Many policy analysts and members of the media had oversized expectations for progress on negotiations on the Trans-Pacific Partnership (TPP) free trade agreement (FTA) during President Obama’s recent trip to Asia. The trip was an important step in the process of focusing on key stumbling blocks in the process of reaching an agreement. Plenty of work remains for all sides.
In agriculture those stumbling blocks with Japan are wheat, beef, pork, dairy, sugar and rice where Japan wants to make no market access changes. That is clearly where movement has to be made if there is to be an agreement. The original TPP goal was full market access when the FTA was implemented. That goal went out the window before Japan entered the talks. Somewhere between immediate full access and no change in the status quo is the basis for an agreement.
After the trade talks in Tokyo, an unnamed senior Administration Official gave a press briefing on Air Force One. He said the talks had been taken to a different level where “in a number of the products we were able to identify what the path is going to be towards the ultimate resolution.” That is still pretty hazy, but he said they discussed “various factors that go into market access agreement — the length of time over which a market access barrier might be reduced, which barriers are eliminated and which barriers are reduced and what the relationship is between them, how the market access is structured. And we went through each one of these products and oftentimes line by line of the tariffs.”
There was no mention of specific products, how much tariffs would be reduced or over how many years, but the groundwork has been laid. The other countries in the TPP talks recognize that progress on the agricultural talks between the U.S. and Japan had to happen to give momentum to other bilateral market access negotiations.
The second key issue coming out of the talks was a comment by Japan’s Finance Minister, Taro Aso, as reported in the Wall Street Journal, “No agreement would ever be reached until the U.S. midterm elections are over.” He went on to say, “Suppose an agreement were reached between U.S. and Japan—there’s no guarantee it would be approved by the Congress.” Mr. Aso was referring to the Obama Administration not having Trade Promotion Authority (TPA) from Congress with agreement on negotiating objectives and Congressional approval or rejection of an agreement without amendments.
No U.S. government in the last 50 years has tried to negotiate trade agreements without TPA. The Administration began promoting TPA about nine months ago after negotiating for several years on TPP without it. The Administration is caught with Members of Congress wanting to know more about TPP before voting for or against TPA. There is general agreement that Congress will not vote on TPA until a lame-duck session after the November elections, and maybe not even then. There will be little real movement on TPP until TPA is resolved.
The U.S.-Japan Joint Statement at the close of the meetings said, “Today, we have identified a path forward on important bilateral TPP issues. This marks a key milestone in the TPP negotiations and will inject fresh momentum into the broader talks. We now call upon all TPP partners to move as soon as possible to take the necessary steps to conclude the agreement. Even with this step forward, there is still much work to be done to conclude TPP.” That is a hopeful joint statement, but one that recognizes the challenges ahead.
President Obama stopped in Malaysia, a TPP country, to offer support to Prime Minister Najib Razak. His ambitions for the TPP have been curtailed by hesitant members of his own political party. President Obama said he was aware and supportive of Malaysia’s ‘domestic sensitivities.’ The President left a different message in South Korea, which has not joined the TPP talks, but may want to in the future. He warned that its treatment of US exporters under the 2-year old Korea-U.S. FTA will be reflected in how the U.S. views South Korea’s participation in the TPP FTA.
The next step forward on TPP FTA comes when the Chief Negotiators for the 12 countries meet May 12-15 prior to a meeting of Asia-Pacific Economic Cooperation (APEC) trade ministers in China May 17-18. The TPP Trade Ministers will likely reconvene in Vietnam on May 19. The Chief Negotiators meeting will have a similar format as the last meeting in Singapore in February where some negotiating groups also met. The last formal negotiating round was in Brunei last August. The talks are in need of the fresh momentum from the U.S.-Japan meetings.
While the Chief Negotiators meeting in Vietnam is important, it should not be looked at as a wrap-up meeting. Japan needs time to politically digest what was promised and not promised in the meetings last week. Those Japanese officials hesitant to make changes can talk about delaying until after the U.S. election in November. Perhaps TPA will never be approved and the U.S. government will quit pushing TPP. Before the elections, it would be hard for President Obama to agree to maintain any significant Japanese barriers to U.S. agricultural products.
The senior Administration Official who held the press briefing made an important observation. He recalled that one of the reasons for having Japan join the TPP talks was to support structural reforms necessary to revitalize and renew Japan’s economy. If the Japanese economy follows a slow growth track into next year, Japan’s political leaders may see the TPP reforms as even more important and agree to the market access for agricultural products that the U.S., Australia, New Zealand and Canada have pushed for so many years.
The TPP negotiating process has proven to be much slower than envisioned a few years ago. That was inevitable as the group grew in numbers, became more diverse and included a developed country, Japan, in need of substantial internal reforms. If the slowdown in talks continues for too long, one or more countries will need to break-away and move to unilateral free trade openings and reforms as the surest way to faster economic growth.