The triple disaster that hit Japan on March 11 has, as has been written on this blog and elsewhere in The Diplomat, had a wide-ranging impact on Japanese society, the economy and the country’s political climate.
But the effects are also being felt in trade policy. Last week, the government formally postponed its decision on whether to join the US-backed Trans-Pacific Partnership (TPP) trade bloc, citing the need to focus on disaster relief.
The TPP initiative currently only counts Australia, New Zealand, Malaysia, Vietnam, Brunei, Singapore, Peru and Chile among its members, but should Japan also decide to join, it’s believed the body would serve as a precursor for a larger free trade organisation encompassing both Asian and Pacific markets.
The TPP hopes to provide a comprehensive deal in which all tariffs are eliminated, including those on sensitive items. Of course, the economic advantages TPP would bring are up for debate. For the United States, for example, TPP countries account for just 5.3 percent of trade. But whatever the economic benefits of the pact, there are also some potentially significant political ones. As Australian National University Prof. Peter Drysdale has argued, the TPP ‘would drive a wedge down the middle of the Pacific…between the United States, its partners and China.’
Prime Minister Kan had hoped to announce Japan’s accession at November’s APEC meeting, hosted by Japan in Yokohama. After all, when he came to office, he placed trade liberalisation at the top of his agenda for economic growth and argued that the TPP would help reverse Japan’s inward-looking trend and initiate activity that could bring new trade opportunities abroad. Japanese business was also keen not to be left behind in the race to shape the bloc.
Yet in the face of strong opposition from agricultural lobbies, the administration was forced to postpone until the following June. And with the country now facing its biggest disaster since World War II, the decision has been deferred again.
On the surface, the argument that TPP should be delayed to allow the government to focus on the recovery seems reasonable. But it also overlooks the very real related problems facing Japan’s reconstruction efforts and its approach to trade, particularly the entrenched conservatism and strength of the farming and fishing community—and the inability of government to make a stand against these interests.
Negotiations so far over membership underscore a dichotomy in Japanese policymaking, with officials in favour of international competition vying for influence with domestic pro-farmer lobbies. Even though the TPP has enjoyed widespread popular support (three-fifths in favour according to one Yomuiri Shimbun poll), Japan has been prevented from presenting a flexible bargaining position. The ability of Japanese farmers—through the ballot box and strong lobbying groups—to influence policymakers and form ‘tribes’ within the Diet has slowed negotiations.
Japan’s peculiar setup also hurts progress in negotiations. Whereas in South Korea, the Ministry of Foreign Affairs and Trade oversees all stages of negotiations, in Japan each chapter is negotiated by the ministry potentially affected, giving rise to in-fighting and even effective veto rights over the whole to a single ministry.
Japan’s Foreign Ministry is leading negotiations, but it has to navigate internal frictions such as contradictions between agriculture and industrial interests. This bureaucratic turfism stifles decisive decision-making and can occasionally lead to embarrassment for the Japanese government, as was the case when former Prime Minister Junichiro Koizumi hoped to sign an FTA with the president of Mexico during a visit, but was held back by the Agriculture Ministry.
The ruling Democratic Party of Japan previously announced its intention to ‘press ahead with fundamental domestic reforms’ and ‘bold policies’ to strengthen competiveness. To this end, the government provisionally announced a ‘Headquarters for the Promotion of Agricultural Structural Reform’ to ‘promote both high-level EPAs and (work for the) improvement of Japan's food self-sufficiency and revitalization of its agriculture industry and rural communities.’ But such reforms now appear to have been shelved.
Many fear the latest decision to delay bodes ill for the long-awaited Japan-Australia free trade agreement, despite a positive visit by Australian Prime Minister Julia Gillard to Tokyo last month. With the Doha Round looking close to failure, and the global trading system in flux following the financial crisis, the importance of opening markets and resisting protectionism should be clear.
Considering Kan’s personal commitment to the TPP, questions are also likely to be raised over his leadership ability following the announcement. Chief Cabinet Minister Kaoru Yosano has now confirmed that a decision over TPP will be pushed back to November, when US President Barack Obama is due to host the next APEC meeting in Hawaii.
The United States now considers the TPP a priority area, something which should bode well for Japan’s eventual membership—but only if domestic opposition can be soothed. At the end of the day, Japan must look beyond ‘reasonable’ short term considerations such as focusing on reconstruction, and instead look to what needs to be done to Japan to initiate enduring growth.
The news on May 19 that Japan’s economy has once again slipped into recession should be a wake-up call to Japanese politicians and bureaucrats that while providing relief is essential, this shouldn’t come at the expense of a long-term growth strategy that has free trade at its core.