USJI Event Is the TPP a Source of Cooperation or Conflict?: Japan s Perspective May 17, 2012 Shujiro URATA Waseda University
1.TPP: Trans Pacific Partnership Agreement Origin: P4 (Chile, New Zealand, Singapore, Brunei) FTA enacted in 2006 High level and comprehensive FTA (21 st century trade agreement) : in principle, 100% tariff elimination, establish rules on IPR, government procurement etc (Enlarged) TPP in negotiation: Began in March, 2010, currently 9 negotiating members (original 4 countries are joined by Australia, Peru, the US, Vietnam, and Malaysia) expected to reach conclusion by the end of 2012 APEC Leaders agreed that TPP is one of three pathways toward FTAAP (Free Trade Area of Asia-Pacific) along with ASEAN+3 (CJK) FTA (EAFTA) and ASEAN+6 (CJK, India, Australia and New Zealand) FTA (CEPEA)
Japan s Position toward TPP and Recent Developments of FTAs in Asia-Pacific Japan has shown an interest in joining the TPP negotiation, but so far it has not been able to commit itself to the TPP negotiations because of strong opposition in Japan Japan is currently conducting preliminary talks with the negotiating members Japan s indication of interest in TPP appeared to have aroused other countries interest in regional integration: Canada and Mexico expressed interest in TPP, China in CJK FTA
FTAAP: Free Trade Area of the Asia-Pacific Efforts under various frameworks ASEAN+3(EAFTA) (ASEAN + JP, CH, KR) ASEAN+6(CEPEA) (ASEAN+JP, CH, KR, IND, AUS, NZ) TPP Current members Vietnam Viet Nam Brunei Malaysia Singapore TPP US A Peru New Zealand Chile Australia ASEAN+1 FTA RCEP Establishment of 3 working groups (for trade in goods, services and investment) in 2012 India China Korea Japan Australia & NZ Japan-China-Korea Launch of negotiations in 2012 FTAAP (APEC) Russia China Korea Japan CH. CH. Taipei HongKong Thailand Brunei Malaysia Vietnam Singapore Philippines Indonesia PNG Australia New Zealand Canada US Mexico Peru Chile (Source: METI, Japan)
TPP: Source of Cooperation or Conflicts? Cooperation: Setting transparent, stable, fair economic rules and systems for establishing business friendly environment, in order to deal with unfair competition by the firms from developing countries Conflicts: Trade liberalization elimination of tariff and non-tariff barriers (e.g. Japan: Agricultural and service sectors, US: Automobiles)
2. Japan s Economic Situation Low economic growth Closed economy Declining and aging population Declining savings rate Growing huge government debt Growing dependence on Asian economies
% GDP Growth Rates 20 15 China Japan United States World 10 5 0-5 -10
$billion GDP of the US, China, Japan 16000 14000 12000 10000 China Japan US 8000 6000 4000 2000 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
% Trade-GDP Ratios 80 70 60 Japan China US World 50 40 30 20 10 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
FDI-GDP Ratios 10 9 8 7 6 Japan China US World 5 4 3 2 1 0
1,000 Japan's Declining and Aging Population 140,000 120,000 100,000 65-15-64 0-14 80,000 60,000 40,000 20,000 0
% Declining Gross Domestic Savings (% of GDP) 40 35 30 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
% Government Debt-GDP Ratios (%) 250 200 150 Japan US UK Germany France Italy Canada 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
60.0 %Japan's Trading Partners 50.0 East Asia ASEAN+6 NAFTA 40.0 30.0 20.0 10.0 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
3. Expected Benefits from FTAs/TPP FTAs in general Achieve economic growth for Japan and the world (WTO negotiations are stalled) Expand export market for Japanese firms (prevent hallowing out of the Japanese economy) Improve investment environment for Japanese firms Obtain energy and natural resources Promote structural reforms in Japan Improve and establish good relationship Provide economic assistance to developing countries
Region-wide FTAs Asia-Pacific (TPP) Establish stable, fair, and transparent business environment by setting economic rules and institutions: 21 st Century-type FTA East Asia (RCEP) Construction and effective utilization of regional production networks Establish market access to region-wide market Assist construction of region-wide infrastructure
4. Strong Opposition from Agriculture Reasons Food security (stable and sufficient supply) Multi-functionality of agriculture Protection of environment Maintenance of culture Maintenance of regional economy Protection of vested interest
High Tariff Agricultural Products (%) Beef Dairy products Wheat Barley Sugar Pork Corn Starch Peanuts Rice Konnyaku potato 0 200 400 600 800 1000 1200 1400 1600 1800
5. Concluding Remarks TPP can be both a source of cooperation and conflicts for Japan and the US Japan and the US can cooperate to establish business friendly environment via TPP Japan and the US should overcome the conflicts by committing to trade liberalization even in sensitive sectors with implementation of appropriate trade adjustment assistance measures
Japanese government has to convince Japanese people that TPP/FTAs would enable Japanese economy to recover and Japanese people to enjoy economic growth The future of agriculture depends on its exports to foreign countries, especially those in Asia, which may be made possible by having high level FTAs such as TPP with Asian countries Question to Dr. Schott: What is required for Japan to do, in order for the US to approve of Japan s joining TPP negotiation?