TPP with Japan to bring bigger U.S. trade deficit

WASHINGTON (Kyodo) -- Japan should not be included as a new member of the U.S.-led Trans-Pacific Partnership free trade talks as it is likely to trigger a larger U.S. trade deficit due to Tokyo's problematic automotive market and currency policy, a U.S. think tank said in a report released Wednesday.

"If the TPP were concluded on its present basis and include Japan, it would inevitably result in an increase in the U.S. trade deficit and a decline in the U.S. gross domestic product growth as well as in U.S. employment while failing to achieve any increase in Japanese imports or anything like free trade," the Economic Strategic Institute said in the report.

The Japanese automotive market is the foremost example of the "closed open market" phenomenon with nontariff barriers, while Japanese authorities have intervened in the currency market to maintain an undervalued yen, the report said.

Given that the Japanese market has the lowest penetration of imports and foreign brand autos of all the major auto markets, the report said, "Japan can negotiate secure in the knowledge that no matter what formal concessions it makes, imports will not rise."

"In the particular instance of the TPP, this is all the more the case because the negotiating agenda does not cover the intervention in international currency markets, various investment subsidies and anti-competitive market structures and practices that cause the major distortions of free market trade flows," it said.

"Unless the proposed agreement can be recast to cover the major elements driving trade and to provide for affirmative action to counter old structures and practices, it should not include Japan and should probably not proceed at all," the Washington-based think tank said.

Japan's entry into the TPP talks has been delayed by reluctance of the United States and other farm producers due to their concerns about uncertainty over Tokyo's willingness to open its market. In the United States, the automotive industry is particularly wary of Japan's participation in the TPP talks.

The Pacific free trade agreement is currently under negotiations with nine countries -- Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. Canada and Mexico, which were accepted as new members, are expected to formally join the negotiations in fall following domestic parliamentary procedures in member economies.

August 9, 2012

Source: Mainichi Japan