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U.S., Japan Meet to Settle TPP Differences; Major Troubles Remain

U.S. and Japan trade negotiators met this week in an attempt to settle stubborn differences that have stalled the once brisk progress of the Trans-Pacific Partnership (TPP) talks. However, the two nations failed to reach a rapprochement, casting a pall of doubt over the future of the TPP.

U.S Trade Representative Michael Froman said, “We’ve made some progress over the last two days, but there are still considerable differences in our positions on key issues.”  Now, the timetable for the eventual conclusion of the TPP remains unclear, though many once expected that an agreement would be reached by the end of 2013. Froman was equivocal when addressing the issue: “We always said that the substance of an agreement or the negotiations should determine the timetable.”

Froman met with Japanese Economy Minister Akira Amari and apparently were at least able to clarify the terms of the distance between them. Japan agreed to slice its tariffs in half, reducing the duty on Australian beef to less than 20 percent from 38.5% over the next eighteen years. Japan, though, still maintains its tariff on U.S. beef at 38.5%.

The two nations have recently stepped up their efforts to resolve their persistent points of dispute. On March 27, Acting Deputy United States Trade Representative Wendy Cutler met with Japanese Ambassador Hiroshi Oe in Washington, D.C. Last January, Froman met with Japanese Minister Takeo Mori in Switzerland with the purpose of designing a roadmap for remaining discussions. The U.S. has insisted that Japan move toward a tariff-free regime under the TPP, but Japan has resisted fully liberalizing its agricultural sector, nominating five product areas as “sacred,” which means effectively taken off the table for negotiation. Problematically, beef and rice are among the areas the U.S. has been equally insistent are, at the very least, open to the possibility of future revision.

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Many trade experts believe the ultimate settlement of the TPP squarely hinges upon the US. and Japan affecting a rapprochement on a series of contentious issues. Smaller nations have been exchanging concessions regarding intellectual property, regulatory reform, foreign investment and infrastructural improvements for additional access to both American and Japanese markets. However, that greater access is widely understood as contingent upon the prior opening of markets between the U.S. and Japan. And now a series of smaller arrangements have been imperiled by the stalled talks between the two industrial leaders. Australia is demanding increased access to the U.S. sugar market. Vietnam wants to eliminate trade barriers that saddle its exports with additional costs. Malaysia is anxious about its access to Western medicines. Brunei wants to protect its state-run enterprises. And the potential inclusion of South Korea and China into the mix, both of which have recently expressed an interest in inclusion late in the game, has only further muddied the waters.

According to Froman, these previous points of agreement, or “landing zones,” had been handed off from minister level authorities to lower-level bureaucrats for the sake of hammering out technical details, a sign that major ideological divides had been bridged. The U.S. had secured a reasonably impressive measure of consensus on controversial issues like intellectual property protections, the role of state-owned enterprises and rules of origin. The U.S. has also been jockeying for agreement on a special tribunal established to allow signatory nations to challenge violations of TPP rules outside the jurisdiction of their own courts.

Froman continues to express optimism regarding the possibility that the U.S. and Japan will soon broker a rapprochement, while also conceding that such an arrangement is crucial to the TPP negotiations as a whole. He said, “We are hopeful that Japan is able to come to the table prepared to achieve the kind of outcome that is expected as part of the TPP. Resolving the U.S.-Japan market access questions will be critical to the success of the TPP.”

However, Japan’s Deputy Economy Minister, Yasutoshi Nishimura, conceded, “On our side, there are certain things that we cannot compromise on due to parliamentary resolution. We have explained this many times to the U.S. and have asked for their flexibility.” From the perspective of Japanese trade authorities, they have already made a bevy of significant concessions, easing once tight restrictions on U.S. beef imports, permitting the U.S. to temporarily maintain tariffs on Japanese auto imports and limiting the kinds of services Japan’s state-run health care industry can offer in the international market.

Some U.S. officials have attributed the impasse to Japanese Prime Minister Abe’s weakening enthusiasm for trade reform specially after Japan’s Parliament recently passed considerably weakened versions of the bold restructuring he previously championed. From the perspective of U.S. trade leaders, Abe capitulated when confronted with political pressure, caving into Japan’s powerful farm lobby, choosing to appease popular will rather than affect difficult changes.

Japanese leaders, however, espouse a contradictory narrative that implicates President Obama’s diminished political power as the principal cause of TPP inertia. Beleaguered by scandals and locked in endless partisan dispute, Japanese authorities worry that Obama no longer has the power to confidently promise congressional approval of whatever promises he makes. This concern has only been exacerbated by intense disagreement among U.S. legislators over Obama’s executive trade promotion powers, colloquially dubbed “fast tracking authority,” or his power to expedite trade-related treaties through the process of congressional review.