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International Relations

With TPP ratification in sight, Abe raises banner of free trade

Thailand, South Korea and Taiwan show interest in joining

Under Prime Minister Shinzo Abe, Japan is on track to become the second of the 11 TPP member countries to ratify the agreement, after Mexico.   © Reuters

TOKYO -- The reworked Trans-Pacific Partnership trade agreement moved a little closer to enactment after a nod from Japan's parliament Friday, a boost to multilateralism as a counterweight to the increasingly self-interested U.S. and China.

Japan's lower house approved a bill to ratify the Pacific Rim free trade deal, making it all but certain to pass before the current parliamentary session ends next month. Once the approval process is complete, Japan will become the second of the 11 TPP member countries to ratify the agreement, after Mexico.

The pact will enter into force 60 days after ratification by at least six members, kicking off tariff cuts and regulatory harmonization across a zone constituting 15% of global trade. Quick approval by Japan would brighten prospects for the deal to take effect by year-end.

Passing other legislation needed for the TPP could prove tougher for Japan, however. A lower house vote was pushed back to next week after opposition lawmakers submitted a motion of no confidence against Economic and Fiscal Policy Minister Toshimitsu Motegi, Japan's TPP point man.

Tokyo hopes to use speedy ratification of the agreement as a bulwark against a growing protectionist trend in global trade. "We'll show the world that we're flying the free-trade flag," Prime Minister Shinzo Abe told lawmakers Thursday.

The deal will also help Japan deflect pressure from U.S. President Donald Trump to pursue a bilateral trade agreement when the two sides begin talks toward "free, fair and reciprocal" trade late next month. Trump withdrew the U.S. from the TPP shortly after his inauguration in January 2017, prompting the remaining members to rework the pact into its current form.

Once Japan ratifies the TPP, it can invoke the agreement to counter American demands such as further tariff cuts on agricultural and industrial products, refusing to budge beyond the concessions in the multilateral deal. It plans to offer more flexibility elsewhere, including cooperation on energy projects and purchases of defense equipment.

Japan is not the only country shying away from two-way trade talks with Washington for fear that they will be strong-armed into a disadvantageous deal. This has fueled growing interest in the TPP as an alternative offering free trade and transparent rules of the road for business.

Motegi visited Thailand this month to explain the significance of the agreement, and Deputy Prime Minister Somkid Jatusripitak told him that Thailand aims to join "as soon as possible." South Korea, Taiwan, Colombia and the U.K. -- which is looking to get trade deals lined up as it prepares to leave the European Union -- have also expressed interest.

Japan's economic partnership agreement with the EU, set to be signed as early as July and take effect early next year at the soonest, should add momentum to the push for multilateralism. The deal is expected to lift Japan's gross domestic product by an estimated 5.2 trillion yen ($47 billion), nearly filling the gap left by the U.S. withdrawal from the TPP. The current version of the TPP is seen providing a 7.8 trillion yen boost, for a total of 13 trillion yen, not far off the 14 trillion yen estimate for the original.

Japan is also stepping up its efforts on the Regional Comprehensive Economic Partnership, a 16-member trade framework that also consists of China, South Korea, India, Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations. Tokyo will host a cabinet-level meeting in July, the first to be held outside ASEAN.

"It's a declaration of intent that Japan will lead the negotiations to a conclusion," a Japanese economic official said.

Drawing the U.S. back into the TPP is a top trade policy priority for Tokyo. If Washington is left out in the cold and forced to compete on an uneven playing field in many markets, industrial and agricultural interests will demand a return to the fold, the thinking goes.

Along with the geopolitical significance, Japan anticipates benefits to businesses and consumers from the TPP as well.

Lower trade barriers are expected to bolster auto exports. Canada will eliminate its 6.1% tariff on passenger vehicles over four years after the deal takes effect, while Vietnam will scrap a more than 70% levy on large vehicles.

Companies that import food will benefit from cuts to duties on agriculture, forestry and fishery products and processed goods.

Itochu holds a 49.9% stake in Canadian pork producer Hylife Group Holdings, through which the Japanese trading house ships the meat to Japan and other Asian markets. The popularity of such products as herb-fed pork has spurred the company to expand capacity, and the TPP's tariff cuts should provide a further boost.

The deal could also be big news for wine sellers, fellow TPP member Australia is the fifth largest supplier of non-sparkling wine to Japan. Asahi Group Holdings unit Asahi Breweries said it welcomes lower tariffs, noting that climate change has made imported wine more expensive.

The trade deal's impact is less clear elsewhere. Supermarket chain Yaoko  said it remains uncertain about how much the TPP will do to lower prices for imported goods in light of rising shipping costs. The company cited currency trends and fuel prices as factors it must account for in procurement.

Restaurant operator Skylark  does not expect an immediate impact from the TPP, due to its long-term planning for ingredient purchases. The company said it will keep the trade pact in mind as it considers various procurement options.

Yoshinoya Holdings imports meat for its beef bowls mainly from North America. Australian beef is generally grass-fed rather than grain-fed, imparting a distinctive smell that makes it less suited to the company's signature dish. But the tariff cuts could lead to broader use of grain-fed beef or joint purchasing with meat processors, according to Yoshinoya -- either of which would let it reap the benefits.

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