Chamber Backs Japan's Entry Into Ongoing TPP Talks If Conditions...

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Inside U.S. Trade - 03/08/2013

Chamber Backs Japan's Entry Into Ongoing TPP Talks If Conditions Are Met
Posted: March 7, 2013

SINGAPORE -- The U.S. Chamber of Commerce supports Japan's entry into the Trans-Pacific Partnership (TPP) negotiations "as soon as possible," as long as Tokyo commits to the same high standards as current TPP participants and does not materially slow down the negotiations, according to a senior Chamber executive attending the 16th round of TPP talks here. "The Chamber's view has always been that Japan is the third-largest economy in the world, and getting them at the table in this negotiation is a game changer," Chamber Vice President Tami Overby said in an interview with Inside U.S. Trade. "And we very much support getting them at the table as soon as possible" as long as Japan is able to meet those two criteria, she added. In addition, Japan would have to make progress on confidence-building measures identified by the United States in the areas of autos, insurance and beef before it could be in a position to join TPP, Overby said. This would illustrate that Japan can deal with the politically difficult issues of autos, beef and insurance at the negotiating table. She noted that Japan has already made progress on the beef issue, a reference to Tokyo's move earlier this year to allow U.S. beef from cattle up to 30 months to be sold. This is up from a 20-month age limit, which Japan put in place to guard against bovine spongiform encephelopathy (BSE). Overby declined to recommend specific confidence building measures, but suggested that Japan could exempt a certain number of car imports from having to comply with measures that U.S. auto companies view as non-tariff barriers. Such a move would be aimed at giving "U.S. exporters confidence that they would not be adversely affected by these very creative non-tariff measures," she said. Overby said one place Japan might consider as a "starting point" on autos is the 2010 U.S.-Korea deal that renegotiated the original terms of their bilateral free trade agreement. In that renegotiation, Korea granted an exemption from Korean safety standards for 25,000 cars each per U.S. auto manufacturer if the vehicles meet U.S. Federal Motor Vehicle Standards. After the renegotiation, the Korea FTA went into force on March 15, 2012. According to Commerce data, a comparison of the April through December period of 2012 compared to the same period in 2011 reveals that the trade deficit grew by roughly 32 percent during the time that the Korea FTA was in force. In the auto sector specifically, full-year 2012 data show that U.S. exports of passenger vehicles to Korea increased annually -- rising to $616 million by value from $420 million the year before. This represents an increase of 46 percent. Imports of passenger cars from South Korea by value totaled $10.6 billion in 2012, up from $8.6 billion the year before which constitutes a 23 percent increase (Inside U.S. Trade, Feb. 15). One industry source speculated that Japan could increase the number of U.S. autos subject to its so-called "preferred handling scheme." That arrangement exempts low-volume auto importers from having to comply with Japanese automotive standards. But Russell Scoular, regional director of Asia-Pacific government affairs at Ford, who participated in the stakeholder event here, said he did not think Japan would be able to address the systemic barriers in its auto sector with "one or two actions." In a presentation to negotiators, Scoular reiterated Ford's opposition to including Japan in the TPP due to Tokyo's track record "as one of the most closed automotive markets in the world," the lack of restructuring of its auto industry, and the country's history and continued practice of currency manipulation. The notion that Japan's entry may not materially slow down the negotiations is based on the assumption that Tokyo would accept all the terms that have been negotiated so far. However, that is a big assumption given the pressure that Prime Minister Shinzo Abe is facing from his own Liberal Democratic Party (LDP) to set certain conditions for Japan's entry.

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Chamber Backs Japan's Entry Into Ongoing TPP Talks If Conditions...

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These conditions are based on LDP election campaign promises, and would exclude sensitive products such as rice, beef, dairy and sugar from the negotiations. Other conditions would prohibit changes to Japan's food safety regulations, including mandatory labeling for genetically modified food and regulations for BSE, as well as the rejection of an investor-state dispute settlement mechanism (Inside U.S. Trade, March 1). Overby pointed out that, before Japan could join the TPP talks, it would also have to complete bilateral consultations with other TPP countries, as a decision to allow Japan into the talks has to be made by consensus among all 11 partners. Other countries besides the United States that have expressed worries about Japan joining the talks are Australia, New Zealand, Canada and Mexico, according to Overby. Asked about a Feb. 22 U.S.-Japan joint statement that appeared to leave open the possibility that each side could protect sensitive sectors in a final deal, Overby made the argument that no trade agreement, including those negotiated by the United States, has zero exclusions. "I don't think anybody is expecting that perfection from Japan, but we do want them to come into this agreement and put everything on the table and the U.S. industry has high expectations," she said. "There have been a lot of longstanding problems that we believe that now is the time to address them and that TPP is the way." Cal Cohen, president of the Emergency Committee on American Trade (ECAT), suggested that one way Japan's sensitivities could be dealt with in a final TPP agreement is through longer tariff phaseouts. One of the most sensitive products for Japan is rice, for which it now limits imports through a quota negotiated in the Uruguay Round trade talks. The Chamber position on Japan's TPP participation is at odds with the one taken by the Business Roundtable (BRT), but similar to the one taken by ECAT. BRT President John Engler argued last month that Japan's potential entry into the TPP should wait until the current participants conclude ongoing negotiations. In a presentation this week to TPP negotiators, Cohen said his group supports Japan's participation as long as the Japanese government is prepared to commit to a fully comprehensive market access package without exclusions; full adoption of strong disciplines across all TPP negotiating areas; and an agreement that includes new disciplines in areas such as state-owned enterprises. In a subsequent interview, Cohen said another condition for Japan's entry would be its commitment to complete the negotiations expeditiously and not slow down the talks. This is same condition that Canada and Mexico agreed to when they joined the talks last October, according to Overby. "Both Canada and Mexico when they joined agreed to accept all the chapters that were closed and to sign on to that and be able to influence what was still on the table. So we are hopeful that our Japanese colleagues will be able to do that," she said. She said Abe and his advisers recognize that the "clock is ticking and that they need to get to this TPP table as soon as possible if they want to have the ability to help shape it." At the same time, she noted that a lot of the "challenging issues" in TPP have not yet been resolved, and therefore Japan would be able to have input in those areas if it joins the talks soon. Abe has said he plans to make a decision on whether to join TPP as soon as possible, and some observers have speculated he could make a breakthrough announcement by the end of next week (see related story).
Inside U.S. Trade - 03/08/2013, Vol. 31, No. 10

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