US trade representative Michael Froman and Japan Minister of Economic and Fiscal Policy Akira Amari at a press conference at the Trans-Pacific Partnership (TPP) ministerial meeting in Singapore on Feb 25, 2014.
Despite the fact that members of the Trans-Pacific Partnership (TPP) on Tuesday (Feb.25) in Singapore announced they made “further strides toward a final agreement”, the four-day talk still ended disappointedly without a satisfactory deal. Again, the gulf lied between the current two biggest powers within the TPP – the United States and Japan. After rounds of talks, the US and Japan still cannot reach an agreement on tariff removal. Where is the problem indeed? The long living huge hurdles are mainly about lowering the tariff of farming goods and automobiles. And they are just hard are to overcome.
It is fair to say that Japanese farmers are most protected worldwide. Because of the lack of massive land, the development of Japan’s agriculture has long been depending heavily on government subsidy and trade protection. According to OECD, have of Japanese farmers’ income coming from subsidies and price support. With regard to international trade, among all the free trade agreements that Japan has committed to, the “five sacred” farm products, including rice, wheat, beef and poultry, dairy products and sugar, are not included at all. The reason of this policy is simple: to protect domestic farmers from cheap imports as the result of free trade. In addition to the economic concern, politics also plays a critical rule in the development of Japan’s agriculture. Japan Agriculture cooperative (JA), a gigantic organization of farm co-operatives that dominates the industry. Not only a simple gathering of farmers, JA is an influential political power, by closely tying to political parties in power and has the capability in exercising its political clout in trade decisions by the government.
Japanese farmers are protesting against TPP.
Ever since the announcement of jointing the TPP talk, JA remains strongly opposing the partnership and organized farmers protesting towards the talk. Therefore, even after rounds of negotiations, Japan has been quite insistent on opposing of lowering or eliminating the tariff of sensitive farming goods, namely the “sacred five”.
Moreover, the open up of Japan’s automobile market is another sticking point in the TPP talks, mainly between the discordance of the US and Japan. Claims have been made that Japan’s automobile market is greatly closed to imports. The foreign share of Japan’s auto market is around 6 percent, while that number of the US is around 40 percent. Ford, the leading American carmaker, described Japan as “the world’s most protectionist country”, accusing that among every 200 cars exporting to America, only one that is shipped to Japan. He also accused Japan of having “a rolling set of barriers over the decades ranging from outright exclusion of importers, to harassment of import brands, and unique regulatory requirements that are often applied to a low volume import, creating excessive cost.” On the other hand, Japanese automakers pointed out that it was a misunderstanding that Japan has created any import barrier on foreign cars. The reason why American cars cannot seize a larger market share, as they argued, are simply the cars are not customized to the Japanese market enough. Yet, it is unlikely for US to reach consent with Japan if the deal is not satisfactory to the US automakers.
Although the TPP talks seem to be staggering, to Japan, the attraction of nearly 40 percent of the world economy is definitely something hard to resist. So Japan must be willing to work things out. Agriculture and automobiles have long been the sensitive to Japan, so they will not back off easily with regard to the terms of trade. As far as I am concerned, Japan should be confident about the competitiveness of their own farming goods in the international markets. The Japanese rice, for example, has fairly good reputation worldwide. The participation in the world trade will also propel the growth of the industry, instead of solely rely on the assistant from government. Similarly, they should believe the Japanese cars can still maintain a large share of the domestic markets, even in the competition with foreign models, given the reputation of Japanese cars. The other countries in the TPP will also help to solve the problems of Japan, since the access to the access to the market of third-largest economic power is something that cannot be ignored. Without Japan, the partnership itself will have significant loss.
As Tim Groser, New Zealand trade minister, stated, “Market access is in some respects the heart and soul of the trade agreement so until that’s done we don’t have an agreement”. So although progress has been made steadily, for reaching an completely satisfactory agreement of Japan and other countries in TPP, there is still a long way to go.