Asia-Pacific Policy Papers Series
Politics and Trade Policy in Japan:
Trans-Pacific Partnership Negotiations
By William L. Brooks
Johns Hopkins University The Paul H. Nitze School of Advanced International Studies
tel. 202-663-5812 email: [email protected]
The Edwin O. Reischauer Center for East Asian Studies
Established in 1984, with the explicit support of the Reischauer family, the
Edwin O. Reischauer Center for East Asian Studies at the Paul H. Nitze
School of Advanced International Studies (SAIS) actively supports the
research and study of trans-Pacific and intra-Asian relations to advance
mutual understanding between North-east Asia and the United States.
The first Japanese-born and Japanese-speaking US Ambassador to
Japan, Edwin O. Reischauer (serv. 1961–66) later served as the center’s
Honorary Chair from its founding until 1990. His wife Haru Matsukata
Reischauer followed as Honorary Chair from 1991 to 1998. They both
exemplified the deep commitment that the Reischauer Center aspires to
perpetuate in its scholarly and cultural activities today.
William L. Brooks
Dr. William L. Brooks has been an adjunct professor at Johns Hopkins University since 2009,
after retiring from the U.S. Department of State. For 15 years, he served as head of the U.S.
Embassy in Japan’s media analysis and translation unit, responsible for analyzing the impact of
Japanese media trends on U.S. interests. He had two earlier postings to Embassy Tokyo’s
economic section and also served as a senior research analyst at the State Department’s Bureau
of Intelligence and Research. He has a doctorate from Columbia University and taught history at
the university level before entering government service. Since retiring, he has written two
monographs -- The politics of the Futenma base issue in Okinawa: Relocation negotiations in
1995-97, 2005-2006 (SAIS, 2010), and Cracks in the Alliance (SAIS, 2011) – and is writing a
book on Japanese politics. He also has translated three books of poetry and two philosophical
works. In 2012, he taught at Kyung-Hee University in South Korea during the summer, and in
2014, he was a visiting scholar at Waseda University in Japan during the summer session.
Asia-Pacific Policy Papers Series, No. 18
©2015 by the Edwin O. Reischauer Center for East Asian Studies
Johns Hopkins University–SAIS
1619 Massachusetts Avenue, NW
Washington, D.C. 20036
Tel. 202.663.5812 Fax: 202.663.5940
All rights reserved
Printed in Japan
Cover design by Automated Graphics Systems, Inc.,White Plains, Md.
FOREWORD
The Reischauer Center for East Asia Studies, now in its thirty-first year, has
been committed from its very inception, amidst the turbulence of the 1980s in USJapan relations, to scholarly research on public-policy questions of major
international import. Apart from an annual Yearbook of US-Japan Relations—the
only publication of its kind now existing—we also publish Asia-Pacific Policy
Papers on a wide range of political, economic, and social topics. Our founder,
Edwin O. Reischauer, who was also my personal mentor close to four decades ago,
stressed the importance of overcoming the “broken dialogue with Japan”, and
mutual understanding across the Pacific is always one of our central objectives.
Prospects for the Trans-Pacific Partnership, or TPP as it is popularly known, are a
natural topic for consideration, in terms of our longstanding research priorities. A
US-Japan bilateral agreement on TPP, involving the first and third largest
economies in the world, is crucial to the success of the broader twelve-country
negotiation, which could in turn add substantially to regional and global growth. It
is also crucial to the prospective success of the US-Japan summit talks that now
appear likely to be held in Washington during the late spring of 2015. And the
balance of political forces in Tokyo and Washington is crucial to understanding
what sort of agreement might be possible.
The Reischauer Center is also pleased to be publishing, for the third time,
the research of our own Professor Bill Brooks, one of the most knowledgeable
analysts of US-Japan trade politics in either the United States or Japan. Professor
Brooks, a Columbia University Ph.D., served for fifteen years as the director of US
Embassy Tokyo’s Media Analysis and Translation Section, and has also taught for
the past five years at SAIS, and edited our Yearbook of US-Japan Relations. As the
reader of this monograph will note, Professor Brooks uses Japanese sources
extensively, to paint an insider’s picture of just how both Tokyo and Japanese
society more generally see the TPP issue and how Japanese responses are changing,
under the impact of international pressure, domestic structural change, and the
proactive efforts of the Abe Administration to secure the assent of the Japanese
people at large.
This is a good read, on an important topic. And it is quality research, by one
of the most competent researchers on either side of the Pacific on this topic. The
Reischauer Center is proud to publish Politics and Trade Policy in Japan, and I
hope that the reader will find this work as enlightening and stimulating as I have
done.
Kent Calder
Director
Reischauer Center for East Asian Studies
Introduction: Trans-Pacific Partnership, the New U.S.-led Regional Architecture
Since the mid-1980s, the global economy has been rushing toward regionalism or, more
precisely, regional trade agreements, a major consequence of inadequacies of the current GATT
and WTO regimes, and the inability of the latest WTO effort, the Doha Round, to create new
rules to fill the gaps. This new regionalism, in contrast to early movements that produced the EU,
is occurring everywhere and thus has a global scope. It also goes beyond trade in goods and
services to include finance and foreign direct investment. The movement draws its inspiration, if
you will, from the North American Free Trade Agreement (NAFTA) that the United States,
Canada, and Mexico put into effect in 1994. For the U.S., the Korea-U.S. Free Trade Agreement
(KORUSFTA) that went into effect in March 2012 may be as significant as the NAFTA, for it
not only creates export opportunities and domestic jobs but also is a crucial free trade agreement
linking Asia to the United States.
The next step in building a U.S.-led architecture for the Asia-Pacific region will be the successful
launching of the Trans-Pacific Partnership Free Trade Agreement (TPP FTA), which was
expected to be launched in October 2012, but then was postponed until November 2014. This
again has slipped until at least the spring of 2015. Among the 12 countries seeking TPP
membership, Japan to a great extent has been a stumbling block in its bilateral negotiations with
the United States due to its continued protection of areas in its economy.
In contrast to the formation of the EU and the U.S.’ respective drives to sign landmark free trade
agreements (FTA), Asia’s regionalism has been less orderly – a “noodle bowl” of FTAs – and
almost overwhelmingly market driven. Early on, Japan tried to take the lead in promoting a
regional economy, but it was unsuccessful at the political level (policy driven) and more
successful at the corporate level (market driven). Over the years, Japanese companies have
contributed more to building an integrated economy by building production networks all over
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East Asia than did Tokyo with its various concepts, such as the former ruling Democratic Party
of Japan’s amorphous East Asian Community. The TPP in contrast allows Japan and other Asian
countries to link with the U.S., Canada and other countries across the Pacific in a regional
architecture that is vast in scope and may become the essential conduit for moving beyond
regionalism into a global sphere – a backdoor means of fulfilling the WTO’s original goal in the
Doha Round.
In the General Agreement on Tariffs and Trade (GATT) Uruguay Round negotiations, Japan was
a member of the “core four” group (the United States, the European Union, Japan and Canada),
but in recent years, Japan has barely secured its position following the United States, the
European Union, China, India and Brazil. Japan’s position in the WTO has declined, rendering it
less likely that its claims will be accommodated. In TPP negotiations, however, Japan could be
influential alongside the United States, considering its economic size. Having made a bold
decision in March 2013 to join TPP negotiations, Prime Minister Shinzo Abe of the Liberal
Democratic Party (LDP) continues to be determined to do so as early as possible, but only on
Japan’s terms. This unwillingness to accept deep concessions, primarily in the protected
agricultural sector, has stalled TPP talks in 2014. A bold decision in the end, however, would be
a defining moment for Japan that could set the pace of its active reemergence into the global
arena as a major player. Abe’s predecessor, Yoshihiko Noda of the then ruling Democratic Party
of Japan (DPJ), was equally committed but unable to garner his own party’s support for a final
decision to join TPP negotiations.
If Abe, facing significant domestic opposition, is successful in crossing the LDP’s Rubicon,
which at this writing would seem to be in the spring of 2015, Japan alongside the United States,
as major TPP players in the Asia-Pacific could set the pace and contents of a new regional
architecture that would expand across the APEC membership and ultimately take on a global
scope.
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Defining TPP
An FTA mainly liberalizes trade in physical goods, but the TPP arrangement is different in that it
covers a vast range of goods and services that are now being discussed among participating
countries in 29 working groups. Perhaps it would be better to describe the TPP as an Economic
Partnership Agreement (EPA) that includes a broad area of goods and services, as well as
investments.
Launched in 2006 by Chile, New Zealand, Singapore and Brunei (P4), the TPP was later joined
by the U.S., Peru, Australia, Vietnam, and Malaysia. From the start, the TPP signed by the P4
was an FTA with a high level of liberalization. In contrast to ordinary FTAs, this one was special,
with almost no items exempted from the import liberalization scheme. But similar to other FTAs,
the agreement allowed participants 10 years to implement it. The TPP initiative took off in 2010
after President Obama in a September 2009 speech in Tokyo stated that the United States would
join expanded TPP negotiations. At the APEC conference in Hawaii in November 2011, Japan,
Canada, and Mexico carefully expressed their interest in joining with qualifications. Preparatory
negotiations with TPP members then got underway.
Joining TPP does not necessarily mean toeing the line on the main premise of scrapping of tariffs
on all goods and services. Brunei excludes all alcohol and tobacco products on religious grounds,
while Chile and New Zealand insist on taking 10 years to remove all tariffs on products covering
20-30% of their trade, such as agricultural products, petroleum products, textiles/footwear, and
transport equipment. It is conceivable that exceptions for certain products may emerge in the
respective negotiations of Japan, Canada, and Mexico.
Relevance of the TPP
Is there really a need for still another regional organization like TPP, since so many existing
institutions already exist: APEC, ASEAN plus three, ASEAN plus six and a future FTAAP, not
to mention the RCEP? One reason for TPP is that there are still major gaps in the regional fabric
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of FTAs. For example, Japan has no FTAs with either China or South Korea, or for that matter
with Canada or the U.S.
But what about the fact that China is not a member and has not expressed interest in joining?
Some economists have argued that once TPP countries, including Japan, have established
advanced rules covering the Asia-Pacific region, they will most likely present them to China for
consideration. Chinese companies then will likely comply with the rules as being in their best
interest. China in the end will likely be brought into fold at the stage of TPP expanding to
become the FTAAP, creating economic and political stability in the region.
China at this point, though, has other ideas. It supports another proposed pact that would counter
the TPP. The Regional Comprehensive Economic Partnership (RCEP), introduced at the
November 2012 East Asia Summit, would create an alternate path toward Asian regionalism that
would not include the United States. It would include China, ASEAN, South Korea, Japan,
Australia, India and New Zealand. The goal is to conclude this Asian FTA by 2015, but if TPP is
successfully launched this year, with Japan on board, it would greatly diminish the impetus for
the RCEP as the FTA of choice in the region.
If Japan joins the TPP membership, the significance of the agreement becomes enormous. If the
economic scale of the original eight countries that negotiated the TPP is calculated, they only
make up 0.9% of world GDP as of June 2010. Adding the U.S. to make the TPP 9, the share goes
up to 27% of world GDP. When Japan, Canada, and Mexico are included to make the TPP 12,
the share rises to 39%. This would make TPP the largest trading bloc in the world, compared to
the ASEAN plus 3’s 23%, the ASEAN plus 6”s 27%, or the EU’s 26%.
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Subtracting Japan, the TPP 11 over the next five years will see a rise in nominal GDP of $4.55
trillion. This approaches China’s expected $4.792 trillion, and signifies the easy access through
the TPP to a growth market almost equal to that of China.
Ongoing TPP negotiations
To expedite the TPP agreement, the twelve countries in negotiation have formed 29 working
groups on a wide range of policy issues. For example, negotiations have included a policy to
immediately eliminate tariffs on 95% of a comprehensive list of items, and ultimately for the
ambitious goal of almost all items. Some trade experts argue that even though the TPP purports
to scrap all tariffs without exception, such will not necessarily be the case in the end. The WTO
rules are not absolute about eliminating all tariffs. GATT Article 24 states that “essentially, all
trade” should be tariff-free, leaving a bit of leeway. Among advanced economies, the U.S.,
Canada, Mexico in the NAFTA have scrapped 98% of all tariffs, and the EU in its FTA
eliminated 97%, so there are exceptions. The U.S. in its FTA with Australia exempted such items
as sugar, syrup, and blue cheese. Only Singapore among the TPP members has agreed to scrap
all its tariffs.
The conventional wisdom for FTAs among advanced economies is to eliminate more than 95%
of tariffs. Japan, however, has not met that threshold. In the 12 EPAs it has signed with other
countries, the tariff-eliminating level has barely reached 90% because of the many exceptions for
agricultural products. Doubtless certain exceptions can be expected from TPP negotiations, but
Japan’s low level of tariff elimination demands that it concedes more on agricultural products
than it may wish. Otherwise, the negotiations will end up a futile exercise.
Some observers claim that even in ongoing TPP negotiations, issues specific to the 21st century
have yet to be discussed in depth, the result of conflicting positions among the countries
concerned. There is also the reality of existing economic integration in East Asia based on the
production networks already set up and on the ASEAN countries intention to expand its ASEAN
plus 3 and plus 6 arrangements into a region-wide FTA – an option that Japan might choose,
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even if it joins TPP. China, in apparent reaction to the TPP negotiations, seems to have turned
sharply proactive about advancing the ASEAN-centered negotiations, most recently the RCEP,
and has become less insistent about which Asian countries should participate. When negotiations
start, China can be expected to carve out a role at the center of regional economic integration.
Since Japan in its bilateral EPAs with specific ASEAN countries preserved trade protection on a
wide range of agricultural products, the result was an FTA with a low degree of freedom in tariff
elimination -- an index of FTA quality. As a result, in the ASEAN plus 3 or 6 cases, an East
Asian model has yet to be established. TPP, however, demands a high degree of tariff
elimination that puts Japan on the spot, as it would China, should that country ever decide to join.
