This Monday in a statement made during an interview with The Wall Street Journal, Japanese Prime Minister Shinzo Abe announced that Japan and the U.S. were very close to coming to one their biggest trade agreements yet. The agreement, which will apply to the twelve countries in the Trans-Pacific Partnership (TPP), has been in the works for over five years, and Japan and the U.S. are its two most powerful advocates (Parks). However, several obstacles still remain, both domestically and abroad within the two countries.
You’ve probably noticed that I still haven’t told you what the components of this agreement are. The reason for this is because nobody quite knows with the exception of the actual negotiators what those components truly are. The committee has been quite secretive throughout the drafting of the agreement. Most American politicians are barely familiar with it, having gleaning all of their knowledge from document leaks, and this makes them, especially democrats, nervous. In some cases, even angry. Bernie Sanders recently called the TPP agreement “disastrous” and “written behind closed doors by the corporate world”. He condemned its purpose “to protect the interests of the largest multinational corporations at the expense of workers, consumers, the environment and the foundations of American democracy” (Srinivas). And Sanders isn’t the only one who’s so openly against the plan. According to Lori Wallach, the director of Global Trade Watch, “The opposition to the trade agreement comprises unions, environmental, consumer groups – in other words, the entire Democratic base.” The main source of contention stems from the agreement’s perceived similarities with the North American Fair Trade Agreement (NAFTA), both of which lowered tariffs for American exports. After NAFTA was signed in 1994, the U.S. experienced a mass exodus of jobs, with about 700,000 offshored, most of them in manufacturing (Srinivas). This time, Wallach says, the additional incentives of the TPP’s agreement will cause millions of additional jobs to be lost.
It only makes sense that the American democratic party, which is known for representing minorities and members of the lower class (i.e. the people who would most likely be losing their jobs due to outsourcing), would object to this agreement (Sargent). What’s strange is that Obama himself wholeheartedly supports it, and has even expressed that he will go against the opinions of his fellow democrats in order to get it done. This, oddly enough, has gained him support from many members of the Republican party, which support corporate growth. The Obama administration has promised that, by lowering tariffs for American exports, the agreement will help increase international trade competition, particularly with China. With 98% of American exporters are small businesses, the president expressed in last year’s State of the Union address, new trade partnerships will in fact increase the number of jobs in America: “Listen, China and Europe are not standing on the sidelines. Neither should we” (Srinivas).
Meanwhile, Japan is dealing with its own domestic problems. The country has been struggling with deflation for nearly two decades, and remains mired in weak economic growth. The new approach, which hinges on this deal with the U.S., has been dubbed “Abenomics,” after Prime Minister Abe who created the model. It’s immediate goals include boosting Japan’s domestic demand and gross domestic product, which will ultimately increase inflation and help the country become more competitive in the international market (McBride, Xu). The agreement helps Japan do all of these things by working in tangent with the U.S. to lower the costs of its imports, as well as it’s exports. Lowering the costs of Japanese exports will ultimately make it easier for other countries to buy them, placing Japanese products in higher demand. The same can be said about the U.S. lowering the tariffs on its own exports. Doing so will help both countries compete with China, whose products will remain the same price as the others lower.
Currently the only thing keeping this agreement from happening are some negotiations over rice and auto parts. The U.S. would like to be able to sell about four times as much rice to Japan as its current quota permits, although this would force several Japanese jobs in rice agriculture to fold. Japan, in turn, wants an immediate dissolution of the 2.5% tariff on U.S. imports of auto parts, but with the auto industry having so much influence on American government, negotiators are trying to avoid cutting tariffs for as long as possible (Kajimoto). Ultimately, some compromises will have to be made. “Negotiations can’t work if one side makes no concessions, but there are various domestic restrictions,” Japan Economy Minister Akira Amari summarized in an interview with Japan’s public broadcaster NHK. Prime Minister Abe hopes that he and President Obama can come to a final understanding when he visits Washington at the end of the month (Baker, Hayashi).
Baker, Gerard and Hayashi, Yuka. “Abe: U.S., Japan Close to TPP Trade Deal.” The Wall Street Journal. The Wall Street Journal, 20 April, 2015. Web. 21 April, 2015.
Kajimoto, Tetsushi. “Japan, U.S. Report Progress on Trade Talks, Though Tokyo Stands Tough on Rice.” Reuters. Thomson Reuters, 19 April, 2015. Web. 21 April, 2015.
McBride, James and Xu, Beina. “Abenomics and the Japanese Economy.” CFR Backrounders. Council on Foreign Relations, 10 March, 2015. Web. 21 April, 2015.
Parks, Miles. “Japan, U.S. ‘Close’ to Major Deal.” NPR. NPR, 20 April, 2015. Web. 21 April, 2015.
Sargent, Greg. “Will Massive Trans Pacific Trade Deal Hurt American Workers? Labor Secretary Thomas Perez Pushes Back.” The Washington Post. The Washington Post, 20 April, 2015. Web. 21 April 2015.
Srinivas, Siri. “Trans Pacific Partnership: Obama Ready to Defy Democrats to Push Secretive Trade Deal.” The Guardian. Guardian News and Media Limited, 20 Jan., 2015. Web. 21 April 2015.