In Asia Trip, Obama Makes Push for Trans-Pacific Trade Pact

1 May 2014

US President Barack Obama’s trip to Asia came to a close on Tuesday, following several days of meetings with regional leaders on the planned Trans-Pacific Partnership (TPP) Agreement. Though the trip ended without a Japan deal on agriculture and automobile trade – prompting many to question the likelihood of concluding the overall TPP negotiations in the near-term – leaders on both sides say that they now have a “path forward” to potentially address their bilateral issues.

Along with visiting Japan, the tour also included stops in Malaysia, South Korea, and the Philippines, where the US President made a strong push for increased trade ties. Obama has made the goal of cementing the US’ “pivot to Asia” a key part of his presidential legacy, despite scepticism from some quarters of how committed Washington actually is to that process, given the difficulty seen in closing a TPP deal.

During the trip, Obama also suggested that the Philippines and South Korea could potentially be welcomed into the TPP once a deal is concluded, if they show a willingness to take on the agreement’s level of ambition. TPP participants say that they hope the deal can serve as a template for a broader trade pact for all 21 members of the Asia-Pacific Economic Cooperation regional group.

Along with the US and Japan, the TPP also includes Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The proposed deal would cover 40 percent of the world economy, and along with eliminating or reducing tariffs on thousands of product lines would also feature chapters on disciplines ranging from intellectual property, digital commerce, the environment, and state-owned enterprises, among others.

The potential gains from the pact have been estimated by some analysts at US$223 billion a year in additional global income.

 

“Path forward” found in US-Japan talks

The disagreements between the US and Japan – the two largest economies in the talks – have been the main focus of trade watchers over the past several months, though some analysts and officials have warned that even if these bilateral disagreements are resolved, much work remains to address the outstanding issues that exist across various TPP chapters. 

The two sides have been at odds over the US’ insistence of substantially greater access to the Japanese agricultural market, pushing for tariff elimination in this area. Washington has also been calling for a reduction in Tokyo’s non-tariff barriers for automobiles. Japan, meanwhile, wants lower tariffs for automobiles it exports to the US.

The sensitivities of Japan’s farm sector – particularly with regards to beef, dairy, rice, pork, and sugar – have been one of the biggest difficulties for negotiators to resolve. Agriculture has been historically subjected to heavy protections in the Asian island economy, and domestic producers also receive substantial government support. (See Bridges Weekly, 10 April 2014)

Though Japanese government officials have acknowledged that some reforms to the sector will be needed – even if these are unpopular – the country’s Diet recently passed a resolution insisting that the Prime Minister maintain protections for select farm categories.

“On the part of our country, there is this resolution adopted by the Diet,” Abe acknowledged at a joint press conference with Obama, promising to heed domestic legislators’ requests. However, he continued, “we also hope to conclude the talks in a favourable way.” 

Tokyo is the newest member in the talks, having joined in last July. Shortly before it signed onto the deal, it agreed to hold separate bilateral talks with Washington on how to treat non-tariff measures, particularly regarding automobiles, with the results to later be incorporated in the overall TPP framework. (See Bridges Weekly, 25 July 2013 and 18 April 2013)

In a joint statement released after their meeting last week, Obama and Japanese Prime Minister Shinzo Abe said they were “committed to taking the bold steps necessary to complete a high-standard, ambitious, comprehensive Trans-Pacific Partnership agreement.”

“Today we have identified a path forward on important bilateral TPP issues,” they added. “This marks a key milestone in the TPP negotiations and will inject fresh momentum into the broader talks.”

Details on what this path forward involves were scarce, with some officials noting afterward that while advances have been made in how to deal with these difficult topics, they may not be in a position to announce them yet.

The weeks preceding the Obama-Abe meet had been full of sessions in both Washington and Tokyo between top-level negotiators in an effort to bridge the existing gaps, given that an agreement between them is seen as key to advancing the trans-Pacific talks as a whole. However, the two leaders warned last week that much work lies ahead for all 12 members, calling for the entire group “to move as soon as possible to take the necessary steps to conclude the agreement.”

Liberalising trade, such as through the TPP, is part of the “third arrow” of the Japanese Prime Minister’s three-pronged “Abenomics” strategy, aimed at boosting the country’s economic recovery. A new report from the International Monetary Fund has indicated that, for Abenomics to truly yield increased growth, Tokyo must implement structural reforms – and quickly. (For more on the IMF report, see related story, this issue)

“Prime Minister Abe, I think courageously, has recognised that although Japan continues to be one of the most powerful economies in the world, that over the last two decades its pace of growth and innovation had stalled and that if, in fact, Japan wanted to push forward in this new century then reforms were going to have to take place,” Obama told reporters following his meetings with Abe. “TPP is consistent with these reforms.”

However, he added, “there are always political sensitivities in any kind of trade discussions. Prime Minister Abe has got to deal with his politics; I’ve got to deal with mine.”

TPP talks defended in Malaysia

Days later in Malaysia, Obama defended the US’ involvement in the pact from some critics who have said that Washington is exerting undue pressure on some smaller members of the trade talks to extract tough concessions.

“You shouldn’t be surprised if there are going to be objections, rumours, conspiracy theories, political aggravation around a trade deal,” Obama told reporters. “That’s true in Malaysia; it’s true in Tokyo; it’s true in Seoul; it’s true in the United States of America – and it’s true in the Democratic Party.”

Malaysian officials concurred, with Prime Minister Najib Razak insisting that “we were not bullied into it.”

“Emphatically, in no uncertain terms, we went to the TPP on our own accord,” he added. “We are working around the sensitivities and challenges, which I alluded to in my discussions with President Obama. He fully understands our domestic sensitivities, and we will sit down and try to iron this out with the intention of trying to work out a deal in the near future.”

New members?

The possibility of bringing new members into the TPP after the negotiations are concluded was also raised last week, with Obama and his counterparts in Seoul and Manila both suggesting that the pact could eventually be expanded to include these countries.

Following his meetings with South Korean President Park Geun-hye, Obama highlighted the need to ensure that Washington’s existing deal with Seoul – which entered into force in early 2012 – is fully put in place, in order to set the stage for Seoul to potentially meet TPP’s standards. Though officials have welcomed the results of the US-Korea pact so far – despite the criticisms of some advocacy groups that have noted the US’ worsening trade deficit with the Asian country – they have also noted areas where implementation could be improved.

Eyes on Vietnam, APEC meetings

Chief negotiators from TPP member countries are slated to meet later this month in Vietnam, a few weeks ahead of a meeting of APEC trade ministers, which like in years past is expected to feature a side meeting of TPP ministers.

The last two TPP ministerial-level meetings, both held in Singapore, touted progress but no deal, and whether the next one will lead to an agreement – or timeframe for one – is unclear. (See Bridges Weekly, 27 February 2014) Though US officials have said in recent months that they hope for a deal in 2014, TPP members have not formally announced a new target date for wrapping up the talks, having missed earlier goals for end-2013 and end-2012.

ICTSD reporting; “Japan, U.S. offer different takes on progress in TPP negotiations,” THE ASAHI SHIMBUN, 26 April 2014; “IMF warns failure to reform threatens Japan’s growth,” FINANCIAL TIMES, 28 April 2014; “Ending Asia Trip, Obama Defends His Foreign Policy,” THE NEW YORK TIMES, 29 April 2014.

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