Japan and the Trans-Pacific Partnership: All In, or Out?

Posted April 2, 2014 at 5:28pm

U.S. Trade Representative Michael Froman will give congressional lawmakers an update on the Obama administration’s trade agenda Thursday, including its efforts to close out Trans-Pacific Partnership negotiations. While that agreement is expected to be concluded in the coming months, U.S. agricultural groups are concerned that it may fall short of the comprehensive deal they had hoped for.

That’s because Japan — one of 12 TPP countries and the key TPP market for a majority of U.S. agriculture — wants to exclude from the negotiations a number of “sensitive” agricultural products, including beef and pork. That’s a non-starter for U.S. agriculture, which wants elimination of tariff and non-tariff barriers on all American farm products.

Unfortunately, Japanese Prime Minister Shinzo Abe is under enormous political pressure to maintain tariffs on agricultural imports. The irony is that Japan’s agricultural sector represents less than 1 percent of the country’s gross domestic product, with rice accounting for half of that; and, by Abe’s own admission, it needs massive reform. The resolution of this internal struggle will determine the value of Japan’s membership in the TPP and, possibly, of the TPP itself.

Historically, support from the U.S. farm sector has been critical to ensuring congressional passage of implementing legislation for trade agreements, but that support likely won’t exist for a TPP agreement that does not eliminate tariffs on farm products.

Japan’s position on agricultural products also has broader implications for concluding the TPP negotiations anytime soon. When one member doesn’t eliminate tariffs on a broad swath of products, others are compelled follow suit. Japan’s failure to eliminate tariffs on a large number of food and agricultural products would result in the withdrawal of concessions to Japan not just by the United States but by other TPP members. Some of those countries no doubt are looking for such an excuse to protect their own sensitive products.

The result would be a downward spiral of expectations for the TPP, with the deal moving from a comprehensive, first-class agreement to one that may have difficulty generating the level of interest and support needed here at home to gain congressional approval.

No one should be misled about the seriousness of this problem. Although Japan says it is asking for exceptions for just five categories of agricultural products, several products are lumped together (such as beef and pork). In fact, there are eight categories — dairy, sugar, pork, beef, wheat, barley, rice and starch — but each of these can cover dozens of products. Just check the dairy case and cheese section at the supermarket to see how many dairy products there are. In fact, the number of individual tariff lines that could be covered in Japan’s exemption list is close to 600. Japan wants to exempt nearly three times more tariff lines from tariff elimination than are in all 17 previous U.S. free trade agreements. The tariff lines cover a large amount of current trade as well as a huge amount of potential trade.

Additionally, accepting Japan’s TPP offer, with its product exemptions, would be a terrible precedent that would affect the ability of the United States to gain meaningful concessions from the European Union in the Transatlantic Trade and Investment Partnership negotiations, which are just getting under way, and from nations such as China and the Philippines when the TPP expands.

If Japan is unwilling to embrace the same trade principles as all the other TPP countries, it may be necessary to move the current negotiations to a conclusion without that country and to hope for success with Japan when the TPP is expanded to a second group of nations in a couple of years.

And while it would be a shame if the effort to include Japan in the TPP were to fail, it would be worse to force through a second-tier agreement that fails to fulfill our aspirations and that ultimately fails to garner broad support here at home.

So, for U.S. agriculture, the question for Japan is: All in, or out?

Forrest Roberts is CEO of the National Cattlemen’s Beef Association; Neil Dierks is CEO of the National Pork Producers Council.