Japans Possible…

 

NASA Satellite Image of Japan Captured March 1...

NASA Satellite Image of Japan Captured March 11, 2011 (Photo credit: NASA Goddard Photo and Video)

 

Japans Possible Entry Into the Trans-Pacific Partnership and Its Implications

 

CRS Report for Congress

 

Prepared for Members and Committees of Congress

 

Summary Report

 

In late 2011, after a year of extended internal deliberations, the Japanese government decided to explore the possibility of joining the Trans-Pacific Partnership (TPP) negotiations. The TPP would be a free trade agreement (FTA) among at least 11 countries—Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The United States and its TPP partners envision the agreement as “a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st century challenges.”

 

Congress has a direct and oversight role in the issue of U.S. participation in the TPP. It must approve implementing legislation, if the TPP is to apply to the United States. Some Members of Congress have already weighed in on whether Japan should be allowed to participate in the TPP and under what conditions. More may do so as the process proceeds.

 

Although Japanese leaders have not made a final decision yet on the TPP, they have been engaging in discussions with each of nine TPP partners separate from the main TPP negotiations. (Canada and Mexico have not officially joined the discussions.) At this writing, Japan has completed discussions with six of the countries, all of which support Japan’s participation and all of which already have been or are in the process of negotiating bilateral FTAs with Japan. Discussions with the United States, Australia, and New Zealand continue. The Obama Administration has identified three issues that Japan needs to address as “confidence building measures” if the United States is to support Japan’s entry into the TPP: Japanese restrictions on imports of U.S. beef; market access in Japan for cars made by the Detroit-based U.S. manufacturers; and preferential treatment for insurance and express delivery subsidiaries of state- owned Japan Post. No deadlines have been set for completion of the consultations.

 

The TPP is the leading U.S. trade policy initiative of the Obama Administration and a core component of Administration efforts to “rebalance” U.S. foreign policy priorities toward the Asia- Pacific region by playing a more active role in shaping the region’s rules and norms. As the second largest economy in Asia, the third largest economy in the world, and a key link in global supply/production chains, Japan’s participation would be pivotal to enhancing the credibility and viability of the TPP as a regional free trade arrangement.

 

Japan’s membership in the TPP with the United States would constitute a de facto U.S.-Japan FTA. A large segment of the U.S. business community has expressed support for Japanese participation in the TPP, if Japan can resolve long-standing issues on access to its markets for U.S. goods and services. However, the Detroit-based U.S. auto industry has expressed strong opposition to Japan participating in the TPP negotiations.

 

The question of whether to join the TPP trade talks has generated enormous attention and controversy inside Japan. Opposition to joining has been particularly strong among vested interest groups, such as the agricultural community and has divided both Japan’s ruling party and largest opposition party. Many analysts believe that current Japanese prime minister Yoshihiko Noda is committed to entering Japan in the negotiations after he completes some domestic priorities in the late summer and early fall. However, Noda’s hold on power is tenuous, and in August the major opposition parties forced him to promise to call parliamentary elections at “an early date,” presumably by early 2013. Noda’s party, the Democratic Party of Japan, is widely expected to do poorly and perhaps lose the premiership. The largest opposition party has opposed the TPP unless certain exceptions are allowed. Given Japan’s political uncertainty, even if Japan succeeds in joining the negotiations, it is not clear if any government in Tokyo will be strong enough to overcome this opposition when it comes time to approving a final agreement.

 

The outlook for Japan’s entry into the TPP negotiations remains unclear at this time and depends on a number of factors. Perhaps the most critical factor is whether Japanese political leaders can reach a political consensus on whether to proceed with the negotiations and then whether Japan can reach agreement with the TPP partners on conditions of its entry. The addition of Canada and Mexico, which will formally join the negotiations in the fall of 2012, could complicate the negotiations as well, as those two countries may have their own demands for Japan.

 

The TPP issue presents both risks and opportunities for the United States and Japan. On the one hand, if successful, it could reinvigorate an economic relationship that has remained steady but stagnant, by forcing the two countries to address long-standing, difficult issues, and allowing them to raise their relationship to a higher level. On the other hand, failure to do so could indicate that the underlying problems are too fundamental to overcome and could set back the relationship. It could signify the failure of the United States and/or Japan to deal with domestic opposition to a more open trade relationship.

 

 

About CHAINSOFF

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