Obama Should Woo Japan to Join Pacific Trade Pact

Illustration by Brendan Monroe

Obama Should Woo Japan to Join Pacific Trade Pact

By Paul Sracic Feb 10, 2013 6:30 PM ET

As U.S. President Barack Obama prepares for his State of the Union address, he has a chance to deliver a surprise message that would strengthen relations with a major ally, improve his leverage with congressional Republicans, and give a positive jolt to U.S. and international markets. It would take only one sentence. Obama could announce that he fully supports Japan joining the Trans-Pacific Partnership negotiations.
Now covering 11 economies that together conduct more than $1 trillion of trade each year, the TPP is a multinational free- trade agreement started by Brunei, Chile, Singapore and New Zealand a decade ago. The Obama administration notified Congress in late 2009 that it would be joining the talks.
In addition to eliminating tariffs, the TPP aims to confront nontariff issues such as the protection of intellectual property and the distorting effects of state-owned enterprises. Administration officials have expressed hope that the TPP would lay the foundation for an Asia-Pacific free-trade zone.
Although the TPP is a trade agreement, it has enormous geopolitical ramifications as a potential economic counterweight to the rise of China, which has been busy forging its own regional and bilateral agreements. In fact, Obama has repeatedly referred to the TPP as a critical part of his administration’s plans to “rebalance” U.S. foreign policy toward Asia. Yet Japan, the third largest economy in the world and the only Asian nation whose economy rivals China, hasn’t yet formally asked or been invited to join the TPP.

Import Opposition

One challenge for the administration is that the United Auto Workers, the AFL-CIO and the American Automotive Policy Council, which represents Detroit’s automakers, oppose (or in the AFL-CIO’s case, have “serious concerns regarding”) Japanese participation. Currently, automobiles imported from Japan face tariffs as high as 25 percent. Already, a weakening yen threatens to lower the dollar price of these imports, and the Center for Automotive Research estimates that lower U.S. tariffs would result in a 6.2 percent increase in Japanese auto imports to the U.S.
More broadly, the U.S. continues to have significant issues with Japan’s attitude toward trade and investment. As Ron Kirk, the outgoing U.S. trade representative, put it in the supercilious tone favored by U.S. negotiators dealing with Japan: In order for Japan to be included in the talks, it “must be prepared to meet the TPP’s high standards for liberalizing trade and to address specific issues of concern to the U.S. regarding barriers to agriculture, services, and manufacturing trade, including non-tariff measures.”
Should Obama invite Japan to become part of the TPP negotiations during his State of the Union address, the very real issues that Kirk raised would have a clear forum in which to be discussed. Also, the U.S. already has free-trade agreements with six TPP members: Australia, Canada, Chile, Mexico, Peru and Singapore. Without Japan on board, the TPP would be little more than a vehicle to add some additional standards to the North American Free Trade Agreement and include a few tiny (Brunei?) Pacific-facing nations.
Even if Obama is willing to face down the auto industry and organized labor, it isn’t clear that his counterpart in Japan, Prime Minister Shinzo Abe, can withstand his own TPP opponents. His predecessor Yoshihiko Noda wanted to bring Japan into the TPP negotiations, but was forced by domestic political concerns to move slowly.
Now Abe faces the same constraints and must confront Japanese agricultural interests that oppose any agreement that might threaten their traditional protected status. Japanese rice producers, in particular, enjoy the benefit of a 778 percent tariff on imports from foreign competitors. It is worth noting that the prospect of dismantling such barriers is precisely why the farm lobby in the U.S., unlike those connected with the auto industry, strongly supports including Japan in the TPP.

Volatile Electorate

Unlike Obama, Abe depends on the popularity of his political party, the Liberal Democratic Party, to remain in office in Japan’s parliamentary democracy. The LDP crushed the ruling Democratic Party of Japan in last year’s lower house elections, but recent Japanese political history shows a volatile electorate.
The percentage of the vote that the LDP received in rural districts was consistently much stronger than in mixed or urban districts. Of course, precisely these districts are most likely to be tied to agriculture and therefore opposed to Japan joining the TPP. In recent days, many of their LDP representatives have stepped up their agitation against joining negotiations, which a party policy research panel has begun exploring. This may explain why Abe, who at first seemed more supportive of Japan joining the TPP than his predecessor, has lately given indications of wavering support.
Abe’s position on the TPP would be considerably strengthened if Obama were to mention Japan and the TPP in his speech. To provide some context, in 2011, when Obama mentioned India and China in his State of the Union address, the Yomiuri Shimbun, one of Japan’s most important newspapers, headlined its coverage of Obama’s address with the words “Japan Goes Unmentioned This Year Too.” Imagine the headlines in Japan the morning after a specific invitation to Japan was extended by a U.S. president.
Obama might find that he had also strengthened his hand at home with Republicans in Congress, who generally favor trade agreements and who have criticized the president for being slow to act on this front. In fact, he might shrewdly be able to link an announcement about Japan with a request for the type of trade promotion authority (fast-track) enjoyed by President George W. Bush until 2007.
Finally, if Obama were to welcome Japan into the TPP negotiations during the State of the Union address on Feb. 12, the impact would also be felt in another Asian capital. Tensions are rising between Japan and China over the Senkaku (or Diaoyu) Islands in the East China Sea. A specific mention of Japan during such an important speech would send a message to Beijing about the strength of the U.S.-Japan alliance and discourage those in China who doubt whether the U.S. would come to Japan’s aid should hostilities arise.