TPP failure would cost the US trade dominance

[LeveragedBuyout]

I am out of patience. Abe needs to put up, or shut up about his third arrow--and if not, Japan should be ejected from the TPP. After India's destruction of the latest WTO talks, it's clear that smaller agreements that are viable are preferable to larger agreements that are subject to blackmail.

Chances of a TPP Agreement by Year’s End Fading | The Diplomat

Chances of a TPP Agreement by Year’s End Fading
With little time left, Japan does not appear ready for concessions that would make the TPP viable.

By Clint Richards
September 10, 2014

Japan and the U.S. have been pushing forward with negotiations on the Trans-Pacific Partnership since late last week, as the two allies seek to find agreement on the key sticking points of trade barriers in the agricultural and automotive industries before the prospective group’s year-end negotiation deadline. While the TPP involves 12 Pacific Ocean nations, the resolution of Japan’s protection of these two domestic industries with its largest trade partner in the bloc would dramatically improve the chances of an overall agreement. The strong political and security alliance between the U.S. and Japan should also improve their chances of successfully negotiating economic issues. Nonetheless, Japan does not appear willing to completely remove the high tariffs on its five “sacred” agricultural industries.

Last week during negotiations in Washington, the two sides said they were in “the final phase” of TPP-related auto industry trade talks. Yet Japan’s ambassador in charge of economic diplomacy, Takeo Mori, somewhat muddied the waters when he said that it was desirable to reach an agreement on auto industry and agricultural trade at the same time, according to the Jiji Press. Minister of TPP Affairs Akira Amari also said he hoped both issues could be resolved by early October through ministerial level talks with U.S. Trade Representative Michael Froman. However, on Tuesday during bilateral farm industry trade talks, the Agriculture, Forestry and Fisheries Minister Koya Nishikawa requested concessions from the U.S. in its key industries. He told a press conference that “If economic cooperation progresses without causing pains to the agriculture, fishery and forestry industry, it would be better to conclude an agreement early,” and that “I hope the United States will take a step” toward an agreement giving concessions to Japanese import restrictions and tariffs.

The U.S. for its part is seeking to get Japan to agree to the lowest possible trade barriers, with Japanese government sources saying the U.S. might arrange a state visit to Washington for Prime Minister Shinzo Abe to discuss trade and security issues with President Barack Obama in January. However, the meeting would likely only happen if TPP negotiations were successfully concluded beforehand. According to the source that spoke with the Kyodo News, both sides believe the APEC summit in Beijing on November 10 and 11 is likely the deadline for a successful conclusion of negotiations. However, with the U.S. mid-term elections occurring earlier in the month, the likelihood that the U.S. and Japan will reach a meaningful compromise is slim.

To give an example of the scale of Japanese agricultural tariffs, and thus the barriers to a TPP deal, beef industry negotiations are instructive. Japan recently concluded a FTA agreement with Australia in April. Underthe rules of this agreement, Japan’s 38.5 percent tariff on beef would be reduced to 19.5 percent for the frozen variety of this product. That reduction would take 18 years to be fully implemented and would still be subject to higher tariffs if imports exceeded a prearranged amount. If a reduction to 19.5 percent over 18 years constitutes bilateral free trade for Japan, it will be very difficult for Tokyo to negotiate lower tariffs with a much larger group of countries, across several other equally sensitive agricultural sectors.

Japan is seeking to improve its agricultural efficiency, and thus vulnerability to cheaper imports. Large portions of Japan’s arable land are lying fallow as farmers grow too old to work or move away from rural areas. The Nikkei estimates that some 400,000 hectares of farmland, or an area roughly the size of Shiga prefecture, goes unused. The government is attempting to address this by doubling or tripling the small current tax on fallow farms, yet it would eliminate the tax for farmers who allow land banks to sublet their fields to other farmers or groups looking to expand. However, like many of the government’s other plans to improve Japan’s agriculture, this policy would only be effective long after the current TPP negotiations.

