Japan's Entry To TPP Up For US Congressional Approval
30 April 2013
Posted by: Author: Mike Godfrey
Source: Mike Godfrey (Tax-News.com, Washington)
Following an announcement earlier in the month that the United States and Japan had completed bilateral consultations, Acting US Trade Representative Demetrios Marantis notified Congress, in a letter dated April 24, of the Administration's intention to include Japan in the Trans-Pacific Partnership (TPP) agreement negotiations.
The notification triggered a 90-day consultation period with Congress and the public on US negotiating objectives with respect to Japan. While Marantis noted in the letter that Japan's entry into this important negotiation will help to deliver significant economic benefits for the US, Japan and the Asia-Pacific region, it is still likely to generate significant opposition within America, particularly from motor manufacturers and their Congressional allies.
"The participation of Japan, a major US trading partner as well as close ally, further increases the economic significance of a TPP Agreement. With Japan's entry, TPP countries would account for nearly 40% of global gross domestic product and about one-third of all world trade," Marantis wrote. "We will work with Congress as we use the TPP agreement to promote new technologies and emerging economic sectors, create new opportunities for US exporters, including small- and medium-sized businesses, in the region, and help US firms participate in production and supply chains in order to encourage investment and production in the US."
Senate Finance Committee Chairman Max Baucus (D – Montana) reiterated that "the TPP presents tremendous opportunities to expand US exports and support hundreds of thousands of good-paying jobs here in America. The Asia-Pacific economies are some of the fastest growing in the world, and Asia is importing more and more goods from around the world. The US needs to share in that growth, and the TPP offers the way to do so."
However, in his letter, Marantis also had to confirm that the US will conduct bilateral, parallel negotiations with Japan to address concerns in the automotive sector and non-tariff measures (NTMs) in other sectors, and that the Administration will consult closely with Congress and stakeholders on the elements of these negotiations during the 90-day consultation period.
Marantis had previously disclosed that, "since November 2011, the US has been engaged in consultations with Japan focused on Japan's readiness to meet the TPP's high standards for liberalizing trade and investment, and to address specific bilateral issues of concern in the automotive and insurance sectors, as well as other Japanese NTMs."
During consultations in February this year, the two Governments issued a joint statement confirming that, if Japan were to join the TPP, Japan has agreed that it would subject all goods to negotiation for tariff reduction (including, it is assumed, those agricultural products where much opposition will be found from within its influential farming sector), while US tariffs on motor vehicles will be phased out in accordance with the longest staging period in the TPP negotiations, substantially exceeding the tariff reductions provided in the South Korea-US free trade agreement.
In conjunction with those tariff cuts, however, it was stressed that the US and Japan will address NTMs in parallel with the TPP negotiation, especially those related to the trade in motor vehicles. It was confirmed that the NTMs will be "tangible and meaningful, and implemented through legally-binding agreements, exchange of letters, new or amended regulation or law, and/or other mutually agreed means, at a time when the TPP takes effect."
Even then, the American Automotive Policy Council still had its doubts, stating that, "because Japan is the most closed auto market among developed nations and helps accomplish that through NTMs, including manipulating its currency, Japan cannot be treated like other US trade partners. … After the necessary restructuring of the American auto industry, it is stunning that the US government would endorse a trade policy that puts the industry at a competitive disadvantage and comes at the cost of American auto jobs."
Nevertheless, despite those difficulties, the TPP remains a key element of US efforts to increase exports to the faster-growing economies of the Asia-Pacific region, and it has been commented that the addition of Japan would distinguish it as the most promising platform for a Free Trade Area of the Asia Pacific, in due course.
In addition to the US, the current TPP countries include Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, and each country will have to confirm successful completion of its domestic procedures before Japan's entry into the talks can be finally ratified.