America, Japan Block Trans Pacific Partnership Progress

Protectionism in both countries is preventing progress on what could be a huge trade agreement.

What could be one of the world’s most comprehensive trade agreements, encompassing twelve nations that jointly account for 40 percent of global commerce, remains mired in disputes that have less to do with trade than domestic politics.

The most recent Trans Pacific Partnership talks in Sydney, Australia failed to resolve key differences between the tentative bloc’s two largest economies: Japan and the United States.

America’s chief trade negotiator, Michael Froman, said on Thursday he did not expect to have a final agreement by the time leaders of the Asia-Pacific Economic Cooperation meet in Beijing next month.

Agreement is already a year overdue. The talks’ deadline was first set for the end of last year.

The talks stalemated in September when Japan’s negotiators walked out of a meeting with their American counterparts in Washington DC. The Americans had been disappointed by the Japanese’s refusal to discuss a big cut in tariffs and withdrew their own offer to lower tariffs on imported car parts. The Economist cited one Japanese policymaker describing the episode as the most acrimonious since the bruising bilateral trade wars of the 1980s.

As The Wall Street Journal put it at the time, “America wants Japan to deliver on its rhetoric of bold reform, aimed at reviving the country’s long stalled economy.”

Conservative prime minister Shinzō Abe has promised to revitalize Japan’s economy, the world’s third largest, after two “lost decades” that followed a deep recession in the 1990s. But almost two years into his second term, reforms have been underwhelming. Abe has shied away from making the sort of changes in agriculture and Japan’s labor market that could lift the island nation’s economy out of its long slump.

The United States are not without blame. The country subsidizes automakers and farmers and many legislators are reluctant to expand foreign access to a variety of markets, mostly food but also biodiesel and ethanol production, for fear of job losses in their districts and states. Such protectionism also hampers America’s trade talks with the European Union.

Both pacts are about more than economics. A transatlantic free-trade agreement would revitalize the Western alliance at a time of renewed Russian assertiveness in Eastern Europe. The Pacific talks represent the economic side of President Barack Obama’s “pivot” to Asia, as the Atlantic Sentinel‘s Richard Colapinto
explained last year.

Some leaders in Asia were concerned that the United States were relying too much on the military to signal its commitment to the region. Thus, the free-trade area was a vehicle President Barack Obama could use to emphasize the economic side of his policy. By seeking to increase the quality of trade relations in Asia, his administration puts the onus on China to reform its commercial practices if it wants to participate.

China has so far been excluded from the talks. If they fail altogether, other countries in East and Southeast Asia will surely be tempted to enact bilateral trade pacts with what is soon to be the world’s largest economy. A Trans Pacific Partnership, however, should encourage China to open up its market — as long as it is not principally excluded from the group.