JAPAN’S MOMENT TO LEAD ON TPP
By Matthew P. Goodman
06 Oct 14. In the late 1940s, the United States chose to make a strategic investment in the international economic order, which had been reduced to rubble over the previous three decades. By helping create new institutions like the World Bank and the International Monetary Fund, then offering its capital and open markets to rebuild the war-torn economies of Europe and Japan, Washington paid a small price to advance its own long-term prosperity and security. The return on that investment has been immeasurable.
Over the next few weeks, Japan has a similar opportunity to invest in its own economic and strategic future. By leaning forward to close a bilateral deal with the United States under the Trans-Pacific Partnership (TPP), the Abe government can kill three birds with one stone: reviving Japan’s economy, strengthening its partnerships in the Asia-Pacific region, and upholding the global rules-based order that has so benefited Japan over the past 70 years.
The 12 countries participating in the TPP have been working for over four years to reach a high-standard, 21st-century trade agreement. They are now tantalizingly close to a deal, but success hinges on the ability of Japan and the United States to reach agreement on improved market access for each country’s exporters. And this in turn depends on Tokyo’s willingness to go a bit further in opening its agriculture market, especially for dairy, beef, and pork.
Despite the inflated claims of JA, Japan’s agriculture lobby, the price of allowing more access for foreign agricultural products is truly negligible. Japanese farmers exposed to greater competition are likely to be cushioned by long transition phases, income supports, and remaining protections. The agriculture sector as a whole is likely to become more efficient, creating new export opportunities for Japanese farmers who make high-quality products.
Yet the potential returns for Japan on an investment in the TPP are enormous, for three main reasons. First, Japan will enjoy substantial economic benefits. Peter Petri of Brandeis University has estimated the annual income gains for Japan from a TPP agreement that includes South Korea at $120 billion in 2025. In the near term, a TPP deal is likely to boost the Tokyo stock market and give a much needed lift to the “third arrow” of Prime Minister Abe’s economic reform program, which most observers agree is losing momentum.
Second, the TPP is vital to Japan’s strategic interests in the Asia-Pacific region. It will deepen Tokyo’s ties with regional partners, especially in Southeast Asia. Most important, the TPP will strengthen the U.S.-Japan alliance and underpin the Obama administration’s strategy of “rebalancing” to the Asia-Pacific, which is also losing steam. Broad and deep U.S. engagement in Asia is critical to Japanese security and prosperity.
Third, the TPP will update and uphold the global rules-based order. A high-standard TPP agreement will align trade and investment rules with 21st-century international commerce, which is centered on global value chains. The current rules are not only out of date but under challenge from emerging countries like China, which understandably want to have more say in shaping the rules, but may also wish to rewrite them in ways detrimental to Japanese interests.
To be sure, the U.S. needs the TPP for the same three reasons: to promote economic growth, reinforce America’s presence in the Asia-Pacific region, and uphold the rules-based order. But Japan arguably needs these things more. Its economic future is less certain, and it has more challenges in its immediate neighborhood.
Of course, the domestic politics of the TPP are hard. But they are less hard for Prime Minister Abe than for President Obama. Abe is secure in his party position, has little opposition in the Diet, and faces no national elections until 2016. His