Proponents in Japan of joining TPP have an interesting argument that would seem to take Japan
somewhat off the hook in eliminating all tariffs. They cite a general understanding among TPP
negotiators that if countries already have FTAs or EPAs with other countries, there would be no
need to renegotiate. If so, the existing exceptions for the U.S. in its FTA with Australia, such as
sugar and dairy products, would stand. Japan’s hope then would be that in setting common rules
for the TPP agreement, its pre-existing bilateral FTAs or EPAs with six of the TPP countries,
including Singapore, Malaysia, and Vietnam in which rice and other sensitive products are
exempted from having tariffs removed would be honored. At any rate, Japan under Prime
Minister Abe joined the negotiations in mid-2013 in order to affect the rule-setting process
before it was too late.
Since Japan has a relatively low rate of zero tariffs on imported products, 80%, the goal during
the TPP negotiations has been to keep as many of the remaining tariffs or existing exemptions as
possible. In the TPP talks so far, pushback by the U.S. and certain other members like New
Zealand has focused heavily on Japan’s insistence on adhering to its current levels of trade
protection on select agricultural products. For the U.S., auto trade is another stumbling block.
Concerning economic integration in East Asia as well, Japan can never take the initiative in
addressing 21st century issues that TPP is concerned with if it continues to engage in 20th
century-type trade of goods.
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America’s TPP Strategy
Asia has long been viewed by the United States as vital to it trade and security interests. The
Asia-Pacific region is a key driver of global economic growth and accounts for nearly 60% of
global GDP and roughly 50% of international trade. Since 1990, Asia-Pacific goods trade has
increased 300%, and there has been a 400% increase in foreign investment in the region. To link
the Western Hemisphere with Asia and pursue its regional trade interests, the United States has
focused on such multilateral groupings as APEC and such bilateral agreements as KORUS-FTA
– the Korea-U.S. free trade agreement. For the U.S., TPP logically is the next step in building a
true regional architecture encompassing the Asia-Pacific.
Asia, as well, has accelerated its intra-regional economic activity and political and diplomatic
cooperation through such arrangements as the Asian Association of Southeast Asian States
(ASEAN) plus three—China, Japan, South Korea—and the ASEAN plus six (also known as the
East Asia Summit)—China, Japan, South Korea, India, Australia, New Zealand. The U.S.,
excluded from such groups, has been careful to pursue American involvement, with either
President Obama or the Secretary of State attending the annual East Asia Summits since 2010.
But the real thrust of U.S. policy is to take the lead in the region by participating in the TPP,
starting with the negotiation of Free Trade Agreements (FTAs) with New Zealand, Brunei,
Malaysia, and Vietnam. The U.S. currently has FTAs with Chile, Singapore, Australia, and Peru
-- though these agreements could be revisited depending on the outcome of TPP negotiations.
The negotiations for all TPP participants are likely to be complex, given the challenge of
integrating the many FTAs that already exist between some parties.
In essence, in taking the lead in the TPP talks, the U.S. is attempting to create a regional
architecture that APEC was never intended to achieve. Such architecture would be open-ended
and not exclusively reserved for a select list of nations. It would counter but not necessarily
diminish the intrinsic roles of other regional institutions that the U.S. is not part of, such as
ASEAN plus three. By joining the East Asia Summit, President Obama boosted the U.S.’
standing in the region, but the TPP is the real game changer, creating a U.S.-led free-trade
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regime that would bring about qualitative shifts in the trade and investment flows in the region
that APEC tried to do through voluntary commitments but never achieved.
Moreover, TPP is not the U.S.’ ultimate goal; it is a step forward toward to a larger Free Trade
Area of the Asia Pacific (FTAAP) by 2020 at the earliest. This is why it is vital for such
countries as Japan to join the TPP before the rules are set up and have its views reflected in the
outcome.
The participation of the U.S. in the TPP is regarded as a catalyst for other Asia-Pacific states to
join. But the inclusion of Japan a major economic power may have an even more powerful effect
to entice other nations to pick the TPP in order to obtain freer access to Japan’s markets. The
Republic of Korea, for example, may join. It is in America’s best interest to make Japan feel as
welcome as possible as a new member of the TPP club. And the view of TPP as a potential
building block for a future FTAAP is not lost on Japan.
For most observers, the TPP is seen as a U.S. policy response to the rapidly increasing economic
and strategic linkages among Asian states, some of which have excluded the United States. At
the first negotiating session, New Zealand Trade Minister Tim Groser speculated that the United
States would use the TPP “as the primary vehicle for putting the U.S. into the game of AsiaPacific integration.” He added that the value-added of the TPP for the United States would be to
expand to other countries “so it can only make sense in terms of the world’s number one
economic superpower if this is indeed a building block for something larger.”
Some observers believe the TPP membership will expand U.S. trade with Asia while
strengthening U.S. ties with the region across the board. In recent years, while the United States
has remained a leading trade partner for nearly all Asian states, its relative importance as a
trading partner for many Asian states has been declining. The pace of Japan’s trade with China
now surpasses that with the U.S. The fear among some U.S. policy and trade analysts was that
the U.S. was running the risk of being marginalized by not responding to the proliferation of
trade agreements signed in Asia in recent years.
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This concern appears to have been a driving force behind decisions in Washington to more fully
engage the U.S. in Asian regional architectures by using the TPP initiative. By engaging in the
TPP, the United States is changing this dynamic, both by joining this new trading bloc and by
taking the lead in shaping it to be consistent with already-existing comprehensive U.S. FTAs.
The TPP negotiations have become the signature U.S. trade policy under President Obama.
While the United States continues to engage with its trading partners in the World Trade
Organization over the ongoing but stalemated Doha Round negotiations, agreement does not
appear to be within reach. Moreover, owing to various difficulties surrounding each of the
pending FTAs with Colombia, Panama, and Korea, the Obama Administration has only chosen
to bring the one with South Korea to Congress for consideration under its trade promotion
authority. To the surprise of everyone, the KORUSFTA received Congressional approval. The
United States has comprehensive FTAs with four of the existing committed TPP participants, so
for the Obama Administration, negotiation of a comprehensive TPP agreement may present it
with the means to pursue this fresh trade strategy unencumbered by existing trade controversies.
Japan’s TPP Dilemma
There is no doubt that Japan lags behind other major trading countries in signing FTAs, and even
EPAs, its preferred mode, have been slow in coming, though there is one with ASEAN. As of
2011, only 17% of Japan’s trade is covered by EPAs, most of which involves ASEAN. Until
TPP arrived on the scene, Japan concentrated its energy on an EPA with ASEAN plus 6 (Japan,
China, South Korea, Australia, New Zealand, and India). It shied away from bilateral FTAs or
EPAs with such major agricultural exporters as Australia and the United States. For Japan, the
merit of signing an FTA with the U.S. would be the elimination of the tariffs the U.S. imposes on
auto imports (2.5%) and truck imports (25%), but the U.S. would like Japan in turn to end its
protection of the agricultural sector and eliminate certain non-tariff barriers in other sectors, such
as insurance. But these issues are minor compared to overcoming the political clout of the
agricultural bloc in Japan. Moreover, agricultural products are also standing in the way of
Japan’s efforts to sign EPAs with China and the Republic of Korea.
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In the case of South Korea, however, EPAs now account for 36% of its trade, thanks in great part
to agreements reached with the EU in October 2011 and with the U.S. in December 2011. Japan
now fears that such agreements will give Korean companies the advantage now in areas where
Japanese exports are strong, namely, autos and electrical/electronic products.
With a rapidly aging society and fewer babies being born, Japan reasons that it cannot depend on
domestic demand to grow its economy but must rely on exports to survive. The Asia-Pacific
region is its lifeline. In 2010, Japan’s global exports totaled 60 trillion yen, and of that, about
one-fourth was exports to the nine countries already in the TPP. APEC’s 21 countries are the
recipients of 76% of Japan’s exports. In terms of foreign direct investment (FDI), too, Japan
relies on TPP and APEC countries. In 2010, when there were six TPP participants, the
outstanding balance of Japan’s FDI to those countries totaled about 64 trillion yen or 40% of
Japan’s global FDI. For all of APEC, the total is 60% of FDI by Japanese manufacturers.
There is another incentive for Japan to join TPP besides protecting its existing markets: the
dynamic effect of TPP membership on the domestic economy, which has been suffering from
long-term deflation. According to a simulation by the Cabinet Office of the impact of Japan’s
joining the TPP, GDP can be expected to rise by 0.48% to 0.65%. Private economists place the
figure higher. Kenichi Kawasaki estimates that if Japan joins the TPP, the boost to the economy
would be .8% or 4 trillion yen. The Asian Development Bank calculates that it would be about
1%. The most recent simulation by Peter A. Petri and Michael G. Plummer (Petri, 2012; Nikkei,
1/28/2013) estimates that Japan’s joining the TPP would push up GDP by 2% over a 10 year
span, with exports expanding 14% more than if Japan were not a member.
But the immediate benefit of Japan joining the TPP would be the message that would be sent to
other countries that Japan finally is truly opening its markets. The effect would likely be a rush
of investments and skilled and talented labor into Japan from overseas, which Japan needs in
order to help revitalize its economy.
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Part 1: TPP under the Democratic Party of Japan Governments (2009-2012)
Prime Minister Naoto Kan’s TPP Decision Derailed
Japan’s entry into the TPP debate was abrupt and without warning. On October 20, 2010, DPJ
Prime Minister Naoto Kan in a Diet policy speech suddenly touched on his intention to consider
joining TPP negotiations. Kan was noted for his impulsiveness, but this snap decision caught
everyone off guard. He made the statement just prior to the Asia-Pacific Economic Cooperation
(APEC) meeting in Yokohama in mid-November. Initially, there was a bandwagon effect as the
media showed their editorial approval of such a bold move, and politicians made pro-TPP
speeches and comments. For example, then Foreign Minister Seiji Maehara in an October 19
speech stated the case in stark terms: “The share of Japan’s GDP held by the primary sector [i.e.,
agriculture] is 1.5%. In order to protect that 1.5%, do we have to sacrifice the other 98.5%?” He
further expressed a sense of crisis: “Unless we seriously think about opening the country, Japan’s
competitiveness will steadily decrease.”
It took a while for the anti-TPP forces to launch a counter-offense in the press and public forums,
but agricultural and other interests soon went on the attack with their own arguments about how
TPP would destroy Japan’s agricultural sector and other weak industries (See Nakano, 2011, and
Ogura, 2011).
Prime Minister Kan had been ready to announce a positive decision on TPP at the APEC summit
meeting in Yokohama, but faced with strong objections from farm interests, he was forced to
back away. More seriously, the massive earthquake/tsunami disaster and nuclear accident on
March 11, 2011, derailed Kan’s plan to make a final decision on TPP by June – all preparation
work stopped cold -- and the issue languished until Prime Minister Yoshihiko Noda came on the
scene in the fall.
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Yoshihiko Noda Fails to Cut the Gordian Knot of a TPP Decision
Even before he became premier in early September 2011, Yoshihiko Noda was a strong advocate
of Japan joining the TPP negotiations. As prime minister, he put in every effort to build a
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political consensus that would allow him to announce Japan’s participation in the TPP
negotiations at the Asia-Pacific Economic Cooperation (APEC) forum summit that he would
attend in November in Hawaii.
Noda, picking up from his predecessor Naoto Kan, convened a meeting of relevant Cabinet
members to resume the internal coordination process. That work was supposed to be finished by
June 2011, but it had been suspended in the wake of the devastating earthquake and tsunami that
struck northern Japan in March.
Noda found his Cabinet deeply divided over the matter, one group led by Economy, Trade and
Industry Minister Yukio Edano who favored joining the talks, and another led by Agriculture,
Forestry and Fisheries Minister Michihiko Kano, who were opposed. Kano, acting as a protector
of agricultural interests, namely the powerful farm cooperatives (JA), was certain that the freetrade talks would force Japan to open its protected and politically sensitive farm market to a
flood of imports. He believed that the TPP would lead to the total destruction of Japanese
agriculture as an industry.
Noda saw the TPP in other terms. He saw the multilateral free-trade agreement as a boon for the
entire Japanese economy, and believed that the agricultural sector if given sufficient time, could
cope with international competition.
The nine countries then engaged in the TPP talks had set a goal of achieving a broad accord for
the proposed TPP agreement by mid-November, when APEC leaders would gather for the annual
summit. Noda earlier had met with U.S. President Barack Obama on the sidelines of the UN
General Assembly meeting in New York and expressed his interest in Japan joining. He planned
to clarify his government's stance on the U.S.-led trade initiative when he met again with Obama
on the sidelines of APEC (Mainichi, October 2, 2011).
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Noda Seeks to Quell Opposition to the TPP
Noda already had the backing of the business community, led by the Japan Business Federation
(Keidanren), to enter the TPP negotiations. On October 11, Noda met with Nobuaki Koga,
chairman of the Japanese Trade Union Confederation (Rengo), one of the DPJ’s chief
organizational backers, to receive its official concurrence, as well. During the meeting, the Prime
Minister solicited union support, saying that his government would step up its coordination of
efforts in order to announce Japan's participation during the APEC summit meeting. His plate
was already full. "I've managed things safely, but there's a mountain of challenges I have to
overcome, such as an integrated reform of the social security and tax systems and setting Japan's
stance on the TPP. November will be a decisive month," Noda reportedly told Koga (Yomiuri,
October 13, 2011).
On taking office in September, Noda placed top priority on intraparty harmony. But he soon
realized that an early political decision on joining the TPP, an issue which had already split
political and business circles, was bound to set off a storm of resistance. Still, he believed that
time was of the utmost importance. Noda wanted Japan to join the TPP talks as soon as possible
so that it would be in a good position during the rule-setting phase. Under the TPP scheme,
which aims to scrap all tariffs in principle, participating countries would discuss and set rules,
including how many items could be exempt from the elimination of tariffs and whether the rules
would be reviewed a few years later. Once the rules were decided, Japan would have no choice
but to accept them as is. Japan, by entering the talks early, would be able to help set rules that
would allow its buy its weak agricultural sector some time and leeway.
Noda and other advocates of joining the TPP were also motivated by a desire to use membership
as a way of deepening the U.S.-Japan alliance, which had been damaged by the policies of the
administration of Yukio Hatoyama (2009-2010). Prime Minister Hatoyama had emphasized
moving away from the United States and toward Asia, and he promoted an East Asian
Community concept that would exclude the U.S. During a symposium in early October 2011,
Norihiko Narita, a special adviser to the Noda Cabinet, revealed, "When [Prime Minister Noda]
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meets with President Obama again at the APEC meeting, he would find it difficult to say, 'Wait
longer on the Futenma [Okinawa basing] issue' and 'Also wait on the TPP issue'" (Ibid.).
