Barely two months in office, Japan’s prime minister Yoshihiko Noda faces a split in his ruling party over a push to liberalize trade relations with other Pacific nations.
The premier has demanded consensus on Japan’s entry to the Trans Pacific Partnership before its prospective members are due to convene in Hawaii next month but his Democratic Party is divided.
The Trans Pacific Partnership began in 2006 as a free-trade agreement between Brunei, Chile, New Zealand and Singapore. Australia, Malaysia, Peru, the United States and Vietnam are on track to join the organization which seeks to eliminate all tariffs on Pacific trade by 2015. Canada, the Philippines, South Korea and Taiwan have also expressed an interest in joining.
During next month’s Asia-Pacific Economic Cooperation meeting in Honolulu, present and future members of the TPP are expected to decide on expansion as well as the broad outlines for a trade agreement.
Japan’s agricultural lobby is opposed to joining the partnership. Former agriculture minister Masahiko Yamada leads the resistance against freer trade within the Democratic Party. He is an ally of party strongman Ichirō Ozawa who is currently under investigation on corruption charges. Noda’s ascendance to the premiership in September was a setback for Ozawa who had endorsed his opponent.
Noda has tried to unify the ruling party by bringing Ozawa allies into his cabinet but the debate over whether or not to join the Trans Pacific Partnership is fracturing his very government. The defense minister, Yasuo Ichikawa, a former agricultural ministry bureaucrat, is one of the voices cautioning against a multilateral liberalization of trade relations. Opponents of TPP membership fear that Japanese farmers would struggle to compete against other East Asian and South American producers.
The underlying predicament, writes Jeffrey W. Hornung at The Diplomat, is that both of Japan’s major political parties rely heavily on rural support. Bodies that represent farmers’ interests have gained an “inordinate amount of influence” of the political process, he writes.
The Democratic Party has advocated direct income subsidies for small farmers for more than a decade while the liberal democrats, traditionally in power, enacted structural economic reforms in the 1990s that disadvantaged the rural economy. Rural voters switched parties in 2009’s election and propelled the Democrats to power for the first time in their existence.
Japanese businesses, by contrast, argue that freer trade could be a boon to the country’s sluggish economy which is still recovering from March’s devastating earthquake and tsunami. They fear that Japan is lacking behind other Asian powerhouses, Korea in particular.
South Korea, which recently enacted a free-trade agreement with the United States that could boost its exports by several tens of billions of dollars per year, conducts more than a third of its trade with countries it has trade deals with. The Japanese figure is just 18 percent.
Japan’s population, moreover, is shrinking. By midcentury, it is expected to have lost 32 million people, a huge drop for an industrial nation that will have to rely increasingly on exports.