Japan at the Crossroads
Comment on “Free Trade Agreements and Domestic Politics: The Case of the Trans-Pacific Partnership Agreement”
Article first published online: 20 DEC 2013
© 2013 The Author. Asian Economic Policy Review © 2013 Japan Center for Economic Research
Asian Economic Policy Review
Volume 8, Issue 2, pages 350–351, December 2013
How to Cite
Chia, S. Y. (2013), Comment on “Free Trade Agreements and Domestic Politics: The Case of the Trans-Pacific Partnership Agreement”. Asian Economic Policy Review, 8: 350–351. doi: 10.1111/aepr.12036
- Issue published online: 20 DEC 2013
- Article first published online: 20 DEC 2013
The Naoi and Urata (2013) paper explores the fascinating political economy of Japan's participation in free trade agreements (FTAs), notably the Trans-Pacific Partnership Agreement (TPP). There has been tremendous speculation in the international media on Japan joining the TPP negotiations given its agricultural protectionism and President Obama's declaration that the TPP will be a gold standard agreement for the 21st century with no “sacred cows.”
Why do countries join the TPP negotiations? It is noted that most of the TPP negotiating partners already have FTAs with each other. For the USA, it would be to expand American exports in a level playing field, hence the need to break down not only border barriers, but also behind the border barriers, such as state-owned enterprises (SOEs), weak intellectual property rights (IPR) protection, and lax labor and environmental standards. For smaller economies, it would be gaining preferential access to the huge US market.
For Japan, it would be a mixture of geostrategic and economic factors, the former involving the USA and Japan's role in the Asia–Pacific. For the latter, analysts point to the cost of not joining in a mega-FTA involving the USA, the competition with China for global and regional trade and investment, the opportunity of helping set global trade rules for the 21st century, as well as leading to much needed domestic agricultural reforms. Japanese agriculture is not only uncompetitive, but also suffers from a declining and aging farm population. Yet Prime Minister Abe is reported to promise that he would protect agricultural commodities, such as rice, wheat, sugar, dairy products, and beef from tariff elimination in the TPP.
Naoi and Urata highlighted that Japan has not conceded opening up its agricultural sector in the numerous FTAs it has signed and implemented, mainly with developing countries. It is somewhat disheartening to note that these FTAs so far have little impact on agricultural protectionism in Japan due to strong opposition by the antitrade coalition and a loser-sympathetic public. In the FTA literature, one of the arguments in favor of FTA participation is the pressure it puts on domestic reforms. It would be enlightening for some analysis of the public opinion polls of other FTAs that Japan has engaged in. Is there less discussion and less polarization because the stakes are much smaller and Japan is able to continue its agricultural protectionism with trade-offs of investments and economic cooperation benefits for its developing country partners? Japan has now embarked on FTA negotiations with the EU – how are Japanese sectoral and product sensitivities being handled by its negotiators, and has there been public polarization as with the TPP, or does that happen only with agricultural liberalization?
The opinion surveys cited in Naoi and Urata show that the antiagricultural liberalization sentiment is more broad-based than just Japanese farmers. There is also the Japanese Agricultural Cooperatives and their political organizations. There is bipartisan politics and the role of the Japanese media in molding public opinion. In addition, there is the unique behavior of the Japanese consumers in accepting the high prices of domestically produced agricultural goods. Naoi and Urata noted that the “battle for votes” depends very much on the financial resources the pro-TPP and anti-TPP groups are able to muster. Could the pro-TPP lobby in Japan muster enough resources to sway “public opinion”? The lobby of Japanese industrialists (represented by the Keidanren) appears much weaker than Japanese agriculture, particularly with opposition from sectors such as the auto and healthcare industries. Perhaps a strong Abe government and his efforts to revive the Japanese economy will help persuade more of the “uncertain” public to swing in favor of the TPP. Promise of measures to financially compensate the losers will also help.
What will happen to the TPP negotiations with Japan on board? Will the “gold standard” be compromised with exemptions for highly sensitive agricultural products? If compromises are made on agriculture, what about other contentious issues, such as SOEs and pharmaceutical patents? With the tough issues yet to be resolved, the 2013 deadline for completing negotiations is unlikely to be met.
Finally, the TPP versus the Regional Comprehensive Economic Partnership (RCEP). The main attraction of the TPP versus the RCEP would appear to be US membership of the former (hence increased interest in participating after the USA entered into negotiations), but the main detraction is its declared “gold standard” (such as limiting the role of SOEs, enforcing IPR, labor, and environmental standards). For Japan, there is a need to get closer to the USA because of the security umbrella, but there is also the need to be closer to East Asia for its trade and investment opportunities, particularly the further development of Japan-led regional production networks.
It would be helpful if Naoi and Urata could go beyond the characterization of Japan's FTAs and the opinion polls on participation in the TPP, and highlight some of the dilemmas facing Japanese policymakers and their possible solutions for Japan in the near and far future.