The chances that Japan will be able to reduce its trade barriers low enough to satisfy the U.S., let alone the other prospective TPP members, by the end of this year are becoming increasingly remote. Japan’s request for U.S. concessions speaks to that. Conversely, were Japan’s Pacific trade partners to weaken the restrictions on tariff reform enough to accommodate Japan’s protected industries, the effectiveness and utility of the entire agreement would likely be compromised. As negotiations stand right now there is little chance of the TPP being finalized by the end of the year, and quite possibly for much longer.

 

[Götterdämmerung]

The Lord of the Ring has difficulty to curtail its minions?

 

[Aepsilons]

@LeveragedBuyout , ive been reading news media from US sites and it paints Japan has being being resistant towards compromise in regards to the TPP issue. I think that the stalling is due to failure to compromise in both sides, and I want to emphasize that the US side is resistant to Japanese concerns that should be addressed. Also these talks of American lawmakers threatening to "cut off Japan from talks" paints the image of America as being threatening , and will only make the Japanese lawmakers that are "sitting on the fence" become even more sensitive.Want to know your views how both our sides can get past this.


Japan, U.S. blame each other for snag in TPP talks

WASHINGTON/TOKYO —

U.S.-Japan trade talks hit a rough patch last week with both sides blaming the other for a stalemate over farm exports, a major hurdle in concluding an ambitious 12-nation trade pact.

Bilateral talks between U.S. Trade Representative Michael Froman and Japanese Economy Minister Akira Amari in Washington broke up midway through the second day.

A Japanese government source said U.S. negotiators staged a “hostage-taking” by suddenly threatening not to lift tariffs on Japanese auto parts unless Tokyo met U.S. demands on agriculture.

But a U.S. official familiar with the talks, seen as key to finalizing the Trans-Pacific Partnership (TPP) spanning a third of world trade, said negotiators acted in response to a comprehensively weak offer from Japan on farm goods.

“They have the key here. They improve their agriculture offer, we’ll improve our industrial offer,” the U.S. official said, without confirming details of what was laid on the table.

A second U.S. official said the Japanese delegation “walked out” of the talks, a charge the Japanese source denied.

Japan wants to protect sensitive goods, including beef, pork, rice and dairy, which are important to its farming sector. But with U.S. midterm elections looming, many U.S. farmers and lawmakers have warned against a deal that does not significantly open Japan’s markets and say Japan should be cut out of the talks if it does not give ground.

U.S. pork producers cheered Washington’s firm stance. “The Japanese have been, and continue to be, holding up the entire negotiation. They’ve got to fish or cut bait,” National Pork Producers Council Vice President Nick Giordano said.

U.S. President Barack Obama has said he hopes to have a TPP agreement by year-end. But many observers remain skeptical that the group’s two biggest economies can make the compromises needed, and other TPP partners are reluctant to commit to final offers until they see how the two resolve their differences.

A Japanese government source well-informed about the bilateral talks said Japan went into them prepared to do a deal and having “prepared a position that showed flexibility,” but that the United States was not prepared to engage.

“There will have to come a time that the U.S. realizes that unless they are flexible, they will not have a package, or else they (negotiations) may continue for an indefinite time,” he said.

Japan’s Nikkei business daily said Japan considered slashing beef import tariffs from 38.5% to below 20%, a level U.S. negotiators have said is unacceptable.

The U.S. official said Japan’s offer did not cut tariffs to zero, the original goal, on a significant number of goods and included rules allowing higher tariffs to be reimposed if imports rise to a certain level.

Trade experts were disappointed by the lack of progress, given that Japanese Prime Minister Shinzo Abe said he was “prepared to have an improvement of market access in a daring way”.

At a meeting with U.S. Vice President Joe Biden on Friday, Abe agreed both sides could do more on TPP and said he would go back to work to find a solution, a source briefed on the talks said.


http://www.japantoday.com/category/politics/view/japan-u-s-blame-each-other-for-snag-in-tpp-talks

 

[LeveragedBuyout]

@LeveragedBuyout , ive been reading news media from US sites and it paints Japan has being being resistant towards compromise in regards to the TPP issue. I think that the stalling is due to failure to compromise in both sides, and I want to emphasize that the US side is resistant to Japanese concerns that should be addressed. Also these talks of American lawmakers threatening to "cut off Japan from talks" paints the image of America as being threatening , and will only make the Japanese lawmakers that are "sitting on the fence" become even more sensitive.Want to know your views how both our sides can get past this.


