Place Your Bets: Will TPP Talks Succeed?
Image Credit: Office of the Prime Minister: Japan

Place Your Bets: Will TPP Talks Succeed?


Following Japanese Prime Minister Abe’s visit to the United States, the Trans-Pacific Partnership (TPP) has been gaining momentum. The prospect of the TPP continues to arouse interest and opposition both from inside the proposed member nations and particularly from the countries not involved, notably China.

With Japan’s announcement that it is entering into the TPP negotiations, the significance of the proposed bloc has increased dramatically. The twelve parties to negotiations now include: the United States, Canada, Mexico, Japan, Australia, New Zealand, Chile, Peru, Vietnam, Malaysia, Brunei and Singapore.  Japan’s economy alone is slightly larger than all non-U.S. TPP members combined, and with Japan’s participation the TPP is set to cover just short of 40 percent of the world’s total economic output. If completed, the accession of Indonesia, and perhaps other Southeast Asian nations, will become more likely.

Japan’s negotiations will not be easy, and it is clear that opposition in that country is centered on the once powerful agricultural lobby.  Protests took place in Tokyo last weekend, but the Japan of today is very different from the Japan of yesteryear.  Nowadays, only 1.2 percent of GDP comes from Japan’s agricultural sector, which is nonetheless one of the most protected in the world (with much of the burden falling on Japanese consumers through higher food prices).

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The TPP negotiations will thus illustrate just how much Japan’s demographics have changed.  If the government is able to push the deal through, it will be because of the urban population’s support. Agricultural protection doesn’t make sense when only 4 percent of the workforce is engaged in the sector and when consumers are paying inflated prices for food.

It is not just Japan’s agricultural sector that is bristling at the TPP negotiations though.  As Pacific Money has previously discussed, China is very much on the outside of this agreement and the fact that the United States, Japan, Vietnam and the other negotiating sides are pushing forward anyway is in and of itself significant.

China is already showing public signs of discomfort at the prospect of the TPP coming to fruition.  Shen Danyang, a spokesperson for the Ministry of Commerce, highlighted China’s concerns last week when he stated, "We also think that any regional or bilateral free trade agreement (FTA) should be only a complement to the multilateral trade system, not a replacement for it." Newly appointed Commerce Minister Gao Hucheng reiterated these points later in the week when he stressed that the WTO was the foundation for global trade, and, somewhat, oddly, advocated for the completion of the Doha round of the WTO, which most observers have all but given up on.

China’s response has not been limited to rhetoric however. Last Tuesday China’s Ministry of Commerce also announced a renewed effort to negotiate a trilateral FTA with Japan and South Korea this year, as well as stepping up talks with other trade partners. China’s tense relations with Japan and the pressure it is feeling from the international community following North Korea’s third nuclear test make negotiations both more necessary and more difficult.

At the dawn of the Cold War, the United States championed trade as a way to strengthen its allies against the emergent communist bloc.  As Washington returns to a containment redux strategy, the target of containment seems intent on playing the same game.

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