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US-Japan fail to seal trade agreement before Abe US trip

Bloomberg | April 20, 2015

US-Japan fail to seal trade agreement before Abe US trip

by Maiko Takahashi and David Tweed

U.S. and Japanese officials failed to reach agreement in marathon trade talks in Tokyo, a setback for Prime Minister Shinzo Abe’s hopes of arriving for a summit in Washington next week with a pact in hand.

U.S. Trade Representative Michael Froman left Tokyo after negotiations concluded around 4 a.m. Tuesday, with differences remaining over auto and rice imports. Froman had traveled to Japan on Sunday for two days of talks with Japanese Economy Minister Akira Amari to help pave the way for a broader Asia-Pacific agreement involving 10 other nations.

Differences on trade matters have “substantially narrowed,” Froman said before leaving the Japanese capital. The two countries have reached “stage nine out of 10” in the discussions, Abe said in a television interview with BS-Fuji TV as the talks were held late Monday.

“They tried to spin it in a positive way, but what seems to be pretty clear is that there is no breakthrough,” said James Brown, an assistant professor for international affairs at Temple University in Tokyo. “On a foreign policy level, this is a major disappointment” ahead of Abe’s trip to the U.S. that begins April 26.

The slow progress by Japan and the U.S. in advancing the Trans-Pacific Partnership trade pact in order to remain a center of economic gravity in Asia comes as China enhances its own clout by luring more than 50 countries to join a new China-led regional infrastructure bank. Japan and the U.S. have been trying to overcome differences since Japan first said it would seek to join the TPP in 2013.

Speaking after the talks ended, Amari told reporters that he would meet again with Froman if needed before a meeting of all 12 nations involved with the TPP. He didn’t indicate when such a meeting could be held.

Aircraft Carrier

U.S. officials have taken every opportunity in recent weeks to underscore that TPP is a vital pillar of its “rebalance” to Asia, and the U.S. and Japan both raised concerns over transparency and governance in shunning the China-led Asian Infrastructure Investment Bank.

U.S. Defense Secretary Ashton Carter strayed from military issues in a Tokyo appearance to talk about the importance of TPP in a joint press conference with Japanese Defense Minister Gen Nakatani on April 8. Two days earlier, Carter told an audience in Arizona that the deal was “as important to me as another aircraft carrier.”

The TPP would link economies across the Pacific, making up roughly 40 percent of the world’s gross domestic product. The other participants are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

‘Fast-Track’ Process

The U.S. Senate Committee on Finance introduced a bipartisan bill last week in Washington that could have sped passage of TPP-related trade legislation in Congress.

The legislation would let the White House send Congress trade pacts for votes without amendment, known as trade promotion authority. It also would give Congress the right to revoke the so-called fast-track process if enough lawmakers find the president ignored negotiating goals.

“Fortunately, the U.S. Congress does seem to be working on getting that trade promotion authority, and if that goes through then this will be a lot easier to do,” said Robert Feldman, chief economist at Morgan Stanley MUFG Securities Co. in Tokyo. “There is a always great deal of brinkmanship involved in these negotiations, so the fact that things are reported to have gotten a little bumpy at a very, very late stage doesn’t surprise me a bit.”

Presidential Campaign

The setback if it endures would make it less likely that Japan and the U.S. will get a deal this year. With the U.S. presidential campaign beginning to heat up, Congress may prove more reluctant to approve any trade detail next year before the vote.

“No-one doubts that the gaps between the U.S. and Japanese positions on market access issues have narrowed,” Richard Katz, publisher of the U.S.-based Oriental Economist Report, wrote in an e-mailed note after the talks ended. “But it remains in serious question whether they will narrow enough to allow the two countries to come to an agreement in time so that TPP can be ratified in 2015 — which means signing TPP by around the end of June.”

While TPP talks languish, China and the other founding members of the AIIB plan to sign the articles governing its management by the end of June.

While the U.S. and Japan have both so far refused to join the lender, China has managed to attract a raft of U.S. allies, including Germany, Australia, South Korea and the U.K.

“The TPP has always been not just about economics but the strategic calculation,” said Temple’s Brown. “It makes a huge difference to the United States, especially after the AIIB debacle. Success with the TPP would have shown that the pivot to Asia really does have some substance.”

 source: Bloomberg