On October 11, Noda convened a ministerial meeting on the Free Trade Area of the Asia-Pacific
(FTAAP) and the nation's economic partnership agreements, the first of its kind since the
administration was launched. During the meeting, Foreign Minister Koichiro Gemba pressed
the government to reach a consensus on TPP participation before the APEC meeting, arguing:
"Discussions shouldn't drag on. We have to make a decision at some stage from a broad point of
view." He was immediately rebutted by MAFF Minister Kano, who insisted, "We shouldn't set a
deadline." The ministers attending the meeting continued to wrangle over the timing of a final
decision on TPP, and ended up without an agreement (Ibid.).
Throughout October, the Noda administration and the DPJ continued to intensify internal
discussions. The ruling party’s leaders wanted to break the logjam over joining the Trans-Pacific
Partnership negotiations by November 2 and draw up a set of proposals incorporating the
opinions of party opponents. The plan was to resolve the issue before Prime Minister Noda left
for the Group of 20 summit meeting in France on November 3-4. The party leadership hoped to
reach a consensus to join the negotiations by integrating various opinions in the party. Such a
strategy was designed to fend off criticism by some DPJ members that Japan was blindly
following the United States in its plan to join the negotiations (Yomiuri, October 23, 2011).
At Noda’s instruction, the government and the ruling Democratic Party of Japan launched fullfledged discussions in October 2011 to reach internal agreement on Japan’s participation in the
TPP negotiations. From the start, however, talks among the members of the Noda Cabinet and
the DPJ remained in disarray. Formal debate, interrupted by the devastating earthquake in
northern Japan in March, began again in the DPJ on October 4, when Policy Research
Committee Chairman Seiji Maehara formed a project team (for the DPJ, project teams or PTs
were an integral part of the decision-making process and consensus building in the party). But
on the same day, the opponents to TPP in the party formed their own study group as a
counterforce. It looked impossible that Noda in only a month would be handed the authority to
14
!
commit Japan to join other participating countries aiming to reach a broad agreement on the TPP
framework during summit talks of the APEC forum November 12-13.
The DPJ Project Team (PT) on Economic Partnership, which was chaired by former Economy,
Trade and Industry Minister Yoshio Hachiro, then held a series of meetings, bringing in experts
to promote the benefits of the TPP, as well as to puncture myths about the feared negative
aspects of joining. Hachiro was picked by Maehara because of his background of having worked
for Nokyo, Japan's association of agricultural cooperatives, as well as for his advocacy of joining
the TPP. The Noda government’s plan was to first hold PT hearings attended by party members
and then, after the proposals were drawn up by the party on November 2 and approved by top
party leaders on November 4, a Cabinet meeting would make the final decision to join. Trying to
convince party skeptics to support joining the TPP, Policy Research Committee Chairman Seiji
Maehara argued that even after Japan entered the negotiations, it could always pull out if Japan’s
interests seemed to be at stake – an oblique reference to the protected agricultural sector.
But at the last moment, Prime Minister Noda backed away. He announced on November 11,
2011, just before the APEC meeting in Hawaii, a carefully worded statement about Japan
possibly taking part in the TPP negotiations following preliminary talks with the participants.
He delivered this message to President Barack Obama and leaders of other countries involved in
the TPP process.
Noda had been looking into formally announcing Japan’s participation in the TPP negotiations
during his visit to the U.S. However, views within the ruling DPJ after a month of debate
remained deeply divided. Noda apparently decided that if he went ahead and made an
announcement on participation anyway, it could lead to the collapse of his administration. In
practical terms, too, the Noda government was unable to work out the details due to all the
domestic issues that needed be dealt with, including integrated reforms of the tax, fiscal, and
social security systems, and the issue of resuming operations at offline nuclear power plants
following 2011’s nuclear accident.
15
!
The DPJ, when it came to making tough policy decisions, seemed perfectly happy to
exhaustively debate the issues, as if it were still in the opposition camp of the Diet, but when it
came to making a final decision, it could not reach a consensus, nor was it willing (as was the
LDP later on the TPP issue) to give the Prime Minister a free hand. In that sense, the DPJ never
seemed to act as a responsible ruling party on key issues of national interest (Interviews in Tokyo,
2012, 2013).
16
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DPJ Skeptical of Jumping into TPP
On October 11, the DPJ's economic partnership project team held an executive meeting, but as
expected, encountered difficulty coordinating different views on the TPP within the ruling party.
Although future measures to reform agriculture have been viewed as the key to the nation's
stance in the multinational trade scheme, opponents argued that the sector would be hit hard by
the elimination of tariffs and may not survive. The day before, Noda visited rice farmers from
Gunma Prefecture and said his government would work out a basic policy and action plans by
the end of this month to enhance competitiveness of the farm and fishery industries. But such a
promise apparently did little to persuade TPP opponents within the DPJ (Yomiuri, Oct. 13, 2011)
The DPJ’s Project Team (PT) completed its series of hearings on October 24. The Noda
administration discovered from them that some of the objections to Japan’s TPP participation
stemmed from sheer misunderstandings in the areas of food safety, medical/insurance, foreign
professionals, and the labor market. It countered by preparing a list of frequently asked questions
designed to clear away the myths that had grown up about the impact of TPP on Japanese
markets and systems.
The most formidable of the anti-TPP forces came from agricultural interests. The Japanese
Agricultural Coops (JA) announced that there were at least 350 Diet members supporting JA’s
objection to TPP participation. Former Agricultural Minister Yamada, who headed the anti-TPP
DPJ group, persuaded former Prime Minister Yukio Hatoyama to meet with Noda to request that
he slow down the process. The opposition camp also expressed their reservations. Yoshihisa
Inoue, Party Secretary of New Komeito, made it clear that his party objected to Japan’s early
participation in the TPP negotiation, while LDP leaders accused the Noda administration of
rushing to reach a decision on participation without disclosing the full information necessary for
making a deliberate decision.
Although it says that it protects agricultural interests, JA mainly acts to protect its own interests,
which include banking, insurance, agricultural retailing and wholesaling, and supplying farm
materials and machinery. Its gross profits reach 2 trillion yen a year, and more than half of all
17
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agricultural goods in Japan are marketed through JA cooperatives (4.3 trillion yen in 2007). The
deposits in JA banks total 86 trillion yen (2010), making JA the second largest megabank in
Japan (See Mulgan, 2011). Recent government efforts to drastically reform its national structure
have been resisted strongly by JA.
Countering JA, Noda argued that the government should make the nation's agriculture sector
internationally competitive as quickly as possible so it could survive trade liberalization. He
wanted reform measures to be hammered out prior to his final decision to participate in the TPP
negotiations. When he visited the farming village in Gunma Prefecture, he expressed his
intention to work out a basic policy to strengthen the agriculture sector by the end of the month.
Noda’s desire to rescue agriculture needed more than promises made in the paddies of Gunma.
The foundation of Japan’s farming industry was crumbling fast. The average size of land held by
farm households was miniscule, only two hectares on average (a hectare is 2.471 acres or 10,000
square meters). Fifty-five percent of farmhouses have less than one hectare of farmland.
Productivity is extremely low because many of the farm households are so small. Moreover,
farmers are aging -- the average age is 66 -- and they face a severe shortage of successors.
Abandoned farmland around the country totals 400,000 hectares, equivalent to the size of
Saitama Prefecture south of Tokyo.
Such a reality makes Japanese agriculture vulnerable when competing with such agrarian
countries as the United States that have huge swaths of farmland and high productivity. The
Noda government knew that agriculture reform must include creation of a system to consolidate
small plots of farmland by promoting sales and leasing of farmland, and by utilizing dormant
farmland efficiently.
In an interim report compiled in August, the government's Council to Promote the Revitalization
of Food, Agriculture, Forestry and Fisheries proposed an increase of 20- to 30-hectare farms,
more than 10 times the current average size, in the next five years. But at that time, a blueprint to
reach such an ambitious goal did not exist.
18
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One scheme, proposed by the Agriculture, Forestry and Fisheries Ministry was to start providing
subsidies to farmers lending land, so that the farmland of aged farmers and others could be
consolidated and put into the hands of younger farmers willing to engage in large-scale
agriculture. The ministry included 6.6 billion yen for the project in its budget request for
fiscal 2012. The project was aimed at encouraging farming households with a low
profitability margin to quit farming. However, the small size of the budget request
made the project's effectiveness questionable.
Noda’s plan clashed head on with another DPJ scheme to assist the farm sector -- a system of
subsidies that supported the incomes of individual farm households. This was a key campaign
pledge by the DPJ in the 2009 election. This dole-out measure was provided directly to all farm
households who agreed to join a program to reduce rice production that was administered by the
Finance Ministry. This created a situation where even tiny farm households that should not even
be in the business continue to farm in order to receive subsidies.
Although the DPJ, the main opposition Liberal Democratic Party and its one-time coalition
partner, the New Komeito, agreed to review the income compensation system in the
future, nothing was done during the time that the DPJ was in power. In the meantime, the farm
ministry continued to include 800 billion yen for the income compensation program in its budget
request each fiscal year. Another issue that the DPJ skirted was the system of taxation that
treated farmland more leniently than residential land, again keeping marginal farmers in business
(Yomiuri, October 13, 2011).
The OECD in September 2014 issued a report evaluating agricultural policy among the member
countries. Japan turned out to be second, after Norway, in the share of government assistance
(subsidies and the like) to farm income. Between 2011and 2013, Japanese farmers received 54%
of their income in the form of government subsidies. This figure is actually slightly less than that
in
the
1980s
and
1990s,
but
it
still
is
three
times
the
OECD
average
(http://www.oecd.org/tad/agriculturalpolicies/producerandconsumersupportestimatesdatabase.htm).
19
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Farmers Protest against TPP
Noda Tries to Walk a Fine Line
In order to sooth TPP opponents, Prime Minister used indirect language when he said the
government would join talks on the TPP agreement during a news conference on November 11.
"The government will start talks with related countries toward participation in the TPP
negotiations," Noda said. Regarding the importance of Japan's joining the talks, Noda noted, "It's
meaningful for Japan to open up frontiers in the Asia-Pacific regions as a trading and investing
nation." He believed that Japan's participation in the TPP would be the last chance for Japan to
revitalize its economy. But knowing that his position was precarious, he cautiously said, "We
will protect what we should protect, and win [concessions] we should win."
Noda carefully coordinated opinions inside the government and the ruling coalition parties. He
postponed his decision on the TPP for one day on the 10th, and consulted with senior DPJ
officials about the statement he was going to make during the press conference on the 11th,
listening carefully to their opinions. The morning of the conference, he also consulted with DPJ
Secretary General Azuma Koshiishi and Agriculture, Forestry and Fisheries Minister Michihiko
Kano about what he would tell the press later in the day. As a result of the consultations, Noda
decided to avoid expressing his own feelings that Japan had no choice but to join the TPP
negotiations to rehabilitate the economy after two 'lost decades' of economic stagnation, By
using indirect language, Noda expressed his intention to join the TPP talks, but at the same time,
20
!
he managed to give DPJ opponents the impression that Japan would be joining only the
consultative stage before the actual negotiations began.
His careful wording calmed down opponents of the TTP agreement for the time being, but the
feud in the Diet was expected to flare up again. He knew that a number of other stumbling blocks
had to be surmounted before Japan could even enter substantive negotiations on the free trade
pact.
Critics of the TPP within Noda’s DPJ and the opposition parties had intensified their attack,
claiming the pact would destroy certain sectors, particularly agriculture. They not only forced
Noda to delay his announcement by a day, but some even claimed victory, citing Noda's vague
statement on Nov. 11. Proponents of the TPP disagreed, saying Noda's words still showed he
clearly intended to join the negotiations.
Noda and the TPP Nine
While Noda faced formidable opposition at home, there were external factors that he had to
contend with, as well. Talks already underway involved 21 subjects, such as abolishing tariffs,
rules governing financial services, and electronic commerce. Japan would have to clear all of
these hurdles during negotiations. Moreover, Japan first needed to gain approval of each of nine
countries then involved in the TPP talks--Singapore, Brunei, Chile, New Zealand, the United
States, Australia, Peru, Vietnam and Malaysia--before it would be allowed to join official
negotiations to work out details of the pact.
The process was not expected to be time-consuming in some countries, such as Chile and
Australia, where Cabinet approval or some other form of endorsement was said to suffice. But in
the United States, Congress would have to approve, and that process was expected to take 90
days. And before submitting Japan’s bid to join to the Congress for approval, Tokyo and
Washington would first have to hold bilateral talks, which Foreign Minister Koichiro Genba then
said would take "two or three months." Once all these procedures were completed, Japan could
then join the TPP negotiations, which the Noda administration calculated would be in the spring
of 2012 at the earliest. In late November 2011, when Noda was entering the consultation process,
the TPP countries had already held five rounds of negotiations, aiming to reach a final agreement
21
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around the middle of 2012 on details of the framework. That scenario was not to play out,
however. For example, talks on eliminating tariffs were already stalled as negotiators clashed
over protection of certain industries in their countries.
Tough Opponents at Home and Abroad
Another problem was whether Japan was fully prepared to engage in tough negotiations. The
Japanese government did not have an office that handles all international trade talks, unlike the
United States, which has the Office of the U.S. Trade Representative, then headed by Ron Kirk,
and South Korea, which has trade bureaus under the Ministry of Foreign Affairs and Trade for
that purpose. The Japanese Foreign Ministry would have to serve as the organizer of economic
partnership agreement talks, but it could not also be the chief negotiator. Officials from the farm
ministry would be the negotiators if tariffs on agricultural products were involved, and officials
from the health ministry would join the Japanese delegation if the talks concerned medical
products.
This situation did not faze Noda, who viewed the TPP as a key to revitalizing the Japanese
economy. He told the Diet Budget Committee on November 11 that his negotiating team would
comprise officials from various government ministries and agencies. But he also stressed: "I am
going to be the control tower."
