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Japan takes lead in multilateral trade negotiations

Aurelia George Mulgan / Khmer Times Share:

If any country deserves accolades for bringing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to a successful conclusion, it is Japan. Japan was the primary force driving negotiations for the CPTPP (also known as the TPP-11) after the United States withdrew from the original Trans-Pacific Partnership a year earlier.

It is rare for Japan to lead in multilateral negotiations, but as the past year has demonstrated, the absence of the United States from the TPP has given Japan more “space” to exercise leadership in securing mega-regional trade deals. Japan took the opportunity to lay down “rules of the road” in concert with the remaining TPP partners instead of being on the receiving end of external pressure from the United States, as it had been in the original negotiations.

The Abe administration is committed to the early implementation of the CPTPP for several important reasons.

Japan hopes that the high-standard CPTPP agreement might become a model for other multilateral trade agreements, including the Asean-led Regional Comprehensive Economic Partnership (RCEP), which lags behind the CPTPP in areas such as tariff reductions, state-owned enterprises, labour protection, e-commerce, human rights and the environment. The CPTPP strengthens Japan’s hand in RCEP negotiations, which should help it to make RCEP a high-quality trade agreement.

The CPTPP is additionally designed to act as a bulwark against the Trump administration’s campaign for bilateral “America first” free trade agreements (FTAs). By securing the CPTPP as a “done deal”, Japan wants to be able to argue that it “will not make any compromises that go beyond those made in the CPTPP agreement in [any subsequent] bilateral negotiations with the United States”.

Former Japanese trade negotiator Kazuhito Yamashita has suggested Japan could go even further: “If the United States, which will lose its share of the Japanese agricultural market because of TPP-11, demands a Japan–US FTA, then Japan should claim that since it has made a policy switch to mega-FTAs, the US should just join TPP-11”. CPTPP countries should set the terms of US re-entry into the agreement rather than simply reverting to the original TPP agreement.

On the other hand, a tough approach by Japan might actually cut off a route for the United States to return to the TPP and might push it instead towards pursuing a bilateral FTA with Japan. This could potentially pressure Japan to open its agricultural markets even more than was agreed in the original TPP.

Tokyo hopes that Washington will join the CPTPP once it comes into effect if for no other reason than to deflect pressure to engage in bilateral FTA negotiations. Until such a point, in the absence of a US leadership contribution to establishing and spreading the TPP’s trade and investment rules, Japanese Prime Minister Shinzo Abe has expressed his intention to act as “the flag-bearer for free trade” by promoting the economic values of the TPP to the rest of the world.

As a first step, Japan is enthusiastic about involving other nations in the new TPP. Countries like Taiwan, South Korea, Thailand, Indonesia and the Philippines are already interested. Japan wants to draw in these countries and firmly establish trade rules with high standards of liberalisation in Asia.

Japanese economist Fukunari Kimura agrees that agreements like the TPP play a very important role in deepening and widening regional production networks, since they facilitate the smooth and timely flow of goods at the same time as promoting ease of data flows in the digital economy, which is lacking in Japan’s other regional economic partnership agreements.

Without the US in the agreement, CPTPP’s middle powers have an opportunity to demonstrate greater regional leadership. This relatively depoliticised version of the TPP may prove to be of even greater strategic value than the agreement’s original incarnation.

Informally, Japanese diplomats are saying that one of the CPTPP’s important goals is to “keep China in check” given that it prefers trade rules with lower standards in order to protect domestic firms and industries. This links into an important strategic reason for Japan’s display of such unprecedented trade leadership: concern about the ‘vacuum’ in the Asia Pacific free trade bloc created by the US withdrawal and the possibility that ‘China’s growing power might fill the void’.

Aurelia George Mulgan is a professor in the School of Humanities and Social Sciences at the University of New South Wales, Canberra. This commentary first appeared in East Asia Forum. Read the original commentary at http://bit.ly/2oPco8s

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