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U.S., Japan Renew Commitment to TPP Resolution; Tough Issues Remain

U.S. Trade Representative Michael Froman and Japanese Economy, Trade and Industry Minister Toshimitsu Motegi both recently expressed optimism regarding an eventual conclusion to the Trans-Pacific Partnership (TPP) negotiations, renewing their joint commitment to resolving outstanding disputes.

On Saturday, January 26, the two trade envoys met in Davos, Switzerland with the purpose of designing a roadmap for remaining discussions. The U.S. has insisted that Japan move towards 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.

The reverberations from this impasse have been significant, now halting the entirety of the negotiation process. 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.

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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.

Now, some experts are predicting that April is the soonest a comprehensive consensus can reasonably be expected to form. According to Junichi Sugwara, an analyst with the Mizuho Research Institute: “Japan has apparently concluded it’s not time to offer its best deal.”