The Death of the TPP

Prime Minister Shinzo Abe’s speech at the opening of parliament last week contained a notable omission – any reference to Japan’s joining the Trans-Pacific Partnership (TPP) trade agreement. That seems likely finally to doom the pact, which has been in negotiations with various governments since 2005.

Japanese negotiators walked out on the negotiations only a few days before Abe’s speech, with no serious prospect that they might return to the negotiating table, not at least until general elections in both Japan and the United States are passed.

Abe is in a conservative mode these days – conservative in the sense of don’t rock the boat. He has already indicated that legislation to enact changes in the country’s military posture by allowing Japanese forces to come to the defense of allies will not be on parliament’s agenda this year.

The government’s approval ratings took a dive after the cabinet on July 1 approved a reinterpretation of the country’s pacifistic constitution to provide for “collective defense.” They have only recently recovered, somewhat helped along by his recent cabinet reshuffle.

Abe is not likely to want to alienate any more constituencies, and this especially means not alienating the powerful farm lobby by making any serious reductions in tariff barriers for five sacred cow products: beef, pork, rice, wheat, and dairy products.

The TPP is a trade agreement encompassing 12 Asian and Pacific nations and the United States that is said to be the most far-reaching and comprehensive free-trade agreement ever yet negotiated, covering contentious issues including agriculture, intellectual property and services and investments. Japan came late to the negotiations but is considered pivotal to its success.

“There will either be a TPP with Japan or no TPP, at all,” said economist Richard Katz, a veteran Japan-watcher.

According to the National Pork Producers Council, which is probably the most militant American farm group pushing for complete elimination of tariffs and other barriers, the Japanese still want to keep some 500 tariff lines among the five sacred cows.

“They won’t abolish the Gate Price or lower tariffs; we didn’t get even a half loaf,” said Nic Giordano, vice president for international affairs for the pork producers,

Economists have long lamented the economic distortions that the LDP government of the past has perpetrated in Japan due to the unyielding grip that a few farmers and their allies have on Japanese trade policy.

All of this is to support what are probably fewer than 100,000 farmer households in Japan, most of whom led by farmers who are over 60 and often merely part time farmers. Also distorting the economy are tax breaks on “agricultural” land.

Said economist Katz, Japanese spend about 14 percent of their income for food, twice that of the United States. If that figure could be reduced, even marginally, it might free-up trillions of yen for people to spend on other things. It might also help to make up for some of the shrinkage in consumer spending caused by recent introduction of an eight per cent sales tax.

Joining TPP was to be one of the main “arrows” in Shinzo Abe’s three-part plan to revitalize Japan’s economy after decades of stagnation, a program usually referred to as “Abenomics.” But these days Abe seems to be jumping from one topic to another with no particular plan. One week it is women’s empowerment, the next attracting casinos.

His speech to the opening of parliament’s winter session indicates that his latest crusade will be revitalizing rural economies. It is an important topic – according to some estimates, roughly half of Japan’s rural communities will disappear due to depopulation – but also a fairly uncontroversial one.

Early in his government Abe talked a lot about the “political capital” he had earned through his smashing general election victory in late 2012. The implication of this was that he would have the clout to overcome vested interests in advancing his economic program.

But at the moment, Abe does not seem at all interested in expending capital on anything controversial. For the moment he is looking forward to a nice, quiet parliamentary session, passing a few relatively non-controversial bills while letting his government approval ratings return to their former highs.

Moreover, the election calendar is beginning to dominate the agenda in both Japan and the United States. Abe is concerned about several upcoming gubernatorial races, including in the sensitive Fukushima prefecture and Okinawa and beyond that to the municipal elections in the spring.

Meanwhile, not much is seen as politically feasible in the United States, which of course, holds midterm Congressional elections next month with the 2016 presidential election also looming.

Abe is also concerned about an impending “double” election (both houses of parliament), including the House of Councillors, the upper house of Japan’s bicameral parliament where his party’s majority is dependent on a critical bloc of members beholden to farm lobbies.

Most observers think it will be impossible for the US Congress to pass the necessary Trade Promotion Authority, a parliamentary device which allows for a final single-up and down vote with no amendments that the other Trans-Pacific “Partners” may consider deal-breakers.

Even if revived, it looks increasingly as if the Trans-Pacific Trade partnership will go the way of the Doha round of trade negotiations with talks going on forever and nothing really accomplished.