Q+A: Japan has headache over US-led free trade deal
Reuters | Friday November 05, 2010
Q+A-Japan has headache over U.S.-led free trade deal
By Yoko Nishikawa
Nov 5 (Reuters) — Japan is having trouble forging a consensus on joining an Asia-Pacific free trade initiative, a pact that business lobbies want the government to pursue but that long-protected and politically powerful farmers are resisting.
The government is set to finalise basic guidelines for Japan’s future course on free trade deals generally ahead of the Asia-Pacific Economic Cooperation (APEC) summit on Nov 13-14, which Japan hosts and U.S. President Barack Obama will attend.
Following are key facts about the U.S.-led Trans-Pacific Partnership (TPP) and its possible impact on Japan.
WHAT IS THE TPP?
It would in principle eliminate all tariffs within the zone.
Singapore, New Zealand, Chile and Brunei agreed on a free trade deal in 2006, and have since been joined in talks by United States, Australia, Peru, Vietnam and Malaysia.
There is no formal deadline for completing talks, but supporters hope for a deal by the time that Obama hosts the annual APEC leaders summit in Hawaii in November 2011. The Obama administration sees TPP as a key element of its plan to double U.S. exports over the next five years.
For a new country to join the talks, it needs to get approval from all the member nations. Canada, for one, has been assessing the possibility of entering the TPP negotiation.
WHY IS JAPAN CONSIDERING JOINING
Japanese business lobbies worry that the nation is lagging behind rivals such as South Korea, whose recent free trade deal with the European Union in particular has given them the jitters, and China, now replacing Japan as the world’s second-largest economy.
Japan’s free trade deals with 11 countries and regions account for only 16 percent of its overall trade in value terms, compared to 36 percent for South Korea.
Japan’s Cabinet Office estimates TPP participation would boost real GDP by about half a percentage point annually after taking into account the adverse impact on the farm sector.
WHAT ARE HURDLES FOR JAPAN’S PARTICIPATION?
Japan’s previous free trade deals have left out the heavily protected agriculture sector, but that would not be possible in the TPP, so many farmers are opposed.
Prime Minister Naoto Kan has said he wants to open up Japanese markets but many lawmakers in his own Democratic Party fear negative fallout for farmers so the party is split.
Adding Japan’s $5 trillion economy would greatly increase the potential market-opening gains of the proposed pact. But it could also complicate the negotiations, since Tokyo would have to free up not only agriculture but address U.S. concerns that planned postal system reforms will disadvantage private competitors in the insurance, banking and express delivery sectors.
