Bloomberg News

Japan May Move on Joining U.S.-led Trade Talks Under Abe

December 27, 2012

Japan’s new government may move to join U.S.-led trade talks as the Abe administration seeks to help exporters and strengthen ties with the nation’s main ally amid rising tensions with China.

“Japan will deepen discussions on the Trans-Pacific Trade Partnership,” Agriculture Minister Yoshimasa Hayashi said at a press conference today in Tokyo. His ministry oversees an industry that has led opposition to the TPP out of concern it would hurt domestic farmers. Prime Minister Shinzo Abe told reporters late yesterday that Japan would “comprehensively consider” joining the talks.

The pact would help companies from Toyota Motor Corp. to Kobe Steel Ltd. (5406) compete with rivals from South Korea, which already has a free-trade deal with the U.S. Obstacles include the powerful farming lobby, a key support base for Abe’s Liberal Democratic Party, as he looks to solidify its hold on power in upper house elections in July.

“Abe is likely to make clear that joining the TPP is part of his long-term strategy,” when he meets U.S. President Barack Obama next year, said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. and a former central bank official. “Still, agriculture has very strong lobbying powers, so entry into negotiations won’t happen until after the upper house elections.”

‘Appropriate’ Decision

JA Group, the nation’s main farming lobby, said in a statement today that it is convinced the LDP will make an “appropriate” decision on whether to join TPP negotiations. On Dec. 17, the group said it expects the new government to oppose joining the talks.

The incoming government has set a priority on a supplementary budget to stoke growth in an economy that’s forecast to shrink for a third straight quarter in the three months through December. Economy Minister Akira Amari told reporters in Tokyo today that the prime minister instructed ministries to submit their requests for emergency economic measures and an extra budget by Jan. 7.

“The LDP will focus on short-term policies to support the economy to gain more popularity, which means they are likely to postpone deciding controversial policies such as TPP,” Kyohei Morita, chief economist at Barclays Plc in Tokyo, said last week after the LDP swept to victory in elections for the lower house of Parliament.

Target Completion

The TPP started in 2005 with Brunei, Chile, Singapore and New Zealand as a pact to open trade of goods, services and government procurement among members, building on the principles of the World Trade Organization. Among its goals are abolishing export duties and subsidies for agricultural goods.

The U.S. aims to complete the TPP talks by the end of next year. Negotiators will meet in Singapore in early March for the 16th round of talks aimed at bringing down tariffs, strengthening patent protection and allowing greater access to government contracts. At the moment, 11 countries are involved in talks -- Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

Abe’s predecessor Yoshihiko Noda didn’t join the talks as his Democratic Party of Japan dithered over the decision to participate in the Asia-Pacific trade bloc that will include demands to eliminate tariffs on protected goods.

After Noda met Obama in Honolulu in November 2011 at the Asia Pacific Economic Cooperation summit, the U.S. released a statement that Noda had said he was willing to negotiate on all of his country’s goods and services in the TPP talks, which Japan then denied.

At stake is Japan’s participation in what would be the biggest U.S. trade deal since the 1994 North American Free Trade Agreement. U.S. automakers have opposed Japan’s participation, arguing the country can’t be counted on to lower import barriers.

To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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