18 April 2017

News Report: Why It's Vitally Important for Japan to Sustain Relations Within TPP Without US

Japan is planning to put the Trans-Pacific Partnership trade pact into force without the US, following Washington's withdrawal from the agreement in January and after it became clear that the US would not oppose such a move. Radio Sputnik talked to Dr. Seijiro Takeshita, a Japanese expert in trade, on the viability of the decision.

Japan plans to push forward talks to put a Pacific Rim trade pact (TPP) into force without the United States, which withdrew from the multi-nation agreement in January, local media reported on Saturday, citing sources in the government.

The TPP was signed in February 2016 by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. These countries account for around 40 percent of the global economy; China was not a member.

According to the reports, Tokyo approached its counterparts from the Association of Southeast Asian Nations with an alternate plan.

The deal proposed cutting the US out of the trade zone to form an 11-nation pact, even though Japan has long maintained that the TPP would be meaningless without the US.

According to the media, Tokyo decided to move forward with the pact after it became clear that the US would not oppose such an arrangement.

The 11 nations are expected to start discussing the issue at a meeting of their chief negotiators in Canada in early May, and at a meeting of their trade ministers in Vietnam late next month on the sidelines of an Asia-Pacific Economic Cooperation gathering.

"Tokyo had expressed reluctance to have the TPP come into force without Washington amid concern that a TPP is unlikely to provide a tailwind for Japanese exporters, such as automakers, without the United States, the biggest market in the grouping," Japan Today reported on Saturday.

"But with free trade perceived to be under threat with the rise of protectionism since the launch of the Trump administration, calls have been growing in the government for Tokyo’s leadership in keeping the momentum for free trade," the outlet added.

Radio Sputnik talked to Dr. Seijiro Takeshita, Professor of the School of Management and Information at the University of Shizuoka, on the issue.

"Obviously, if you look at the size of the economy of the US and Japan, which are really outstanding among these 12 nations, and now, when the US has basically opted out, it is very clear from the size point of view that yes, Japan should take the lead," he told Sputnik.

However, he added, considering the domestic factors in Japan, such as a continuous reduction of the workforce, which, in turn, means that domestic demand is going to start shrinking, for Japan to sustain the mobility and relationship within this TPP agreement is of the most vital importance. Especially considering that the weight of the US has considerably come down, meaning that the Asian countries, EU and China have grown quite sustainably.

Certainly, the expert said, without the US, the TPP has lost a certain attraction, but this does not mean that it has lost the attraction in itself. It still has very much positivity that would be very attractive to the Japanese economy on the whole.

Speaking about the viability of such an agreement, Dr. Takeshita however said that there are many other members to the agreement, including Malaysia and Vietnam, who basically started to take an interest in these negotiations because the US was there. It probably would be harder to solidify the solidarity of the group itself without Washington's participation. This is where Japan is having a very hard time, he admitted.

Many of the participants to the agreement, he further said, see China as a geopolitical threat. That was one of the reasons why they wanted to be joining TPP. They wanted to be under the safe umbrella of a joint force which was led by the US. Hence with the withdrawal of the US, the agreement will be far less attractive for them, he suggested.

Dr. Takeshita also commented on another agreement, the 16-member Regional Comprehensive Economic Partnership (RCEP), which is led by China and, in turn, does not include the United States.

"I think there is always a country risk if one is trading with a country like China, even though it is a very, very attractive market. Lots of Japanese companies have recently significantly cut down their foreign direct investment into China. The reason is that they have started to realize that if you want to do trade, it is not only an economic issue. There is a political agenda involved," he told Sputnik.

For countries such as Vietnam or Malaysia, he further explained, it should be clear that they should not only be looking at the numbers, but at a lot of "other issues which do not necessarily appear on the balance sheet that they have to consider."

"If China is going to take the lead, then basically the free road economic situation, the maneuverability of the economy of the region itself will be in jeopardy," he finally suggested.

This story first appeared on Sputnik & is reposted here with permission.