Although the negotiators may reach agreements, ratification must come from within the
participating nations before the deal can go into force. For Japan, ratification of the TPP would
require the endorsement from a majority of Lower House members.
DPJ members opposed to Japan's participation in the TPP negotiations watched Noda's televised
news conference at a room in the Diet. "I was relieved," said Masahiko Yamada, a former
agriculture minister and a staunch opponent of the TPP. "(Noda) did not go as far as to announce
Japan's participation in the TPP talks, but stopped at entering consultations." Kazuhiro Haraguchi,
former internal affairs minister, said Noda's words were what he and others wanted to hear. "The
prime minister did not reach a decision," he said. "That is the answer (we wanted)."
Earlier on Nov. 11, Yamada and other opponents collected signatures of about 140 DPJ members
to call on Azuma Koshiishi, the party secretary-general, to hold a meeting of party lawmakers of
22
!
both Diet houses, more than the required one-third, to underscore their protest. But they were
also careful about not going too far in their opposition because their group strength was not
enough to sway the DPJ by threatening to collectively bolt from the party. They also
acknowledged that leaving the ruling party would weaken their political clout. They told the DPJ
leadership in a memo that entering consultations and participation in the TPP negotiations were
two different things.
Noda’s vague statement thus was meant to minimize discontent among DPJ opponents, including
former farm minister Masahiko Yamada and those who threatened to leave the party. "Prime
Minister Noda didn't say the government would join the negotiations," Yamada said after Noda's
press conference. "He said only that Japan would join 'pre-negotiation negotiations.' He accepted
proposals by the DPJ and stopped short at the end." As a result, Yamada told reporters he would
not leave the party (Yomiuri Shimbun, Nov. 13, 2011).
April Summit Meeting that Fizzled
Ahead of Prime Minister Noda’s visit to Washington for an April 30 meeting with President
Obama, anti- and pro-TPP campaigns heated up in Japan. Consumer organizations and
agricultural coops organized a rally in Tokyo’s Hibiya Park where 3,000 protestors expressed
their fears that joining TPP would spell ruin for Japan’s farmers who would be unable to
compete in the international market. JA Zenchu and other agricultural groups even took out a full
page alarmist (yet totally ineffective) advertisement in the April 24 issue of the Washington Post,
aimed at Americans, to warn them that jobs would be lost, living standards lowered, and
economic inequality increased once the TPP went into effect. Japan’s business sector countered
with its own statements touting the economic benefits that would come to the country if it joined
the TPP.
From a policy perspective, it was somewhat surprising that the DPJ became so divided on the
question of Japan’s joining the TPP. Although it was never fleshed out, the 2009 Manifesto
(campaign pledges) of the DPJ contained a proposal for a free trade agreement between Japan
and the United States. One would assume from that pledge that in theory the party was on board,
but like other parts of the Manifesto that fell by the wayside, including the amorphous concept of
23
!
an East Asia Community (EAC), when it came to implementation, the devil was in the details.
When the idealism of the DPJ as seen in its Manifesto confronted the realism of the party facing
the real possibility of an FTA with the U.S. -- not a pipe dream slipped into a campaign
manifesto but a reality in the form of the TPP -- the party split into two camps and never found a
way to reach a compromise.
Following their summit meeting April 30, President Barack Obama voiced support for Japan
joining talks with the United States and eight other countries on a free trade agreement in the
fast-growing Asia-Pacific region. But he added that no final decision had been made. "We
instructed our teams to continue our consultation regarding Japan's interest in joining the TransPacific Partnership, which would benefit both our economies and the region," Obama said at a
joint news conference with Prime Minister Noda.
Although Prime Minister Noda in his summit meeting with President Obama refrained from
bringing up two items – TPP and the controversial relocation of a U.S. base in Okinawa – the
issue of U.S. natural gas exports to Japan appeared high on the agenda. The President promised
to continue shipments, for the U.S. is making an exception in Japan’s case due to its energy crisis
following the nuclear power plant accident in the earthquake/tsunami disaster in March 2011.
Normally, the U.S. would only agree to export LNG to countries with which it had a free trade
agreement. This time, Japan’s post-earthquake predicament took precedence. Once Japan joins
the TPP free trade agreement, however, it can calculate that LNG shipments from the U.S. will
continue for the foreseeable future.
In joining TPP, Japan first has to get approval through bilateral negotiations from all nine
existing members of the agreement. In Japanese eyes, though, only the approval of the U.S.
really counts. If Japan were to join the TPP, it and the U.S. would make up 90% of the GDP of
all 10 members. So in effect, Japan is negotiating an FTA with the U.S. where the stakes may
include the future of Japan’s stable supply of U.S. energy resources.
24
!
Noda Designs Major Overhaul of the Agricultural Sector
Much has been made of LDP Prime Minister Abe’s plan issued in 2013 to structurally reform the
agricultural sector in order to make it more competitive, but the DPJ under Noda had the same
notion, also linked to TPP, and began the same process.
Although Noda could not reach a final decision on joining TPP negotiations at the APEC
meeting in November 2011, he knew that it would only be a matter of time. He thus set in
motion in early 2012 a policy initiative that aimed to modernize Japanese agriculture. He ordered
his government to draw up plans that would drastically expand the area of farmland per farm
household. Increasing the scale of farming was seen as indispensable to enhancing the
international competitiveness of agriculture in an age of global trade liberalization, starting with
the TPP Agreement. But expanding the size of acreage per farm household had long been a
challenge for postwar Japan that previous governments had tackled but failed to achieve any
progress. Noda started that ball rolling again. (Yomiuri, January 10, 2012).
Goal of 80% Large-scale Farms in Five Years
The average amount of land cultivated per farming household is about 2.2 hectares or about 5
acres. This figure does not even compare with the amount of land per farm in the U.S., which is
10 times that acreage, and Australia, which is well over 1000 times that. Since both the U.S. and
Australia are participants in the TPP talks, there would be no way for Japanese agriculture to
compete without a rapid increase in the economy of scale of domestic production
.
Noda’s plans called for increasing the number of large-scale farming households with more than
20 hectares of area under cultivation on flat land and those with more than 10 hectares in
mountainous regions. The amount of farmland owned by large-scale farmers is now only about
30% of all farmland. The government’s goal was to raise this figure to 80% within five years.
25
!
The fourth national supplementary budget for fiscal 2011 and the fiscal 2012 national budget
included approximately 130 billion yen for related budgets, such as one establishing a system of
providing cooperation subsidies to marginal farmers who abandon farming. The envisaged
system is intended to provide 300,000 yen to 700,000 yen to small-scale farming households that
decide to leave farming. The government earmarked 6.5 billion yen in the fiscal 2012 budget. It
also earmarked 10 billion yen in the fiscal 2012 budget for additional subsidies to cover 20,000
yen paid to farmers who expand their farmland.
On the tax front, the government incorporated in the fiscal 2012 tax system revision guidelines a
preferential treatment system applied to the gift tax so that farmers would find it easier to
abandon their farmland. Those who were given farmland by their elderly parents are allowed to
postpone their tax payments provided that they continue farming. If they lease the farmland to
others, the preferential treatment had been suspended up until then. However, under the new
system, even if they lease the farmland to others, they would be entitled to postpone their tax
payments.
The government calculated that expanding the scale of farmland would visibly improve
management efficiency. Buying pesticide or fertilizer in bulk would help reduce farming costs.
Farmers also would find it easier to introduce large tractors and other farming machines.
According to an estimate made by the Ministry of Agriculture, Forestry, and Fisheries (MAFF),
producing 60 kilograms of rice (1 bale) costs a farmer with 0.5 hectares of farmland 21,712 yen,
but the cost would be only 10,374 yen for a farmer with 15 hectares of farmland.
Still, whether the government’s new policy alone would be enough to bring about massive
farmland consolidation was unclear. It is estimated that meeting the government goal would
require to consolidate a total of 2.9 million hectares of farmland. However, even if 10 billion yen
in farmland expansion subsidies are spent a year, only 50,000 hectares of farmland can be
consolidated, or 250,000 hectares in five years – not enough to seriously reform the sector.
In addition, both the farmland expansion subsidy system and the farmland consolidation
cooperation subsidy system lacked binding power. The government hoped to build a
26
!
comprehensive consensus in the farm sector toward farm acreage. However, Nihon University
Professor Kiyohide Morita, a farm management expert, pointed out: “It is impossible for the
government to meet the goal under the existing system. It will be necessary for it to make a
political decision that will involve drastic reform, such as nationalizing farmland temporarily and
then redistributing it”(Ibid.).
Rice Market in 2012 Ripe for Reform
This is not to say that market forces were not already making an impact on parts of the protected
domestic market. For example, imported rice has gradually been making its presence in the
Japanese market as domestic rice prices rose following the massive earthquake and tsunami in
2011.
Moreover, chain restaurants also began featuring foreign rice, anticipating Japan’s
eventual membership in the TPP Agreement and the likelihood that cheap rice would begin to
flow in from overseas as Japan lowers its tariff barriers. The Seiyu supermarket chain started
selling rice from China’s Jilin Province at its 149 outlets in the Kanto region and Shizuoka
prefecture. Chinese rice is selling well since it is about 20% less expensive than the cheapest
domestic product – a blend priced at 1,650 yen, according to Seiyu.
An increasing number of restaurant operators also have introduced imported rice. Kappa Create
Co., an operator of a sushi restaurant chain, for instance, has been using U.S. rice at one of its
outlets in Saitama City since January 2012. Matsuya Foods Co., which runs gyudon beef bowl
restaurants, followed suit in February, by mixing domestic and Australian rice at about 70% of
its eateries (Yomiuri Shimbun, April 6, 2012).
Despite a good harvest in 2012, domestic rice prices soared in part because producers have been
developing brand-name rice that can be sold at higher prices. The result has been a shortage of
low-priced rice in the market. Developing new rice brands was meant to encourage people to eat
more rice, but the efforts not only drove up retail prices, it accelerated a tendency of people's
reluctance to consume rice (Yomiuri, November 27, 2012).
27
!
The increase in rice brands is not the only factor contributing to the hike in overall rice prices.
Prices for traditionally low-priced crops are also rising. For instance, the price of Fukushima
Prefecture-produced Hitomebore rose 20 percent to 15,929 yen. The rise in prices is believed to
have been caused by an increased demand for rice resulting from restaurant operators' attempts to
buy rice at the lowest price possible.
Ironically, as Japanese domestic rice became more expensive, mainly due to the developing and
growing of delicious brand rice, imported rice prices skyrocketed in 2012. As domestic rice
prices surged, market forces also pushed up prices of imported rice, which had been popular for
its affordability. When the agriculture ministry opened bidding for imported rice in early
November 2012, there was an unexpected rise in domestic demand. Chinese- and U.S.-produced
polished, short-grain rice fetched prices that topped the September trading price for domestic rice
(308 yen) at 312 yen and 310 yen per kilogram, respectively--an extremely rare situation (Ibid).
The trend has continued.
Currently, demand for rice in Japan is approximately 8 million tons. How much of this demand
could foreign rice replace, should rice be liberalized? Japanese consumers almost exclusively eat
short-grained Japonica rice, while most of the rest of the world consumes long-grain and
medium-grain strains. California’s total production of rice (un-milled) is 2.3 million tons, or 22%
of U.S. rice production. Of this, 170,000 tons are short-grained Japonica rice, with another 2.1
million tons being medium-grained (USDA, 2004 statistics). How much more Japonica rice can
California produce? California is now going through a serious water shortage, so expansion of
rice production may be difficult. Moreover, domestic demand for short-grained rice, due to the
popularity of sushi and the Japanese cuisine, is growing. If Japan began to import California rice,
it is unlikely that the volume would be enough to disrupt the domestic market (Fuse, 2012, pp.
66-67).
28
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Part 2: The LDP Returns to Power and Tackles TPP
Abe Aims to Cross the TPP Rubicon
In December 2012, the Liberal Democratic Party (LDP) crushed the DPJ in a Lower House
election and came back into power, along with its coalition partner, the New Komeito. Shinzo
Abe also came back for the second time as Prime Minister, this time with a solid economic
policy agenda that included Japan’s membership in the TPP.
During the election campaign in December 2012, the LDP cautiously pledged that the party
would approve Japan’s joining the TPP if certain sensitive products were exempted from the
zero-tariff requirement. Upon taking office as prime minister, Abe kept the same policy line,
anticipating the upcoming Upper House election in July 2013. His initial policy speech to the
Diet in late January was bold on fiscal and monetary measures to restore a strong economy and
pull Japan out of years of deflation and sluggish growth. But conspicuous by its absence was any
mention of the TPP. He wanted to avoid the same kind of damaging split the DPJ had
experienced earlier over the TPP and other issues. For example, on January 23, 2013, a total of
203 LDP lawmakers expressed their opposition to the TPP at a meeting at LDP Headquarters.
Abe, however, believed that joining the TPP was in Japan’s national interests and would help
reboot the long-ailing economy. He was careful, though, telling the Diet in late January 2013 that
Japan would not participate in the TPP as long as the pact was premised on the elimination of all
tariffs without exceptions. This was taken as meaning that Japan by joining the negotiations
during the rule-setting phase, could press for continuing to protect sensitive agricultural items
like rice and sugar.
Abe quickly laid the groundwork to bypass party activism. He selected and then chaired an
Industrial Competitiveness Council that began deliberations on January 23 on a national growth
strategy. Not unexpectedly, TPP was high on the Council’s agenda since key members from the
private sector favored Japan joining it. The new growth strategy being drafted also not
surprisingly contained bold measures to modernize Japan’s agricultural sector through
29
!
deregulation and farmland consolidation, allowing corporate entities the legal right to enter the
agricultural business that had been lacking.
Meanwhile, the LDP since early in the year was actively setting the ground rules for Abe’s
expected decision on whether or not to joint TPP negotiations. Before he could make the
decision, Abe had to overcome the barrier – which the DPJ tried and failed to achieve – of
coordinating the views of the members of the LDP, which was split pro and con about joining the
TPP pact. In late February, the Committee on Regional Diplomatic and Economic Partnerships
(chaired by former Lower House Vice Chairman Seishiro Eto) adopted a resolution that listed six
items as national interests to be protected in the talks. The Abe government took these as
references in making a decision on TPP.