Japan, U.S. blame each other for snag in TPP talks

WASHINGTON/TOKYO —

U.S.-Japan trade talks hit a rough patch last week with both sides blaming the other for a stalemate over farm exports, a major hurdle in concluding an ambitious 12-nation trade pact.

Bilateral talks between U.S. Trade Representative Michael Froman and Japanese Economy Minister Akira Amari in Washington broke up midway through the second day.

A Japanese government source said U.S. negotiators staged a “hostage-taking” by suddenly threatening not to lift tariffs on Japanese auto parts unless Tokyo met U.S. demands on agriculture.

But a U.S. official familiar with the talks, seen as key to finalizing the Trans-Pacific Partnership (TPP) spanning a third of world trade, said negotiators acted in response to a comprehensively weak offer from Japan on farm goods.

“They have the key here. They improve their agriculture offer, we’ll improve our industrial offer,” the U.S. official said, without confirming details of what was laid on the table.

A second U.S. official said the Japanese delegation “walked out” of the talks, a charge the Japanese source denied.

Japan wants to protect sensitive goods, including beef, pork, rice and dairy, which are important to its farming sector. But with U.S. midterm elections looming, many U.S. farmers and lawmakers have warned against a deal that does not significantly open Japan’s markets and say Japan should be cut out of the talks if it does not give ground.

U.S. pork producers cheered Washington’s firm stance. “The Japanese have been, and continue to be, holding up the entire negotiation. They’ve got to fish or cut bait,” National Pork Producers Council Vice President Nick Giordano said.

U.S. President Barack Obama has said he hopes to have a TPP agreement by year-end. But many observers remain skeptical that the group’s two biggest economies can make the compromises needed, and other TPP partners are reluctant to commit to final offers until they see how the two resolve their differences.

A Japanese government source well-informed about the bilateral talks said Japan went into them prepared to do a deal and having “prepared a position that showed flexibility,” but that the United States was not prepared to engage.

“There will have to come a time that the U.S. realizes that unless they are flexible, they will not have a package, or else they (negotiations) may continue for an indefinite time,” he said.

Japan’s Nikkei business daily said Japan considered slashing beef import tariffs from 38.5% to below 20%, a level U.S. negotiators have said is unacceptable.

The U.S. official said Japan’s offer did not cut tariffs to zero, the original goal, on a significant number of goods and included rules allowing higher tariffs to be reimposed if imports rise to a certain level.

Trade experts were disappointed by the lack of progress, given that Japanese Prime Minister Shinzo Abe said he was “prepared to have an improvement of market access in a daring way”.

At a meeting with U.S. Vice President Joe Biden on Friday, Abe agreed both sides could do more on TPP and said he would go back to work to find a solution, a source briefed on the talks said.


Japan, U.S. blame each other for snag in TPP talks ‹ Japan Today: Japan News and Discussion

Ok, there's a bit more background to this that explains American frustration. Again, sorry for the lack of links, as I am on a mobile device.

1). Japan knew going into the TPP that its agricultural tariffs would no longer be sustainable, so this pressure to eliminate tariffs is not a surprise. In his March 15, 2013 speech announcing Japan's entry into the TPP, Abe acknowledged this.

2). Japan has also been protecting its insurance market through subsidies and favorable regulation for Japan Post. This area is of special interest to the US, given our strength in financial services. Along with autos/auto parts, it is possible that the US stance is simply a hardball negotiating tactic, or an attempt at horse trading to gain advantage in these other two areas (note in your article the use of auto tariffs as a weapon). Remember, the US needs some political wins if this trade agreement has any hope of making it through Congress.

3). This issue with agricultural tariffs also concerns New Zealand and Australia. Since the US was not part of the original TPP grouping, but joined later an essentially took it over, it is under pressure from the other TPP members to look out for their interests.

