definitely affect Japan’s attempt to incorporate the power of economic growth in Asia, which would be the foundation of economic growth in the depopulating and greying country.

At a four-day gathering on the Hawaiian island of Maui through Friday, which had been seen as the final opportunity to secure a deal, trade ministers from the 12 TPP countries could not bridge their differences over thorny issues, including intellectual property and liberalisation of dairy and automobile tariffs.

Mr Akira Amari, Japan’s minister in charge of the country’s talks for TPP, said the 12 countries are now eyeing to reconvene a ministerial meeting late this month to try again to reach an agreement.

The outlook, however, still remains uncertain. Kyodo News