The first and most important item in the resolution was to designate as “sacred areas” not subject
to zero tariffs were certain farm products. The resolution stated:
“In the event that the country takes part in the talks, top priority must be given to securing sacred
areas (vital interests) for five sensitive items in the agriculture, forestry and fisheries area and the
universal health insurance system, in particular. If it is deemed that it will not be possible to
secure such areas, Japan should not hesitate to withdraw from the talks (Tokyo Shimbun, March
4, 2013)”.
The remaining five items, such as safety standards for automobiles, keeping the universal health
insurance system intact, and securing food safety, were thrown in pro forma and have little to do
with the actual negotiations. Since it is only natural for any sovereign state to adopt such
principles, the remaining five items could be easily confirmed during the talks.
The resolution explains to a great extent why the Abe government during the substantive talks
with USTR negotiators that were to occur later was so persistent on certain agricultural items. It
had to show the LDP that it was being faithful as best as it could to the protectionist goal laid out
in the resolution or “withdraw from the talks.”
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!
Abe’s initially planned to come up with a policy decision on TPP before the House of Councilors
election in the summer of 2013. He in fact sped up the process and committed Japan to entering
talks on March 15, 2013. He realized that the window for entering during the rule-setting phase
was growing shorter, and was aware that the U.S. was beginning to show its impatience with
Japan’s inability to make a decision since 2010.
Abe also realized that the timing was right with the public for making his decision. His
popularity was high, and most Japanese were supportive of his policies. According to a Yomiuri
Shimbun public opinion poll carried out March 15-17, the Abe Cabinet received a 72% support
rate. Other polls had a similar level. The Yomiuri survey found 60% of Japanese approving the
Prime Minister’s decision for Japan to participate in the TPP talks. But the public also showed
Abe where they drew the line. On the question of whether rice and certain other agricultural
products should be exempted from trade liberalization if Japan joined the TPP talks, 62% said
“yes.” When it came to farm products, a majority of the Japanese public had a protectionist
streak (Yomiuri, March 18, 2012).
Abe has placed TPP negotiations within the conceptual framework of the “third arrow”
(structural reform) of his “Abenomics” policy agenda. Even the protectionist farm lobby in Japan
has come to realize that structural reform is necessary if farming is to survive in Japan as a viable
industry. But to reach that stage over time, it is demanding protection by at least being able to
retain tariffs and quotas on sensitive agricultural products.
Thus, even though Abe had a free hand to commit Japan to enter the TPP talks, the Prime
Minister was constrained by what the LDP was willing to let him offer as concessions. In return
for Japan’s participation in the TPP negotiations, the LDP decided on March 4 to ask the
government to designate rice, sugar and other products making up 10% of tariff items as
“exceptions” from trade liberalization. With the House of Councilors election approaching that
summer, the party set a high hurdle to show that it was giving consideration to agricultural
groups and other organizations. Abe could not ignore these demands, but because the TPP aims
at 100% free trade in principle, there was little chance that the LDP would see those demands
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!
hold once negotiations began (Nikkei, March 5, 2013). Only the secrecy of the talks per se
allowed Abe’s negotiators to offer concessions.
The LDP’s recommendation was drawn up by a new TPP committee (chaired by Koya
Nishikawa) set up on March 1 under the “headquarters for the promotion of diplomatic and
economic partnership,” reporting directly to the party president, created on the same day. The
committee held its first executive meeting on March 5 to kick off the deliberation process. Its
main topics included the selection of goods to be exempted from tariff abolition and measures to
support agriculture. The committee sought to have all 834 agricultural, forestry, and fisheries
products exempted so far from tariff abolition under Japan’s economic partnership agreements
(EPA) with 13 countries and territories be designated as exceptions as well in the TPP talks.
They make up around 10% of all tariff items.
The government was willing to set rice and sugar as its top priorities, but officials took the view
that less than 2% of the 834 exceptions would be allowed. The LDP’s proposed goal of 10% set
the hurdle too high for the government to accept or to use in negotiations as the bottom line.
The committee also was charged with spelling out recommendations for maintaining safety
standards for automobiles, protecting the universal health insurance system, and other conditions
included in the LDP’s campaign pledges for the recent House of Representatives election. It also
recommended caution in dealing with the issues of the extension of the patent term for
pharmaceuticals, which the U.S. was reportedly demanding, and reciprocal recognition of
licenses for doctors, public accountants, and other professions -- items not included in the
election pledges.
The executive meeting on March 5 set up three more bodies under the committee and decided on
procedural and personnel matters. Committee members were later sent to countries participating
in the TPP talks during the Golden Week holidays in early May or after the Diet adjourned. The
LDP planned to collect information on the negotiations and engage in parliamentary diplomacy
in order to form united fronts with other countries.
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!
The committee enlisted former cabinet ministers and faction leaders as members -- a
heavyweight lineup in order to deal with the anticipated coordination process from then on. The
party had to have enough clout to deal with those local organizations and industrial groups still
strongly opposed to the TPP.
Insurance Policy for Affected Farmers
Foreseeing a drop in agricultural production and food self-sufficiency once Japan joined the TPP,
the Abe government immediately began to study an “insurance system” to compensate the
income of farmers who would be affected once Japan formally joined the TPP agreement. This is
because calculations released by the government on March 15 showed a decline in agricultural
production to the tune of 3 trillion yen once TPP kicked in. The estimates were based on the
assumption that all tariffs on imported goods would be abolished among the countries
participating in the TPP talks.
Government calculations showed that if Japan joined the TPP, its GDP would grow by 3.2
trillion yen each year for the next 10 years. Exports of cars and other products would increase.
Wages would also increase, resulting in a corresponding increase in consumption. Domestic
agricultural production would drop by about 3 trillion yen due to competition from imported
products. The food self-sufficiency rate in terms of total calories would also plunge from the
present 40% to 27%.
The estimates also took other competitive factors into account. For instance, a survey conducted
by the Japan Finance Corporation showed that around 10% of consumers would still buy
domestic agricultural products even if they were 30% more expensive than imports.
Rice production would be hit hard, decreasing by 1.1 trillion yen. Of the total domestic rice
production of 8.5 million tons, 2.1 million tons would be replaced by U.S. rice and 600,000 tons
by Australian rice, according to the government’s estimates. Sugar would be the hardest hit
product. Domestic sugar would be completely replaced by Australian sugar, which is one-third
the price and no different in taste and quality. Starch and wheat would be replaced completely by
33
!
imported products, while the same would also happen to beef and pork, except for certain
specialty products.
The farm ministry in November 2010 issued estimates showing agricultural, forestry, and
fisheries production would suffer a decline of 4.5 trillion yen. The new estimates replaced that
report, since it was based on the assumption that tariffs would be abolished for all nations in the
world and contained other exaggerations (Asahi, March 23, 2013). Japanese farmers have been
understandably terrified that if protective tariffs are eliminated, inexpensive farm products grown
on huge tracts of farmland in the U.S. and Australia would pour into Japan, wiping them out.
Soon after Japan reached an agreement with the U.S. on its participation in TPP talks, a
lawmaker of the LDP held a meeting in Obihiro, Hokkaido, on April 14, as reported by the Asahi
Shimbun. A number of farmers at the meeting voiced harsh opinions with one noting, “Each time
agricultural talks were held, the primary industry has been sacrificed.” Yukihiro Baba, from
Urahoro Town, Hokkaido, said, “I feel as if we were betrayed by the LDP.” He, his wife, and
their son grow wheat, sugar beets and potatoes on an about 45 hectares of farmland.
Their annual sales exceed 40 million yen. However, only about 20% remains in their hands after
paying the cost of fertilizers. He was concerned that once Japan joined the TPP, it would only
throw into bold relief the overwhelming price differences between Japan and the other foodexporting countries. Japan has been protecting agriculture by such means as imposing tariffs of
nearly 800% on rice (Asahi, April 6, 2013).
Concern about Trade-off for Protecting Rice
The LDP requested that five agricultural items that would be most hurt be exempted from tariff
elimination: rice, wheat, dairy products, beef/pork and sweetening ingredients, such as sugar and
starch. Referring back to experience, Lower House member Kosuke Hori, who has been in
charge of the LDP’s agricultural policy, categorically said, “Even if Japan manages to protect the
tariff on rice, the U.S. will seek compensation for that without fail” (Ibid.).
34
!
It was decided in 1993 at the WTO Uruguay Round for a new global free trade agreement, that
Japan should partially approve the import of rice. Japan grudgingly accepted a minimum access
import agreement amounting to 5% of domestic rice demand. Later, during the WTO Doha
Round in the 2000s, Japan was pressured by various countries to increase its imports of rice in
return for protecting its rice tariff. These talks fell apart. For this reason, the prevailing view is
that even if Japan protects rice, the U.S. or Australia will unavoidably press the Japanese
government to increase its purchase of imported rice in compensation.
The government currently imports about 770,000 tons of rice a year. It sells a large portion of the
imported rice as cattle feed to prevent the price of domestic rice from falling. Only 100,000 tons
are used for human consumption. However, the food service industry, such as restaurants, where
competition is keen, has been asking the government to sell it more imported rice. If more rice is
imported, the portion diverted for human consumption will likely increase. Should that occur,
farmers fear the prices of domestically-grown rice will drop, dealing them a serious blow.
Still, there is much mythology by anti-TPP forces that all but a few high-quality rice producers
will be forced out of the market, and that the Japanese will jump at the chance of eating cheap
imported rice. High tariffs are justified to prevent the ruination of the domestic rice market.
The truth is that for 20 years, Japanese consumers have stubbornly resisted eating rice imported
under the minimum-access system. In the domestic market, they seek out high-quality rice such
as Koshihikari and Sasanishiki grains, and rice is now marketed by brand names, many of which
are sought out by consumers. There is another national trend of Japanese eating less rice in their
diets over time, so the rice that is disappearing from the shelves of supermarkets are the cheap
quality strains that consumers no longer buy.
The Agricultural Minister claims that the domestic price of rice in Japan is four times the
international price. But is this true? Recently, the international price of rice has risen sharply.
Currently, the wholesale price differential between domestic Japanese rice and Californiaproduced Japonica strains of rice is about twice or 200 yen per kilogram. Japan would have to
lower its rice price by about half in order to compete with imported rice. Theoretically, given a
35
!
10-year preparation period under the TPP before tariffs drop, and the government program to
modernize Japanese rice production through economy of scale and other reforms, it is possible
that when the tariff on high-quality foreign rice is lowered, Japanese rice growers will by then be
able to compete in terms of price and quality (Asakawa, 2012, p. 39-42).
Other Products like Sugar Will Suffer from Imports
Producers of the raw materials for sugar will receive an even more severe blow. Sugar beets are
grown in Hokkaido and sugar cane is grown in Okinawa and Kagoshima. These sources account
for 70% and 30%, respectively, of the raw materials that go into domestic sugar. The price of
domestically produced sugar is as more than three times that of Australian sugar. Since there is
no difference between Japanese and Australian sugar in physical appearance or taste, it would be
difficult for domestic sugar to survive if the tariff is scrapped. Rice on the other hand differs in
quality and taste, and if domestic prices could be lowered, Japanese quality rice could survive
even against cheap imports.
The prices of New Zealand-made dairy products are the cheapest in the world, because cattle can
be grazed on vast stretches of land there. In Japan, the cost of cattle feed is expensive, because
most of it is imported feed like corn. The price of domestically made dairy products is as much
as three times higher than that of New Zealand’s products (Ibid).
The Outmoded System that Protects Agricultural Products
Is Japan’s agricultural market so closed to foreign imports? Japan imports 60% of its food supply.
And aside from rice with its 5% minimum-access limit, the other sensitive products protected by
high tariffs are all imported. For example, Japan imports 90% of its wheat and soybeans and 60%
of its sugar. Moreover, tariffs on agricultural products are a world-wide phenomenon. The EU’s
average tariff level on agricultural imports is 20%.
With rice, the Japanese government buys all of the minimum-access rice imports and
redistributes them at reasonable prices. On sugar, much of which is the only cash crop for certain
36
!
islands off Okinawa and Kyushu, a tariff of 300% is imposed on imports since the price of
domestic sugar is about three times the international level. Refiners in Japan pay sugar farmers
what is called “adjustment money” at the time they import raw sugar. In addition, the
government doles out subsidy money to sugar beet or cane growers. There is no doubt that
liberalization of sugar imports would devastate this system and the farmers who produce beets
and cane (Fuse, 2012, pp. 66-67).
Other protected items are dairy products and food starch, much of which are produced in
Hokkaido. Domestic cheese is protected by a 30% tariff on imported products. As a result, there
are virtually two different markets for cheeses: domestic varieties that are of average quality, and
high-quality imports sold at exorbitant prices. There are also quotas on powdered skim milk and
butter. If imports exceed 140,000 tons a year, the tariff goes up exponentially. Food starch
(denpun) is produced from potatoes in Japan, unlike foreign products which usually are made
from corn. Japanese food starch is about double the price of imported corn starch. In addition to
tariff protection, farmers engaged in the potato starch production also get subsidies and import
adjustment money (Ibid, pp. 68-69).
The current tariff on imported beef is 38.5%. Until recently, imported U.S. beef was severely
restricted because of a BSE (mad-cow disease) scare, but an easing of the restriction has helped
return American products to the market. When beef was first liberalized some two decades ago,
there was fear that domestic beef production, including the high-quality wagyu (marbled beef)
variety, would be devastated. That did not happen, although there was a 30% reduction in the
number of beef farmers and a 7% production drop. But with the advent of TPP, beef production
in Japan has to develop into an industry, large-scale and efficient. As the number of marginal
beef farmers shrinks, land will be consolidated into large-scale operations. Wagyu beef has its
own market due to its special taste and quality, so should not shrink. Imitation wagyu imported
from abroad cannot compete with the real thing. Where does cheap imported beef go? The bulk
of imported beef that is not hotel quality grade goes to fast-food chains, Korean-style barbecued
beef restaurants, and beef-bowl chains (gyudonya) (Ibid, pp. 72-73).
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!
Japanese pork is protected by a complex gate-price system that would take pages to explain (See:
http://ap.fftc.agnet.org/ap_db.php?id=217). Through a legal mechanism, the government is able
to set ceiling and floor prices for pork, essentially interfering with supply-demand relations in the
pork market. Japan imports about half of its pork, so the system affects both domestic and
imported pork supplies. It has become a major sticking point in negotiations between Japan and
the U.S.
