Japan Delays TPP Decision

Prime Minister Shinzo Abe has decided to defer any decision on whether Japan will continue with an application to join the negotiations on an extended Trans-Pacific Partnership (TPP), presently being led by the United States.

Abe will put off his decision on the matter, which Japan's previous Prime Minister Yoshihiko Noda had made an integral part of the manifesto of the then-ruling Democratic Party of Japan in the recent elections.

It was back in November 2011 that Noda first announced Japan's intention to begin consultations to join the TPP. However, Japan has needed to receive the support of all nine TPP countries to do so, and, while Brunei, Chile, Malaysia, Peru, Singapore and Vietnam have said that they will support Japan's participation, discussions with the others – Australia, New Zealand and the US – have remained inconclusive.

Above all, acceptance by the US of Japan's application to take part in the TPP talks, which would be crucial, has never been a foregone conclusion, due in large part to the fears of US manufacturers, particularly the auto industry, that a tariff reduction would only increase the already-large trade deficit with Japan, as, it is said, Japan's complex non-tariff trade barriers would remain.

Furthermore, and of particular interest to Australia and New Zealand, it has always been recognized there would be substantial opposition to a Japanese participation in the TPP (as in other proposed trade treaties) from its heavily-protected agricultural sector, as the trade treaty would allow for no tariff exemptions on sensitive Japanese products, such as beef, rice and wheat.

The crucial question appears to be whether a Japanese government would be able to deliver on a professed willingness to place all goods and services on the negotiating table for total trade liberalization within the TPP.

In that regard, and given the continued opposition from some of farming's key supporters in the agricultural sector and his ruling Liberal Democratic Party, Abe has now decided that now is not the time to force the issue of TPP participation, despite the opportunities it might bring for other sectors of the economy, and despite the fact that a lengthy delay could mean that Japan is excluded from being involved in negotiating TPP's final details, which are planned to be settled later this year.

January 22, 2013

Source: Tax News