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Three reasons why Japan should join the TPP

The 2010 APEC meeting in Yokohoma ended one month ago but the Japanese media is still discussing whether or not Japan should join the Trans Pacific Partnership (TPP). Prime Minister Kan planned to announce Japan’s accession officially at the leaders’ meeting so as to make it a highlight of APEC 2010 but he had to postpone it until June next year because of strong objections of agricultural protectionists.

Two arguments in favour of Japan’s joining the TPP have already been made. The first centres on ‘second country opening,’ and the second centres on ‘discrimination’. But both of these reasons appeal to a domestic audience but are not persuasive to Japan’s foreign partners. Japan needs to present a third reason to persuade its Asia Pacific partners why it should join the TPP and lead regional integration efforts in the Asia Pacific.

Turning to the first reason, the ‘second country opening,’ as Prime Minister Kan has explained, as Japan’s economy and society have matured, it has become inward-looking. Japan should join the TPP in order to arrest this process and promote active advancement overseas. To this end, Japan must undertake agricultural reform so as to remove the agricultural protection that is currently impeding its accession to the TPP.

But in any case, the fact is that the number of Japanese farmers has decreased by 25 per cent over the past decade. Reform that produces a competitive agricultural sector is therefore imperative regardless whether or not Japan joins the TPP. An opinion group, of which I was a member, proposed a program of nurturing competitive farming without protection to then Prime Minister Aso two years ago but no response was forthcoming. Indeed, there is a need to reform Japanese institutions and practices in quite a few areas, but strong political leadership is currently blocked by huge vested interest groups.

Turning to the second reason, business leaders have argued that Japan will be discriminated against and left behind the globalisation trend if she does not join the TPP. This is the domino theory of FTA or competitive liberalisation which urges you to ‘join as your neighbors do’. Once joined, you can gain from trade diversion by discriminating against non-members.. This justification is shallow – by itself, it cannot provide the best possible policy.

This brings us to the third reason. As made clear by the first reason, Japanese firms cannot survive global competition by targeting a domestic market with an aged population.. It is thus imperative to produce a seamless business environment in which both Japanese and other Asian firms can do free and stable business internationally. This environment is the East Asian community. Joining the TPP should lead eventually to the merging of the Pacific and Asian markets. This is the third, and most compelling, reason for Japan to join the TPP.

The current design of the TPP seems to exclude fast growing Asian economies, which may impede the move toward the Asia Pacific-wide market. As my third reason makes clear, the TPP is trans-Pacific, but it should not divide Asia from the Pacific.

Ippei Yamazawa is an Emeritus Professor of International Economics at Hitotsubashi University, Japan.

December 22nd, 2010

Author: Ippei Yamazawa, Hitotsubashi University



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