Wheat is an odd item to protect, since Japan imports about 90% of its wheat. But this does not
mean that the market is liberalized. All imported wheat is purchased by the government at a
zero-tariff rate. It is then sold at a high price to milling companies. Moreover, income subsidies
are provided to domestic wheat farmers. If a private individual or company should import wheat
outside this system, a tariff of 250% is imposed. This protects the domestic wheat farmers from
competition. Will these farmers be ruined by wheat liberalization? Currently, the international
price of wheat is about half that of domestic wheat in Japan. And due to rough growing
conditions and a wet climate, domestic wheat is inferior in quality to imported grain. It is clear
that Japanese wheat cannot compete with imports (Op cit. pp68-69).
!
LDP Anti-TPP Forces Regroup after Abe’s March 15 Statement
!!
Faced with a fait accompli – Abe’s commitment to join the TPP – anti-TPP forces in the LDP
began to regroup. A group of anti-TPP LDP lawmakers, chaired by Hiroshi Moriyama, decided
in a meeting on March 22 to change its name from the “group that demands immediate
withdrawal from TPP participation” to the “group to protect national interests with regard to the
TPP negotiations.” The focus now of the anti-TPP group would be to set negotiating conditions.
In order to maintain tariffs on such sensitive items as rice, the LDP group hoped to gain a greater
say during the process of government-to-government negotiations. The anti-TPP group was
established after (then) Prime Minister Naoto Kan announced in November 2010 Tokyo’s
intention to start negotiations with countries participating in the TPP talks. The group had placed
demands on the LDP leadership and the government in the process of compiling campaign
pledges for the 2012 House of Representatives election, as well as discussions in the LDP before
38
!
Abe announced Japan’s intention to join the TPP talks. The membership of the group by 2013
had ballooned to 240, which is over 60% of the!LDP Lower House members.!!
!
While the party lined up its forces, the Prime Minister set up his own phalanx. Following Abe’s
bold announcement on March 15 that Japan would participate in the TPP negotiations, he
convened a meeting of a council of the concerned cabinet ministers on March 22 to decide on the
organizational structure to deal with participation in the talks. The secretariat would consist of a
“negotiation team” to deal with the other participating countries in the talks, and a “domestic
measures team” to deal with TPP opponents in the country. The loudest complaints were coming
in from TPP opponents in Abe’s own LDP.
At the same time, the National Governors’
Association, anticipating strong pressure from local communities, was demanding adequate
remedial measures for the regions. That Abe was able to make his TPP commitment in such a
vociferous environment is testimony to his strong leadership.
In addition to the Prime Minister, the other members of the council included Economic
Revitalization Minister Akira Amari, who was concurrently minister responsible for the TPP,
Chief Cabinet Secretary Yoshihide Suga, and Foreign Minister Fumio Kishida. Of the two teams
under the council, a “chief negotiator” would head the “negotiation team,” and that person was
Deputy Minister of Foreign Affairs Koji Tsuruoka, because of his rich experience in trade
negotiations. Tsuruoka would have the rank of a vice minister in order to give him clout during
negotiations with foreign countries. In addition, the Cabinet Office’s senior vice minister, then
Yasutoshi Nishimura, and parliamentary secretary, then Daishiro Yamagiwa, would assist Amari
in such matters as dealing with the Diet.
A “chief domestic coordinator” would head the “domestic measures team.” Deputy Chief
Cabinet Secretary Toyonari Sasaki was picked!to!lead!that!team.!In addition to coordinating with
LDP members seeking to protect the agricultural and other sectors and the concerned
organizations, the team’s other main task was to provide public information to convince the still
skeptical Japanese people of the merits of TPP membership.
39
!
The government initially established the TPP headquarters with 50 members, later increasing the
size to 100. Furthermore, since a broad range of agricultural, forestry, fisheries, and industrial
products would be subject to negotiation in the TPP talks, which requires working across
ministerial boundaries, the “negotiation team” as expected became the mainstay of the secretariat.
In effect, the domestic measures team’s job simply became ‘liaison’ -- conveying the substance
of the negotiations to the public sector.
“Domestic coordinator” for TPP talks
!
The domestic coordinator Sasaki, who hailed from the Finance Ministry and had formerly served
as assistant deputy chief cabinet secretary, was also involved with calculating the estimated
impact of the TPP. He has a staff of around 30 officials from various ministries. Their task is
coordinating with a broad range of organizations, including between government ministries, with
the ruling and opposition parties, and with agricultural, medical, and other groups. In his news
conference on the morning of March 22, Chief Cabinet Secretary Yoshihide Suga said that the
domestic coordinator “will take charge of all domestic issues” (Asahi, March 23, 2013).
It is unusual for a team on domestic measures to be formed for diplomatic negotiations. Under
the Democratic Party of Japan administration, Prime Minister Yoshihiko Noda only went as far
as “consulting with the concerned countries” because he was “struggling with widespread
opposition, not only from the agricultural organizations, but also from medical and other groups,”
according to a senior official of an economic affairs ministry. He recalled that at the time, the
“behind-the-scenes coordination by the Prime Minister’s Official Residence with the Ministry of
Foreign Affairs and the Ministry of Economy, Trade, and Industry was insufficient.” The
business card of Shotaro Oshima, the government’s representative on the TPP, merely showed in
parentheses that he was “responsible for consultations with the concerned countries on
participation in the TPP talks.” The Abe cabinet decided on March 22 to relieve Oshima of his
duties (Ibid.).
The new external affairs team in charge of negotiations with the 11 participating countries in the
TPP talks eventually assembled a staff of 70 officials from various ministries. Chief Cabinet
40
!
Secretary Suga in his announcement stressed that “sectarianism will be eliminated completely
and we will make sure that this is a structure under which all staff members will work for the
national interest” (Ibid.).
Abe’s Traveling Negotiating Team
By the time that Japan was fully engaged in TPP negotiations in mid-2013, the Abe government
had set up a travelling “frontline base” that accompanied the delegation wherever they went,
such as the talks in Brunei in August. The government rented an office there near the
international convention center in Brunei where the negotiations were taking place, equipped
with computers, photocopy machines, and other equipment. Here, the officials would develop
their strategies before the talks.
About 120 officials were usually sent from Japan--100 of them from the government’s TPP
Headquarters and 20 from various ministries to give support. Other countries usually only sent a
few dozen officials. The TPP Headquarters is modeled after the U.S. Trade Representative
(USTR) Office and is sometimes referred to as the “Japanese version of the USTR.” Japan’s TPP
Headquarters, created under the Cabinet Secretariat in April, crossed ministerial boundaries in
sourcing its staff. Headed by TPP Minister Akira Amari, the Headquarters as of mid-2013 had a
staff of 113 assembled from various ministries.
Some 80 officials among them belong to the “negotiation team,” which was in charge of
negotiating with the 11 other TPP members. Chief negotiator Koji Tsuruoka, who hailed from
the Ministry of Foreign Affairs, had been deputy foreign minister for economic affairs until July
2013. He was picked for his experience in negotiating with the U.S. on the deregulation of the
NTT and other issues and had the reputation of being a “tough negotiator who speaks his mind”
(Asahi, August 24, 2013).
The frontline negotiators consisted of 19 division chief level officials from seven ministries.
They were selected through personal interviews by Tsuruoka who also queried them in English
and French. The negotiators were each assigned areas of responsibility among the 21 negotiation
41
!
areas and were given a number of assistants, who kept minutes of the negotiations, researched
treaties and laws, and liaised with the relevant ministries.
The 30-member “domestic team”, the second component of the Headquarters, was responsible
for coordinating with the ministries, the ruling parties, and the industrial organizations. Some 20
officials of this team were sent to main negotiating sessions, such as the one in Brunei, to take
care of such duties as showing ruling party Diet members around or giving briefings to industrial
organization representatives who came to collect information.
As the negotiations progressed, and the government was pressured to select agricultural products
for which tariffs would be eliminated, the domestic team’s priority task became coordination and
behind-the-scenes consultation with the ruling parties and those industrial groups strongly
opposed to tariff abolition (Asahi, August 24, 2013).
These groups were quite active as Abe assembled his TPP team. On March 21, 2013, the LDP
held a joint meeting of its divisions dealing with agricultural, forestry, and fisheries issues,
during which TPP opponents voiced harsh opinions on the benign estimates of the economic
impact of TPP participation released by the government. Views included: “This is like counting
the chickens before they are hatched. Only the benefits are exaggerated”; and, “The estimates did
not include the impact on the industries related to agriculture, forestry, and fisheries” (Sankei,
March 22, 2013).
Meanwhile, after Abe’s March 15 announcement, an anti-TPP group calling itself the
“Association for the immediate retraction of the decision to join the TPP” (chaired by Hiroshi
Moriyama, chairman of the House of Representatives Committee on Agriculture, Forestry, and
Fisheries), a group formed by TPP opponents, held an executive meeting at LDP headquarters
and then a general meeting on March 22. The group felt it was now forced to change its position
from “retraction” to “desperate defense of national interest”; and it renamed itself the
“Association to demand vigorous defense of the national interest in the TPP talks” (Ibid.)
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On March 21, Kyoto Governor Keiji Yamada, president of the National Governors’ Association,
met with Abe at the Prime Minister's Official Residence. He asked for the provision of
information on the TPP negotiations to the local governments and that the decision on
participation in the TPP be made after obtaining the people’s consent.
Abe responded: “Agriculture, forestry, and fisheries are the very essence of life in the regions.
We would like to make sure that this will absolutely not be devastated. We will make utmost
efforts to provide information.” Yamada told reporters after the meeting that “while participation
in the TPP talks is a decision to be made by the national leader, we also hope that adequate
measures will be taken for the local communities” (Ibid.).
Revolt of the Prefectures
!
According to a survey by Kyodo News in mid-April 2013, 23 prefectural assemblies, particularly
those in the Tohoku, Shikoku, and Kyushu regions, passed opinion statements or resolutions
during their March sessions demanding measures to prevent TPP from adversely effecting
domestic agriculture and demanding thorough disclosure of information about the TPP talks.
Seven prefectural assemblies, including Iwate’s and Okinawa’s, explicitly stated opposition to
Abe’s decision to join TPP talks, while the resolutions of most other assemblies demanded
policies to protect national interests. Local governments were upset that Abe had rushed into the
decision and worried that he might sacrifice Japan’s agricultural sector in the talks (Tokyo
Shimbun, April 14, 2013).
The seven prefectures are all primarily agricultural prefectures. Yamagata said that “the influx of
cheap agricultural imports will have a devastating effect on the agriculture, forestry, and fisheries
industries.” Okinawa expressed concern that “this will have a serious impact on the food
processing, tourism, and other sectors of the local economy.” Iwate pointed out that “this will
only hinder post-quake reconstruction and the process of resolving the nuclear power plant
accident” (Ibid.).
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!
Among the remaining 16 prefectures, Niigata asked for “clear-cut policies on how to protect the
national interest and the establishment of a national strategy.” Tottori called for thorough policies
to help domestic agriculture and disclosure of detailed information on the negotiations.
Akita appealed for maintaining the current level of tariffs on rice as the staple food. Kyoto and
Nara demanded that the government’s response should be based on a national debate.
Fifteen prefectural assemblies passed their opinion statements or resolutions after Prime Minister
Shinzo Abe announced Japan’s participation in the TPP talks on the evening of March 15, seven
prefectures did so before the announcement, while the Hokkaido assembly voiced its opposition
to joining the talks almost at the same time as the announcement (Tokyo Shimbun, April 24,
2013).
JA Softens Position, Clout Weakening
By mid-2013, JA Zenchu (Central Union of Agricultural Cooperatives), chaired by Akira Banzai,
while remaining formally opposed to TPP, conceded quietly that it would not stand in the way if
joining TPP were premised on a reduction in tariffs on agricultural products and not on their
abolition. JA believed that farmers could only survive if certain tariff levels were maintained.
The Prime Minister’s Council on Industrial Competitiveness even recommended a reduction in
the cost of producing rice by 40% in ten years, making it internationally competitive, but Banzai
in an interview rejected the goal as impossible (Asahi, May 12, 2013).
Despite the bluster of agricultural interests in Japan, JA’s political clout has weakened over time.
Even that bastion of protectionism has been coming about to realizing that structural reform is
necessary if the agricultural sector is to survive, regardless of whether Japan joins TPP or not. In
TPP, JA expects that farm interests not be sacrificed in the negotiations, but the absolutist
posture has retreated somewhat.
JA thus has reluctantly signed on to agricultural reform and even reform of its own structure and
role. If not, the future is ominous. In 1990, agricultural production was worth 11.5 trillion yen,
but by 2012, it had dropped to 8.5 trillion yen. Staying out of the TPP agreement will not help a
dying sector. Abe has introduced plans to restructure agriculture that he says will double the
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income of farming villages in 10 years. He is treating agriculture in his plans as a growth
industry and not a declining one. Through such initiatives as economy of scale in production,
introduction of agro-business, promotion of food exports, smart subsidies, and programs to
encourage the influx of new farmers and new technology, Japan’s farm sector can be saved.
But politically, agricultural interests can still call the shots, particularly in national elections.
Rural constituencies, despite Supreme Court orders for redistricting, are overrepresented in the
Diet; and urban districts are underrepresented. Only 38% of House of Representatives seats are
given to Japan six largest urban areas, including the mammoth Tokyo metropolitan area. The
Supreme Court has ordered a redistricting to balance rural and urban voting disparities, but the
Diet has yet to pass such legislation. !
!
Anti-TPP Japan Medical Association a Formidable Force
!