4). There is a long-running bitterness in the US about the tactics that other countries have used (especially Europe and Japan) to exclude America's highly competitive agricultural exports. Example: back in the 1980s, during previous negotiations to allow more market access to beef, the Japanese trade negotiator claimed that Japanese intestines were different, and so Japanese consumers would not be able to digest American beef (I kid you not, google "Japan rice imports intestines" and the first hit will be a NYT article about this from 1988!). This was also used to block American pharmaceuticals ("you tested it on Americans, but Japanese are different, so we cannot accept your data to approve the drugs"). Americans have a sneaking suspicion, from previous experience in many other industries, that whatever advantages they gain in tariffs will be diminished by the use of non-tariff barriers, like the ridiculous ones above. Even today, more than a decade after the BSE scare, Japan still does not allow full market access to American beef. And Japan proposes that it will only reduce tariffs if it is allowed to reintroduce the tariffs should imports exceed a certain low threshold? How could the US (and Australia and New Zealand) accept that?

5). I know that the US has had a bad history of bullying Japan in regard to certain trade issues, but our relationship is a complex one. Remember as well the issue of gaiatsu (for other readers here, outside pressure) that Japan has used as a mechanism for internal reform. The Japanese agriculture industry is a basket-case, fragmented, inefficient, and uncompetitive. While this may enter tinfoil hat territory, it is possible that the tensions we are seeing are theatrics meant to enable Abe to overcome internal opposition from the agricultural lobby, and use the TPP as a lever to reform Japan's industry. I will feel vindicated in this position if the ultimate compromise is to reduce agricultural tariffs over a similarly long timeframe that the US has proposed to reduce its auto import tariffs. Alternatively, Japan may come back and demand that the US reduce subsidies to its own agribusinesses, which would help us reform as well, and provide Japan something it could take back as a win to convince its own agriculture industry.

6). India already destroyed the WTO talks by refusing to include agricultural issues, so the parties in the TPP are already agitated about the possibility of a repeat with Japan.

In any case, all countries have their favorite industries that they would like to protect, but the price of free trade is the sacrifice of those protections. In the end, consumers will benefit through lower prices, but we have to get it past the vested interest groups to make that happen. While I am certain that the simplistic common media portrayal of "it's all Japan's fault" is wrong, it is somewhat disconcerting that the other side of the story hasn't made it out there. It's possible that the US media is biased in this, and not exploring the issue sufficiently in order to explain Japan's position, but then why isn't Japan bypassing the US media to proactively explain?

What is the Japanese side to this story?

 

[LeveragedBuyout]

The TPP’s Missing Ingredient by Simon Johnson - Project Syndicate


ECONOMICS

SIMON JOHNSON
Simon Johnson, a former chief economist of the IMF, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics, and co-founder of a leading economics blog, The Baseline Scenario. He is the co-author, with James Kwak, of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.

OCT 22, 2014
The TPP’s Missing Ingredient
WASHINGTON, DC – Looking for ways to stimulate economic growth and create jobs, US President Barack Obama’s administration is seeking to press ahead with the mega-regional free-trade deal known as the Trans-Pacific Partnership (TPP). But is the US going about it the right way?

The TPP’s initial scope was relatively modest, involving the United States and a range of trading partners (Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). But now Japan is on board, South Korea is watching closely, and there is potential for engaging with China through this or a similar framework in the foreseeable future.

The typical approach when seeking to finalize an agreement aimed at reducing trade barriers – while attempting to protect labor and environmental standards – is to ask for less, not more, from those on the other side of the table. But at this stage, the TPP is different: the odds of success would be much greater if the US attached the additional requirement that participating countries do not engage in currency manipulation.

One of the major shortcomings of the global trading system in recent decades has been the absence of an effective constraint on countries that intervene heavily in order to keep their currencies undervalued. A significantly undervalued currency implies a potentially large trade surplus.

Ordinarily, a large surplus puts upward pressure on the country’s currency – making its exports less competitive and boosting demand for imported goods and services. But a country’s authorities can prevent appreciation for a prolonged period of time by buying up foreign currency.

Such intervention results in the accumulation of foreign-exchange reserves – much of which is held in the form of US government debt. In one way, this benefits the US by helping to keep interest rates lower than they would be otherwise. But currency manipulation is also an unfair way to gain a trading advantage, with excessive negative effects on trading partners.

