Japan Receives US Backing for Entry into Trans-Pacific Talks

18 April 2013

Washington officially signed off on Tokyo's entry into the Trans-Pacific Partnership negotiations last week, bringing the Asian economy one step closer to formally becoming a member of the 11-country group.

"Japan's entry into this important initiative for the Asia-Pacific region will help it to deliver significant economic benefits to the United States, Japan, and the Asia-Pacific region," Acting US Trade Representative Demetrios Marantis said on Friday.

The decision comes after over a year of consultations between the two sides, which ramped up in February following a joint meeting between US President Barack Obama and Japanese Prime Minister Shinzo Abe. The Japanese leader had subsequently announced in March that he would be formally pursuing entry into the 11-country negotiations. (See Bridges Weekly, 20 March 2013)

Agreements reached on automobiles, insurance, NTMs

According to the Obama Administration, the bilateral consultations between the US and Japan have led to agreements between the two sides on Japan's automotive and insurance sectors, as well as how the two sides will generally treat the topic of non-tariff measures.

With regards to automobiles, the two sides have agreed that US tariffs on Japanese car imports will be phased out in line with the longest "staging period" for any other product being treated in the TPP talks, with the phase-outs timed to take place at the end of this period. Washington and Tokyo have also decided that treatment of US tariffs will exceed that provided for in the US' existing trade pact with South Korea, which entered into force just over a year ago.

In addition, Japan will increase the amount of vehicles that US automobile producers will be allowed to export under Tokyo's Preferential Handling Procedure (PHP), which is a faster system for Japan to import US cars. The current annual ceiling for US cars allowed under Japan's PHP is 2000 per vehicle type; this is set to increase to 5000 per vehicle type.

Non-tariff measures related to automobiles - another long-standing sticking point between the two sides - will be addressed in bilateral talks held in parallel to the TPP negotiations. The results of these talks will be included in the final Japan-US market access package once the broader trans-Pacific talks are concluded.

The US has also long complained that Japan lacks a level playing field with regards to access to the Asian country's insurance market. To that end, the insurance terms inked between Tokyo and Washington last week will prevent Japan from approving "new or modified cancer insurance and/or stand-alone medical products of Japan Post Insurance until it determines that equivalent conditions of competition with private sector insurance suppliers have been established and Japan Post Insurance has a properly functioning business management system in place." These changes are expected to take years.

Meanwhile, negotiations regarding non-tariff measures in various areas - such as transparency/trade facilitation, investment, intellectual property rights, and government procurement, among others - will be addressed both within the broader TPP negotiations, as well as on a parallel track between Tokyo and Washington.

Mixed reaction from US lawmakers, Japanese public

Friday's announcement by the Obama Administration drew a mixed response from US lawmakers, who will ultimately have to sign off on the final TPP deal once the negotiations are concluded.

Some, such as Senator Max Baucus - a Democrat from Montana who heads the Finance Committee in his chamber, which deals with trade issues - welcomed the move, noting that the inclusion of Japan in the TPP would mean that the pact would cover nearly 40 percent of the global economy.

"Japan's participation in the Trans-Pacific Partnership talks presents an extraordinary opportunity that could open up huge new markets to American goods and services," Baucus said.

Others, however, were more reserved in their response, stressing the long-standing differences between Tokyo and Washington on some trade issues. "The bottom line is Japan must address its longstanding tariff and non-tariff barriers to US exports - in particular on autos, insurance, and agriculture," said Dave Camp - a Republican who chairs the House Committee on Ways and Means.

"I will not support Japan's entry into TPP unless we obtain airtight assurances that Japan's participation in the TPP negotiations will neither diminish the comprehensive and ambitious nature of these negotiations nor delay the goal of concluding the negotiations this year," Camp said.

Tokyo's joining of the TPP has also sparked substantial controversy within the Asian economy, with farmers worried about the potential of losing agricultural import tariffs as a result of the negotiations. While the Japanese manufacturing industry has largely backed TPP participation, automobile producers have expressed dismay at the prospect of US tariffs on Japanese cars remaining in place for the maximum possible period, as outlined in last week's agreement.

July participation?

Before entering the talks, Japan will need the approval of all current members, a list that includes Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Mexico has already signed off on Japan's participation in the talks, following a meeting last week between Abe and Mexican President Enrique Peña Nieto. (See Bridges Weekly, 11 April 2013)

Reports have suggested that a formal invitation to Japan could be extended as early as this weekend, when ministers from the TPP countries gather on the sidelines of the Asia-Pacific Economic Cooperation (APEC) trade ministers' meeting in Indonesia. However, even if Japan is invited to join the TPP this weekend, it will still take some time before Tokyo can formally take part in the negotiations, as current members will have to complete their own domestic procedures.

The US, for instance, must formally notify Congress and then allow for a 90-day period to pass, which would effectively prevent Japan from participating in the next round of talks, scheduled to be held in Lima, Peru in May. Some have hinted that another round of trade talks might be scheduled in mid-July in order for Japan to get involved quickly.

ICTSD reporting; "TPP deal irks farmers, automakers," THE JAPAN TIMES, 14 April 2013.

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