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TPP failure could spell trouble for other trade talks

The Japan News | 4 August 2015
TPP failure could spell trouble for other trade talks
Yuya Yokobori / Yomiuri Shimbun

The failure to reach a broad agreement on the Trans-Pacific Partnership during ministerial talks here last week could harm Japan’s efforts to create a “mega trade zone” through other major accords, such as an economic partnership agreement (EPA) with the European Union. Up until now, the momentum of TPP negotiations toward an agreement has spurred nations not participating in the talks to strengthen their free-trade frameworks. The loss of this momentum could weaken this effect.

Synergistic effect

The Japanese government hopes another round of ministerial-level talks for the TPP can be held this month, though negotiations over dairy products and other issues have hit a rough patch. Further delay in reaching a general agreement could force the government to reassess its trade strategy.

The government is attempting to create a huge trade bloc through the TPP, the EPA with the EU, and the Regional Comprehensive Economic Partnership (RCEP) that is being negotiated by 16 East Asian nations including Japan, China, South Korea and members of the Association of Southeast Asian Nations.

Japan and the EU in May agreed to aim for a broad agreement on the EPA this year, though negotiators have had trouble finding common ground on such issues as how much to reduce tariffs.

A member of the Japanese negotiating team said a TPP agreement could have helped break the gridlock in talks with the EU.

If the TPP is implemented, it is expected to vitalize trade between Japan, the United States and other member nations by lowering tariffs on goods. EU nations, which are not taking part in the TPP, could see automobile exports to Japan and the United States fall, as tariffs for their products would not change.

European automakers and other industries are quick to object to their home countries lowering tariffs. But the prospect of reduced exports to Japan, the United States and other TPP member nations could increase motivation to create a free-trade zone that includes the EU.

“If Japan opens its markets to a high level through the TPP, it could negotiate for the same level with the EU,” a source with ties to the Japanese negotiating team said. Anticipation of this ripple effect is why the ministers’ failure to reach a TPP accord was so disappointing.

U.S.-EU also affected

China has shown a strong desire to conclude the RCEP. The TPP, which is being spearheaded by Japan and the United States, is often seen as an effort to create an economic zone to counter China, while the RCEP is perceived as China’s effort to create a trade bloc centered around itself. Stagnation in the TPP negotiations could sap China’s desire to proceed with the RCEP.

The TPP talks will likely also impact the Transatlantic Trade and Investment Partnership (TTIP) being negotiated by the EU and United States. The two sides disagree strongly on some issues, such as food safety standards, so negotiations have been slow-going. A TPP accord could put pressure on the EU side and help speed up the talks.

N.Z. not backing down

TPP minister Akira Amari has floated the idea of holding another round of minister-level TPP talks, possibly by the end of August, based on a “shared understanding” among the 12 nations taking part in the negotiations.

Yet not everyone is optimistic that progress can be made. “Just because we meet doesn’t mean we’ll reach a broad agreement. A meeting in August is uncertain,” a negotiator from an emerging economy said.

New Zealand Trade Minister Tim Groser, whose country is seeking to expand dairy imports to Japan, the United States and Canada, showed no willingness to make concessions at a dinner meeting with the other ministers. Getting rid of tariffs is a basic principle of the TPP, he insisted at the dinner, according to a person close to the negotiations.

Trying to persuade New Zealand could further delay the prospect of a general agreement.

 source: The Japan News