The International Monetary Fund was founded, in part, to prevent precisely this type of beggar-thy-neighbor economic strategy, which resulted in “competitive devaluations” during the 1930s. Unfortunately, the IMF in recent years has proved unable or unwilling to do so.

Similarly, the US Treasury is legally required to determine if a country is intervening to an unfair and unreasonable extent. In practice, however, the Treasury’s reports on this issue are generally toothless and lead to no real consequences.

Fred Bergsten and Joseph Gagnon, my colleagues at the Peterson Institute, have proposed including a currency clause in any TPP deal. In essence, this would amount to the signatories agreeing not to manipulate their currencies. Such a clause could come with stronger or weaker teeth. The important thing is to shift norms and expectations.

Some US officials are supportive of this approach to the TPP; others are resisting it. But the skeptics should think hard about the likely dynamics in the US Congress when the TPP comes up for a vote. There is strong support on Capitol Hill, from both Democrats and Republicans, for finding some way to limit currency manipulation. Even people who are very much in favor of freer trade – and even of some version of the TPP, like Bergsten and Gagnon – believe that some Asian countries have overstepped the boundaries of reasonable behavior.

With the level of intervention by major countries currently limited (China) or non-existent (Japan), this is an ideal moment to include a currency clause in the TPP, as most countries are less likely to become defensive. Participating countries could allow their currencies to float, or they could operate a fixed exchange rate. In the latter case, however, they must commit not to run large current-account surpluses and accumulate excess foreign-exchange reserves. Any blatant and repeated violation of this commitment would – and should – result in the loss of the special privileges granted under the TPP.

Of course, how the politics plays out will depend on what happens in the US mid-term congressional elections in November, as well as how key figures position themselves for the presidential election in 2016. But both parties are generally interested in supporting free trade, along responsible lines – and recognize legitimate concerns.

Currency manipulation has become a little too ugly in recent years – with associated adverse effects on sectors and communities in the US – for elected representatives to ignore. It is to be hoped that the other TPP countries also come to understand that the agreement is more likely to work if it strongly discourages currency manipulation.

The TPP’s Missing Ingredient by Simon Johnson - Project Syndicate


Read more at The TPP’s Missing Ingredient by Simon Johnson - Project Syndicate

 

[TaiShang]

I do not know how Japan can really open up its auto and agriculture sectors. Both enjoy considerable influence over the politicians through interest groups/lobbies.

Can't the US just ignore these two sectors and go ahead with the agreement? I mean, what is to be gained from Japan even though it opened up its domestic car market? Japanese companies are too powerful and too much in control already.

I guess, whatever the US may gain from this agreement would originated from other "developing" members, rather than the "ultra developed" Japan.

The gains from the rest of the agreement should way larger than the loss the US would incur should it concedes to Japan's demands.

 

[Aepsilons]

Yes, there should be some kind of flexibility in this regard.

 

[TaiShang]

Yes, there should be some kind of flexibility in this regard.

Besides, as a pacifist nation by Constitution, these two sectors are sort of related to Japan's national security.

 

[Aepsilons]

Besides, as a pacifist nation by Constitution, these two sectors are sort of related to Japan's national security.

Agreed.

Secondarily, In the event that the TPP does not pass with Japan, we must double our efforts to implement an FTA agreement with China,Korea, Asean. Long have I been a supporter of Northeast Asian economic integration.

 

[LeveragedBuyout]

I do not know how Japan can really open up its auto and agriculture sectors. Both enjoy considerable influence over the politicians through interest groups/lobbies.

Can't the US just ignore these two sectors and go ahead with the agreement? I mean, what is to be gained from Japan even though it opened up its domestic car market? Japanese companies are too powerful and too much in control already.

I guess, whatever the US may gain from this agreement would originated from other "developing" members, rather than the "ultra developed" Japan.

The gains from the rest of the agreement should way larger than the loss the US would incur should it concedes to Japan's demands.

I am not sure what's driving the auto part of the argument, as even if Japan dropped all tariffs on US autos, I doubt we would have any success selling in Japan. For pity's sake, even I don't buy American-brand cars (I grew up in the 1970s and 1980s, so I'm sure you understand why).