In addition to the farm lobby, the Japan Medical Association (JMA) was the second anti-TPP
force that challenged Prime Minister Abe’s decision to enter TPP negotiations. Consisting of
120,000 physicians, JMA has been on official record since December 2010, during the Kan
administration, as being opposed to Japan joining the TPP, claiming that TPP could trigger
negative effects on Japan’s national health-care system. JMA Vice President Toshio Nakagawa
at a press conference December 3, 2010, charged: “Joining the TPP will force adherence to
market principles in the Japanese medical system and could end up destroying the universal
health-care system.” JMA also claimed that with TPP, “in the free-price market, prices of drugs
and medical equipment will go sky-high, leading to increased gaps in medical services patients
can
receive
based
on
their
income
levels”
(http://www.japan-
press.co.jp/modules/news/index.php?id=1472)
JMA was convinced that Prime Minister Abe was trying to use TPP to deregulate the medical
sector. They cited such evidence as a speech in London on June 19, 2013, in which he said:
“Japan's regulatory regime is like solid bedrock. I myself intend to serve as the drill bit that will
break through that bedrock.” The Prime Minister’s words put JMA on alert, for whenever Abe
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had referred to deregulation, the medical sector was always included as the target. The
Association say him using TPP as the leverage (Sankei, July 1, 2013).
Prior to the Prime Minister’s announcement in March 2013 on Japan’s planned participation in
the TPP negotiations, JMA released a position paper under the name of President Yokokura
listing three conditions for protecting the universal health insurance coverage system: (1) to
maintain the scope of public healthcare services, (2) not to completely lift a ban on "mixedcoverage" medical treatment, in which medical treatment eligible for public health insurance is
applied alongside non-covered treatment, and (3) not to allow companies to enter the
management of medical institutions. The paper also emphasized that Japan “should have the
option of withdrawing from the negotiations” when it has concluded that they run counter to
national interests (Ibid.).
How much JMA’s bluster was real is unclear. Most of its actions were beneath the surface,
unlike the Japan Agricultural Cooperatives (JA), which engaged in a high-profile anti-TPP
movement. The “medical sector” is not included in the 21 areas, such as tariffs and investment
regulations, which are handled in the TPP talks, and the Prime Minister declared on every
occasion that the government will protect the universal health insurance coverage system. There
was concern that the medical sector might be cut off from such areas as ‘financial services’ that
handle the easing of regulations on private medical insurance. The organization nonetheless
feared that the Abe administration might usher in an easing of regulations on medical services as
a bargaining chip in the TPP negotiations (Ibid.).
Keidanren a Staunch Abe Ally on TPP talks
!
From the start, the Japanese business community has backed the TPP as vital for Japan’s
economic future. Japan’s premier business association, Keidanren [Japan Business Federation],
in June 2013 established a project team tasked with collecting information on the state of
progress in the TPP talks for the central government. The team began to extend assistance to the
government from the time it started TPP negotiations that July. By providing relevant
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information to the government, the business group aimed to have its views reflected in TPP
policy.
Roughly 30 companies, including such top member firms as Toyota Motor Co., Hitachi, Ltd.,
and Marubeni Co. joined the project team. Their mid-career employees were charged with
gathering information from government and industrial organization officials, as well as business
executives of TPP member nations, and providing it to the government. The project team was
divided into three groups responsible for (1) basic rules on abolishing or reducing tariffs; (2)
measures to facilitate trade, such as the simplification of customs procedures; and (3) services,
investment, and intellectual properties. Keidanren had never extended such help to the Japanese
government for trade negotiations before (Yomiuri: June 19, 2013).
TPP Briefing for Industrial Associations
Amazingly enough, until June 2013 the Japanese government had never even briefed industrial
associations on the TPP agenda. The government held its first briefing session on June 17 in
Tokyo on the TPP talks for industrial associations, including those from the agricultural and
business sectors. Government officials spoke mainly about whether Japan’s views could be
reflected in the agreement that has been already reached by other TPP member countries. They
candidly admitted that Japan was in a disadvantageous position due to its late entry into the talks.
The Abe government invited some 128 industrial organizations, including the Japan Chamber of
Commerce and Industry (JCCI), to attend the briefing. Most of the organizations responded by
sending a representative.
After the briefing, Hiroshi Kobayashi, agricultural policy chief of the Central Union of Japan
Agricultural Cooperatives, complained about the lack of information provided in the briefing,
however. “Since the government has not fully disclosed information, the public does not yet
understand what the government is carrying out,” he said (Tokyo Shimbun: June 18, 2013).
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U.S. Congress Gets into the Act
Almost immediately after Abe’s commitment to join TPP talks, another group of opponents, this
one in the United States, took a stance objecting to Japan’s proposed membership.
Whereas the Obama administration enthusiastically welcomed Japan’s participation in the TPP
talks and even hinted that exceptions to the no-tariff rule might be possible, the U.S. Congress
did not roll out the welcome mat. The first outcry came from the members who represented the
automobile industry and other interests. Since the Congress has the power to approve Japan’s
entry into the trade talks, heated debate was expected during the approval process.
During a Senate Committee on Finance hearing on March 19, Senator Pat Roberts (Republican)
and other members of Congress criticized and expressed concern about moves in Japan to seek
exemptions for rice and four other sensitive products from tariff abolition. Roberts stated: “We
have serious concern that Japan is seeking exceptions to tariff abolition with the intention of
protecting its agricultural sector.” Senator Orrin Hatch (Republican) took to task the joint
statement issued at the summit meeting between Abe and President Obama in February, in which
the President acknowledged that Japan had sensitive agricultural products. He pointed out that
the statement “gave Japan, which has exempted agricultural products from tariff abolition in
trade agreements so far, the wrong impression that it will be able to protect agriculture again.”
He was apprehensive that if the other participants in the TPP talks also came up with demands
for exceptions, “the significance of the TPP will be compromised.”
Obama’s own Democratic Party was not sanguine about Japan’s entry into TPP talks. Senator
Debbie Stabenow, elected from Michigan, the center of the auto industry, advocated blocking
Japanese cars from entering the U.S. market if Japan did not open up its market to U.S. cars.
Matt Blunt, president of the American Automotive Policy Council, a group made up of the major
automakers, asked President Barack Obama point blank not to allow Japan to join the TPP talks.
Such comments did not phase the Obama administration, which was very keen on Japan’s
participation. Reacting to angry remarks in the Senate, acting U.S. Trade Representative
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Demetrios Marantis told the Senate hearing “The President also has concerns,” but he stated
repeatedly at his news conference on March 20 that the U.S. “welcomes Japan’s participation in
the talks” and that the goal of concluding the negotiations within this year remained unchanged.
He further remarked that “the U.S. will not renegotiate provisions in its existing free trade
agreements with other countries.” The U.S. allows sugar to be an exception under its FTA with
Australia, so the same would apply to the TPP. This was taken to mean that the U.S., despite its
having so far led efforts to abolish tariffs for all commodities, in principle, would now allow
exceptions for the sensitive products (Sankei, March 22, 2011).
Members of Congress differed greatly in their position on the issue of Japan in the TPP,
depending on their home constituencies and their support groups. Senate Finance Committee
Chairman Max Baucus stressed his support for Japan’s participation, saying, “Let’s conclude the
negotiations within this year.” Baucus was elected from the beef-producing state of Montana. He
was appreciative of Japan’s relaxation of restrictions on U.S. beef imports over a BSE (mad-cow
disease) scare (Sankei, March 22, 2013).
USTR’s Scathing Report on Japan
If the Congress’s mood was lukewarm about Japan’s joining the TPP, the view of the U.S. trade
negotiating office -- USTR -- was red hot – as the organization geared up for intensive talks with
Japan. A sign of that came in the Office of the U.S. Trade Representative’s annual report on
global trade barriers issued on April 1, 2013. Japanese ministry officials read the report with
apprehension that the U.S. might make the same demands in the TPP negotiations.
The report criticized Japan for not making sufficient efforts to open up its markets. It charged
that a subsidy scheme to Japanese automakers was unfair to U.S. cars imported under the
Preferential Handling Procedure system. This is a system that simplifies safety inspection
procedures for imported cars of less than 2,000 units per model. The “subsidy” in the report was
taken to be the subsidies for eco-friendly cars. However, according to the Ministry of Land,
Infrastructure, Transport, and Tourism, after the eco-car subsidies were introduced in 2009, they
had also been paid out based on fuel efficiency assessment made abroad in response to the U.S.’s
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demand. “There was no unfairness because U.S. cars that met fuel efficiency requirements were
eligible to receive subsidies.” Moreover, the Ministry continued, the eco-car subsidies have
already ended and there are no plans to revive them. A senior Ministry of Economy, Trade, and
Industry official told Asahi Shimbun, “U.S. cars are not as competitive as European cars.
[USTR] is taking issue with the subsidy system in an attempt to block exports of Japanese cars to
the U.S” (Asahi Shimbun, April 3, 2013).
The report also claims that the import and distribution systems for rice are “regulated and lack
transparency” because Japan imposes tariffs of up to 778% on rice to protect farmers. If Japan
tries to make rice and other agricultural products “exceptions” to tariff abolition, Japanese
newspapers concluded that it may face demands for concessions in the other sectors cited in the
USTR report (Asahi, April 3, 2013; Yomiuri, April 3, 2013).
Japan Joins TPP Talks in July 2013
Finally, in July 2013, Japan was cleared to formally join the TPP talks. Realizing that its late
start in joining the TPP talks placed Japan at a disadvantage, since the other participants had by
July 2013 held 17 rounds of discussions, the Abe administration indicated that it was willing to
compromise in “sacred areas,” such as considering tariff reduction on rice used for processing.
Of the 29 chapters of the draft TPP agreement, 14 have basically been drawn up. There is
concern in the government that “if latecomer Japan begins with talking about its professed
principles after it joins the talks, it may just be ignored by the other negotiation partners” (Nikkei,
July 3, 2013). In the meantime, a new head of the U.S. negotiating team had been picked. In May
2013, President Obama nominated Michael Froman, deputy assistant to the President, as U.S.
Trade Representative. Froman, a former classmate of the President, enjoyed his confidence and
was already handling key trade policies for the White House behind the scenes. Japanese
negotiators were eager to test the waters with the new trade representative.
There also was a strong view in the government that “the TPP agreement cannot be concluded
within this year because of the difficulties in the negotiations over tariff reduction or protection
of intellectual property.” So there may be time for Japan to affect the outcome. But in order to be
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able to participate in substantial negotiations quickly, “it is necessary to clearly identify the areas
where Japan wants to take offensive and areas where it should make compromises” (Ibid.).
One of the driving forces for Prime Minister Abe’s eagerness to formally join the TPP talks as
soon as possible after his inauguration was to team up with the U.S. in establishing economic
rules in the Asia-Pacific. The Japanese government saw TPP in that light as an attempt to apply
pressure on China to eventually accept the new set of rules, should it choose to join at some point.
For the Abe administration, there always seemed to be a strong China angle in any aspect of its
diplomatic strategy, and TPP was definitely no exception. Japan felt that China’s growing
economic influence in the region must be countered.
To that end, the Abe government decided to give top priority to the TPP over such initiatives as
the Regional Comprehensive Economic Partnership (RCEP) involving the Association of
Southeast Asian Nations (ASEAN), Japan, China, South Korea, India, Australia, and New
Zealand, and the Free Trade Area of the Asia-Pacific (FTAAP), which covers a wider area than
the RCEP. Japan would still join RCEP, seeing the two initiatives as complementary, however.
It just did not want China to impose its own trade standards for the region should RCEP and not
TPP become the dominant regional architecture (Sankei, May 23, 2013).
!
American Auto Industry: Japan’s Market Closed
The U.S. Trade Representative’s solicitation of public comments on Japan’s joining the TPP was
closed on June 9, 2013. The U.S. auto industry, seeking to set up road blocks for Japan’s
participation, requested that the tariffs on automobiles imported from Japan be kept in place for
25 to 30 years. The American Automotive Policy Council (AAPC), which represents major car
manufacturers, released a statement that reads, “Japan is the most closed auto market among
developed nations and manipulates exchange rates,” expressing opposition to Japan’s entry into
the TPP. The organization also asked that the tariffs on imported cars from Japan be kept in place
at least for 25 to 30 years. The group also pointed out that the “TPP should have the legal power
to put a stop to exchange manipulation. (Asahi Shimbun, June 12, 2013)”
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Agricultural organizations also expressed strong opposition to Japan’s membership, citing high
tariffs on agricultural products. Many demanded the abolition of tariffs in the agricultural sector,
while others called on Japan to relax procedures for certifying genetically modified farm produce
and food additives. Still other organizations sought favorable conditions for U.S. multinational
corporations in competing with such quasi-government entities as Japan Post Life Insurance and
the National Insurance drug price system.
Wal-Mart, top U.S. retailer operating stores in Japan, criticized the high tariffs on red meat,
citrus fruits, wine, dairy products, and other processed food, which are the main food products
purchased by its Japanese customers. In demanding the abolition of tariffs, Wal-Mart
emphasized that Japan’s participation in the TPP would “create a better competition environment
for Wal-Mart stores,” and help that company get a foothold in Japan.
The major U.S. grain company Cargill pointed out that high tariff, tariff-rate quota,
administrative costs, regulation, and so forth hinder U.S. exports. It argued that “along with nontariff barriers, efforts to eliminate these obstacles need to be made during the negotiation process.”
It also stressed the need to have common trade rules. It specifically demanded common rules on
biotechnological (genetically-modified) farm products and labeling requirements, as well as
deregulation.
The National Milk Producers Federation and the U.S. Dairy Export Council submitted a joint
petition for the abolition of tariff on cheese and other dairy products. They also pointed out that
Japan’s certification standards for food additives are stricter than other countries. They
demanded relaxation of the certification procedures and allowing the use of additives currently
not certified in Japan.
The American Chamber of Commerce in Japan (ACCJ) welcomed Japan’s participation in the
TPP, which would expand to account for 40% of global GDP and one-third of world trade. ACCJ
pointed out that Japan’s participation would triple the U.S.’s economic gains from the TPP from
a GDP increase of $24 billion to $77 billion. The American Insurance Association welcomed
bilateral talks between Japan and the U.S. on non-tariff barriers that would take place parallel to
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the TPP talks. It asked that commitments made during those talks should have the same binding
power as the TPP agreement.
The Pharmaceutical Research and Manufacturers of America demanded that other negotiations,
including the “reform” of the Japanese drug price system which is being discussed at the JapanU.S. Economic Harmonization Initiative (EHI), should take place in parallel to the TPP talks.
The Service Industry Association pointed out that Japan Post Life Insurance under the Japan Post
Group and mutual aid associations were distorting the Japanese insurance market, asking that
they be treated in the same way as private insurance companies, including U.S. companies.
