Japan's TPP fight has just begun

antb / Shutterstock.com

People planting rice seedlings in a flooded paddy field near Lake Aoki, Hakuba on May 17, 2012. It is unusual to see rice planted by hand in Japan as it is mostly mechanized.

Article Highlights

  • Mr. Abe must overcome entrenched interests to secure a wide-ranging trade pact

    Tweet This

  • Some of Japan's tariffs are legendary; rice is protected by a 778% tariff rate

    Tweet This

  • The political imperative for maintaining tariffs in Japan is obvious even if the economics are bad.

    Tweet This

Prime Minister Shinzo Abe's announcement last week that Japan hopes to join Trans-Pacific Partnership negotiations, although welcome, hardly guarantees that the world's third-largest economy will join the only real free-trade game in town. Now for the hard part: Mr. Abe must overcome entrenched interests at the party, state and international levels to secure a wide-ranging trade pact. Japan's future as a leading global economy might well ride on it.

Mr. Abe's most immediate challenge hits closest to home. Back in power since January of this year, the prime minister's Liberal Democratic Party (LDP) has hamstrung its leader by demanding that he ensure tariff exemptions on five "sensitive" products: rice, beef, pork, sugar and dairy products.

Japan's tariffs on such goods are legendary. Rice is protected by a 778% tariff rate, leading Japanese consumers to pay the world's highest prices for their staple grain. Sugar imports face tariffs of 328%, and wheat 252%. The political imperative for maintaining them is obvious even if the economics are bad. Japan's postwar electoral system gives great weight to rural areas. No group has benefited more from the agriculture lobby's support than the LDP.

Tokyo under the LDP has consequently been a laggard in free trade negotiations. Those agreements that Japan managed to conclude relatively quickly, such as with Thailand in 2007, failed to tackle sensitive agricultural issues. The TPP would be different because current participants intend it to be a high-quality deal that will cut or eliminate almost all tariffs, which theoretically leaves little hope Tokyo could continue its agricultural protections.

"I ask you to please trust me, believe in me," Mr. Abe said as he presented his trade plans to the LDP party convention on Sunday. Appeals to loyalty won't help when he brings his case for the TPP to the country at large. The opposition Democratic Party of Japan has a formidable anti-trade wing. Pro-agriculture politicians and lobbyists of all stripes will not give up without a fight.

At least Mr. Abe is enjoying historically high approval ratings, which give him a tailwind to sell the TPP to the public. If there's hope at the national level, it lies in steering the TPP debate away from agricultural parochialism toward the larger matter of Japan's long-term economic competitiveness. In this effort Mr. Abe finds support from Japan's biggest business confederation, the Keidanren, which has long called for the country to reduce its complex system of tariffs. These businessmen see the TPP as a gateway to an even larger free-trade area of the Asia-Pacific.

For now, the business group's idea is for Japan to play the leading role in crafting a trade agreement that not only benefits the country's high-quality producers, but also spurs structural reform inside Japan. They know Japan needs incentives to continue regulatory reform so as to make business more nimble and entrepreneurial. Currently, only 19% of Japan's exports are covered by free trade agreements. Joining the TPP would up that number to 27%, and would undoubtedly force producers to become more competitive.

Even if Mr. Abe is successful in building support for TPP at home, however, the prime minister faces a battle overseas. Not everyone is eager to see Japan join the TPP, which started as a modest affair among Brunei, Chile, New Zealand and Singapore but has now ballooned to an 11-nation group. Should Japan gain admittance into the club, the TPP nations would represent 38% of global GDP, up from 30%. That leaves a lot of scope for internal dissent.

American automobile companies, in particular, are opposed to Japan's entry, arguing that lack of access for U.S. cars in Japan justifies maintaining Washington's tariffs on Japanese cars and trucks. A recent letter by their supporters in the U.S. Congress, all Democrats, have pressured the Obama administration not to accept Japanese participation in TPP talks. Yet Americans should welcome a Japan that is more open to U.S. investment, and they should welcome opportunities to sell to a still-affluent market.

The TPP will go ahead with or without Japan. For Tokyo, sitting on the sidelines would only serve to isolate the country at a time when it needs to open up. Japan would potentially forgo $119 billion in income gains by 2025, according to a report by the Peterson Institute for International Economics. More Japanese youth need to work for foreign-owned companies and learn to thrive in cultures different from their own. Japan's domestic sector, from manufacturing to services, needs to liberalize through exposure to foreign competition.

Tokyo needs to accept short-term pain in order to maintain its position as one of the world's most advanced economies. To do otherwise is to put at risk all that has been created over the past half-century.

Mr. Auslin is a scholar at the American Enterprise Institute in Washington. Follow him on Twitter @michaelauslin.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Michael
Auslin

What's new on AEI

In year four of Dodd-Frank, over-regulation is getting old
image Halbig v. Burwell: A stunning rebuke of a lawless and reckless administration
image Beware all the retirement 'crisis' reports
image Cut people or change how they're paid
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.