The agricultural sector is one of the areas where the US has a competitive advantage, however, and we would gain tremendously if we were able to export to Japan. I understand why Japan would be hesitant to open its agricultural sector to foreign competition over food security issues, but I am certain that arrangements could be made to phase in the opening process in order to enable Japan's agricultural sector time to consolidate, reorganize, and become more competitive. In addition, agriculture is not just a US issue, as the other TPP participants have a strong desire to see this area opened up as well (and New Zealand has been even more aggressive than the US, calling for Japan to be ejected from the TPP because of the agricultural issue since December).

I am certain that the US will have to make compromises in the TPP, but on the other hand, the TPP will almost certainly result in a further increase in the US trade deficit. I think it's in Japan's interests to compromise in this area for the benefit of trade and lower agricultural prices as well. More purchasing power for Japanese consumers must be worth something, right?

 

[Aepsilons]

I am not sure what's driving the auto part of the argument, as even if Japan dropped all tariffs on US autos, I doubt we would have any success selling in Japan. For pity's sake, even I don't buy American-brand cars (I grew up in the 1970s and 1980s, so I'm sure you understand why).

The agricultural sector is one of the areas where the US has a competitive advantage, however, and we would gain tremendously if we were able to export to Japan. I understand why Japan would be hesitant to open its agricultural sector to foreign competition over food security issues, but I am certain that arrangements could be made to phase in the opening process in order to enable Japan's agricultural sector time to consolidate, reorganize, and become more competitive. In addition, agriculture is not just a US issue, as the other TPP participants have a strong desire to see this area opened up as well (and New Zealand has been even more aggressive than the US, calling for Japan to be ejected from the TPP because of the agricultural issue since December).

I am certain that the US will have to make compromises in the TPP, but on the other hand, the TPP will almost certainly result in a further increase in the US trade deficit. I think it's in Japan's interests to compromise in this area for the benefit of trade and lower agricultural prices as well. More purchasing power for Japanese consumers must be worth something, right?

Compromise is the key word, Sir. Government needs to find leverage to persuade the farmers (who have clout in Junior Assembly) in the necessity. This would , if implemented, reduce cost of certain foods and would help the average Japanese buyer. We'll have to see what happens.

 

[TaiShang]

Agreed.

Secondarily, In the event that the TPP does not pass with Japan, we must double our efforts to implement an FTA agreement with China,Korea, Asean. Long have I been a supporter of Northeast Asian economic integration.

Well, I guess, in case the TPP fails, or Japan is pushed aside, then, that will be a boost for the lingering CJK FTA. But, regardless, it is a must for the three nations to ramp up the efforts. Obviously, the agreement would still be soft in terms of protected industries, but, even with certain drawbacks, the agreement would boost the trilateral trade considerably.

 

[senheiser]

I do not know how Japan can really open up its auto and agriculture sectors. Both enjoy considerable influence over the politicians through interest groups/lobbies.

Can't the US just ignore these two sectors and go ahead with the agreement? I mean, what is to be gained from Japan even though it opened up its domestic car market? Japanese companies are too powerful and too much in control already.

I guess, whatever the US may gain from this agreement would originated from other "developing" members, rather than the "ultra developed" Japan.

The gains from the rest of the agreement should way larger than the loss the US would incur should it concedes to Japan's demands.

in agriculture America is way stronger. They would also ruin japanese cousin and food standards as America uses all kind of doping to produce more

 

[Hamartia Antidote]

IFor pity's sake, even I don't buy American-brand cars (I grew up in the 1970s and 1980s, so I'm sure you understand why).

haha!! They honestly don't realize how badly they have lost a generation.

My personal horror that makes me never want to go back.--> Chrysler K platform - Wikipedia, the free encyclopedia

 

[LeveragedBuyout]

haha!! They honestly don't realize how badly they have lost a generation.

My personal horror that makes me never want to go back.--> Chrysler K platform - Wikipedia, the free encyclopedia

The propsensity for GM cars to explode is what did it for me. I remember turning to my father after that and begging him not to buy me a used GM for my first car.