Japan Ratifies TPP - Can it Keep the Deal Alive?

By concluding approval procedures for the TPP, Japan, which has the second-most-powerful economy in the region, has managed—barely—to keep the partnership alive. The government is calling on other participating countries to ratify the TPP, as well. It is hoped that this will help change the mind of American president-elect Donald J. Trump, who has indicated his desire to withdraw from the agreement. If the United States’ refusal to participate in the TPP becomes a long-term phenomenon, then there is the possibility that this could increase momentum towards a framework which differs from the TPP, or for some version of the TPP which does not include the US. However, it appears that the effects of such alternatives would be limited.

Even after President-Elect Trump made it clear that he would send notification of the United States’ withdrawal from the TPP on the day of his inauguration in January of 2017, top officials within the Japanese government economic agencies indicated that they intend to continue to attempt to persuade Mr. Trump to reconsider. “It may take years to convince him,” one official said, “but Japan will never give up on the TPP.”

In addition to aiming for high-level trade liberalization, such as by ultimately eliminating 99.9% of the custom duties on industrial goods exported from Japan, the TPP is also a comprehensive agreement which fixes rules for such areas as investment and intellectual property. While Japan wants to prevent the agreement from vanishing into thin air, other TPP signatories feel differently. For example, Singapore prime minister Lee Hsien Loong has pointed out that it will be the natural course of action to involve China in the construction of an Asian trade zone if the United States withdraws from the TPP. There are thus preparations being made for exploring a new framework in the event that the TPP stalls.

Now attracting attention is an East Asian regional comprehensive economic partnership (RCEP), which would be led by China and other nations and in which the United States would have no part. It seems likely, however, that there would be a lower degree of liberalization under such a partnership than would be found under the TPP.  It has been pointed out that one “side effect” of the RCEP would be increased Chinese influence in the Asia-Pacific region.

Moreover, if Trump remains consistent in his firm opposition to the TPP, this might endue an America-less TPP with a greater sense of reality. However, based on forecasts that the American withdrawal from the TPP would halve the agreement’s massive economic effects, which were expected to expand the GDP of Japan alone by 14 trillion yen, Prime Minister Shinzō Abe has called the TPP without the US, “meaningless.” For the time being, Japan should hurry to conclude with the European Union the economic partnership agreement now in the final stages of negotiation. But trade policies are difficult to navigate while it remains unclear what Trump’s next moves will be.

Hiroaki Tanabe is a staff writer of the Sankei Shimbun economical news department.

December 10, 2016