Japan’s Auto Strategy
According to the Asahi Shimbun (March 6, 2013), Japan’s strategy in going into TPP talks was
to let the United States continue imposing tariffs on Japanese vehicles for the time being. The
United States currently imposes a 2.5% tariff on imported passenger vehicles and a 25% tariff on
trucks. U.S. Trade Representative Ron Kirk informed Japan’s Minister of Economy, Trade, and
Industry Toshimitsu Motegi of the U.S.’s plans to maintain the tariffs on motor vehicles for the
time being at their meeting in Switzerland in January 2013. The U.S. also was demanding the
expansion of the Preferential Handling Procedure system, which currently simplifies safety
inspection procedures for imported U.S. cars up to 2,000 units of a single model annually. Japan
would raise the number to 5,000 units.
Under Japan’s strategy, once it accepted the U.S.’s demand to maintain tariffs on imported cars,
it would demand that the U.S. allow Japan to designate rice and other agricultural products as
“exceptions” to tariff elimination, according to the Asahi Shimbun. Since Japan’s participation in
the talks will require the approval of all countries currently engaged in the talks, the government
calculated that once the U.S. gave its approval, Australia and New Zealand, the only other
countries yet to give their consent, would also follow suit, making it possible to join the talks
officially by September, at the earliest.
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The strategy, though, vexed Japan’s auto industry, which had championed Japan’s early
participation in the TPP talks until then. Tariffs paid by Japanese companies to the 11 countries
currently engaged in the TPP talks total 470 billion yen a year, half of which are by auto-related
companies. If the U.S. retained its tariffs for the time being, Japanese auto makers would be less
competitive in the U.S. market. In contrast, the Republic of Korea, due to its free trade
agreement with the U.S., would be allowed to bring in its vehicles tariff free in a few years. An
executive of a major Japanese car manufacturer voiced his apprehension: “Blanket tariff
abolition is supposed to be the basic premise of the TPP. We cannot compete properly with the
South Korean makers if the terms are not equal” (Ibid.).
The U.S.-ROK free trade agreement (FTA) took effect in March 2012, under which the U.S. is
committed to abolish the tariff on cars imported from the ROK in 5-10 years. So the Japanese
government understandably wanted to have a U.S. commitment to eliminate tariffs on cars
eventually.
After the volatile period of trade friction over Japanese auto imports in the 1980s and the 1990s,
Japanese manufacturers have promoted a strategy of local production of cars they sell overseas to
reduce exports. The autos also have significant local content with parts being procured mainly in
the U.S. Exports now make up only about 30% of cars sold in the U.S. by Toyota and Nissan,
while only less than 10% of Honda cars sold in the U.S. are exported from Japan. Most trucks
are assembled in the U.S. from parts exported from Japan since a high tariff of 25% is imposed
there. Still, about half of the 10 million cars made in Japan each year are exported, of which
nearly 40% are shipped to the U.S. They account for many jobs in domestic plants.
Under Japan’s scenario for entering the TPP negotiations, Tokyo would agree at preliminary
talks to the U.S. maintaining its auto tariffs for the time being. The envisaged timeframe had a
moratorium period of 5 to 10 years or longer set for abolishing tariffs. “Exceptions” to tariff
elimination would be approved for Japan’s sensitive agricultural products, such as rice, which
Japan regards as “sacred areas,” in return for its concessions on the auto sector, the greatest
matter of concern for the U.S. (Mainichi, March 6, 2013). However, the U.S. from the start was
unwilling to accept an early phase out of auto tariffs.
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Japanese “Stakeholders” at Disadvantage in TPP negotiations
Although TPP negotiations are held in secret, there is a venue for global corporations and
industry groups to exchange information with other governments’ officials on the site of the
Trans-Pacific Partnership (TPP) negotiations. The Japanese government suspected but did not
verify the existence of such “meetings of stakeholders” until late in the game. In contrast to the
Japanese government, which maintained strict control of information on the TPP negotiations,
the governments of TPP countries might set about negotiations in collaboration with the private
sector.
For example, during the round of TPP negotiations that took place in Peru, May 15-24, 2013, a
stakeholders’ meeting on May 19 brought together hundreds of officers from some 50
corporations, industry groups, labor unions, non-governmental organizations (NGOs), and so on.
Information was exchanged actively with the participation of chief negotiators and negotiators of
the agencies in charge of the matter.
On the final day, a briefing was held to explain the negotiation situation to those stakeholders.
The involvement of the public and private sectors reflected each country’s intention to stay ahead
of others in rulemaking.
On the other hand, the Japanese government does not allow the involvement of nongovernment
organizations in the process. As a result, industry groups in Japan became increasingly
dissatisfied with the lack of information. In a press conference on June 7, Akira Banzai,
chairman of the Central Union of Agricultural Cooperatives (JA-Zenchu), was frustrated: “The
(TPP) negotiations have been conducted in secret. I must say that they are strange trade
negotiations.” [He was wrong; almost all trade negotiations are done in secret.]
Some officials in the Japanese government believe that information on the TPP negotiations
should continue to be strictly controlled and that meetings with the private sector, when held, are
just to let off steam. In part, the dearth of information to the private sector about what was
happening in the talks, whether leaked or briefed, contributed not only to frustration among the
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interested parties, it also contributed to erroneous media reports and myths about a foreign
invasion into various sectors of the economy. Such myths created fear and strong opposition
among the public that the government took pains to counter. Over the long run the campaign to
promote TPP’s economic benefits proved effective, as support for the TPP in the opinion polls
continued to rise until a majority began to side with the government’s plan.
Endless Talks
Talks between U.S. and Japanese negotiators that began in earnest in July 2013 dragged on
throughout the rest of the year. But rumors of concessions by Japan on the five “sacred” areas
began to filter back to agricultural circles, setting off a round of concern and criticism that the
Abe administration was starting to sell out the farm sector. The following excerpts from a
regional newspaper (Too Nippo, published in Aomori City, northern Japan) are representative:
Editorial: Government’s failure to protect “sanctuaries” would be violation of pledge
The leaders of 12 countries involved in the Trans-Pacific Partnership free trade
negotiations released a statement confirming their resolve to promote the negotiations in
order to conclude them before the end of the year.
Nevertheless, it remains to be seen whether progress will be made in the negotiations on
about 20 areas. Although the free trade talks are based on confidentiality, the government
has been too reluctant to provide detailed explanations to the public. It is a problem that
the government is carrying out the negotiations at its own discretion and making light of
its duty to provide explanations to the public.
Concern has also emerged over growing calls in the government and the ruling Liberal
Democratic Party for shifting the tariff policy. It is said that they intend to look into the
possibility of removing tariffs on a total of 568 items in five categories of highly sensitive
farm products – rice, wheat, beef and pork, dairy products, and sweetening resources. The
five categories have been designated as “sanctuaries” in order to maintain imports tariffs.
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It is believed that the government is aiming to take the initiative in the negotiations by
showing a stance of making concessions on the sanctuaries. Farmers have every reason to
oppose it.
The LDP campaigned for the 2012 Lower House election on the pledge that it would “not
join the TPP talks if they are premised on tariff elimination without exception.” Even
after returning to power, the LDP adopted “a resolution calling for the government not to
hesitate to withdraw from the TPP talks” if the sanctuaries cannot be protected.
LDP Secretary General Shigeru Ishiba did not deny that the LDP was considering
whether or not to lift import tariffs on some items, saying, “It does not mean that the
party will change its pledge to defend the five categories.” If so, the LDP should
elaborate on its campaign pledges.
The principle of the TPP is to completely eliminate tariffs, and this was confirmed in a
ministerial meeting held ahead of the summit meeting. If Japan maintains its current
import tariffs on the five areas, its liberalization rate will be 93.5%. Since it appears
difficult to protect all five categories, some have pointed out that it goes without saying
that tariffs on some items will be removed.
However, if the government gives up on protecting the sanctuaries as it promised to the
public, its premise for joining the TPP talks will collapse. If the government really wants
to review the sanctuaries, it should explain the situation to the public, including measures
to avoid impact and damage, and obtain the understanding of the public. (Too Nippo,
October 9, 2013)
Summer Negotiations
By August 2013, the outline of a “timetable” became clear for the 12 TPP countries to conduct
intensive talks on tariff elimination. Four deadlines were set for moving forward in the area of
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market access issues. Under the timetable, the TPP parties are required to put 95% of their
respective tariff lines on the negotiation table by September 20, according to Kyodo News
(August 2, 2013). The TPP members planned a ministerial meeting on August 22-23 in Brunei as
well. They hope was to accelerate the negotiations for reaching a basic agreement in October.
Since the U.S. reportedly had made a request to exempt dairy products and sugar from tariff
elimination, other countries, including Japan, were prepared to make every effort to secure their
own “sacred areas.” Despite the complications such talks were likely to be, once specific items
were being vetted, the participants hoped to see the entire process end at the summit-level with a
final political settlement (Tokyo Shimbun, August 2, 2013).
The timetable was agreed upon in the Malaysia round in July. All TPP countries were required to
put 75% of their respective tariff lines on the negotiating table by August 16, 90% by August 30,
95% by September 20, and 100% by the end of October. Because Japan only joined the TPP
negotiations in late July, Japan expected to be allowed to present its first batch of items by
September 16 (Ibid.).
According to Kyodo News, the 12 countries were also required under the timetable to disclose
what was agreed upon in bilateral talks to other members by September 20 and then to negotiate
on tariff elimination mostly in a multilateral setting. Japan would have to wind up its bilateral
negotiations with such countries as the U.S. by that time. If Japan eliminated its tariffs on all
items except for the five sensitive products, its liberalization rate would be 93.5% (Ibid.).
Japan, U.S. start bilateral talks on Aug. 7 in parallel with TPP talks
The governments of Japan and the U.S. announced on August 1, 2013, that the first round of
their bilateral talks to be held in parallel with the TPP negotiations would take place in Tokyo
August 7-9. Acting Deputy U.S. Trade Representative Wendy Cutler then visited Japan on Aug.
7-9 for talks with Japanese counterparts on bilateral trade issues that ran in parallel with the
multilateral TPP talks. Cutler emphasized in a statement: “Japan’s announcement that it will
address a number of non-tariff measures that are longstanding concerns for the U.S., was a
critical factor in the decision of the United States to support Japan’s entry into the TPP
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negotiations.” “I look forward to reaching meaningful agreements in a timely fashion,” she
added. Her counterpart was Ambassador for Economic Diplomacy Takeo Mori, who heads the
Japanese delegation
The two sides discussed such market liberalization issues as automobiles and other non-tariff
barrier issues separately. The issues had been around for many years. In the automotive sector,
they are expected to discuss future options for sales outlets in Japan, the tax system for compact
cars, and other matters with a focus on such issues as transparency, distribution, and financial
preferential measures. Regarding non-tariff barriers, nine sectors including insurance, intellectual
property rights, and sanitary and phytosanitary measures were on the agenda. In the insurance
sector, the two sides discussed what conditions should be for competition between Japan Post
Insurance Co., which is under Japan Post Holdings, and private-sector insurers. JP Holdings had
recently decided to strengthen its business collaboration with American Family Life Assurance
Co. (Aflac), a leading U.S. insurer. In response to this development, the U.S. was expected to
tone down its criticism of Japan (Asahi: August 2, 2013).
Japan’s Proposal for Tariff Elimination Set
For Japan, market access issues were the most controversial area in the TPP negotiations. In
preparation for the talks, the Abe government held a meeting of concerned cabinet ministers on
Aug. 15 to set an initial game plan listing those items for which tariffs would be eliminated or
reduced for presentation to other TPP members on Aug. 16. Japan, which joined the TPP talks in
July, was allowed to postpone the deadline for presenting its plan. The government in setting its
initial plan tried to reflect as much as possible the LDP’s call for “defending the five agricultural
products at all costs.”
The government set the “liberalization rate,” or the percentage of items for which tariffs would
be eliminated, at about 75% of the total trade items. Arrangements were made to present the five
sensitive agricultural products, such as rice and dairy products, as “undecided” -- the idea being
to request exemption for them from tariff elimination. TPP parties are required to present
proposals on tariff elimination of all trade items by classifying them into three groups –
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“immediate elimination,” “gradual elimination,” and “undecided.”
The government then
launched full-fledged efforts to lay the groundwork at the political level for the next TPP round
to be held in Brunei starting on Aug. 22. In that connection, Cabinet Office Senior ViceMinister Yasutoshi Nishimura, who served as an assistant to TPP minister Amari, travelled to
consult with the other TPP parties (Sankei: August 13, 2013)
The government grouped electrical goods and other manufactured products in the “immediate
elimination” category in its first plan. It also tagged as “undecided” those agriculture, forestry,
and fisheries items that have been treated as exceptions to tariff elimination in the past economic
partnership agreements (EPAs) and were not the five sensitive items. When the government
later went into bilateral negotiations with countries with which Japan had exchanged threecategory proposals, it sought exemptions from tariff elimination for the “undecided” products.
(Ibid.).
First Round of U.S.-Japan Talks Goes Nowhere
The first round of bilateral U.S-Japan talks held in parallel with the multilateral TPP negotiations
ended on August 9, but the two sides failed to make any progress on any issue. The negotiators
discussed such subjects as auto trade, conditions for competition with Japan Post Insurance, and
food safety standards, which the U.S. is urging Japan to review as “nontariff barriers.” Acting
Deputy USTR Cutler, who headed the U.S. delegation, in a press conference afterward
acknowledged that “there are many issues that must be addressed,” vowing to continue to press
Japan to open its markets. Ahead of the bilateral talks, Japan Post Holdings Co. and American
Family Life Assurance Co. (Aflac), a leading U.S. insurer, announced an agreement to expand
their alliance, triggering expectations that the U.S. side might soften its stance. Cutler brushed
that aside, saying, “This alone will not resolve the various concerns the U.S. has in the insurance
sector.”
Takeo Mori, ambassador for economic diplomacy and head of the Japanese delegation also
admitted that the gap between the two sides remained wide, saying, “As we are at the stage of
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narrowing down issues, we have yet to reach the stage of forging an agreement or finding
common ground” (Tokyo Shimbun: August 10, 2013).
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Amari: TPP accord by Year’s End “Difficult”
After a cabinet meeting on the TPP negotiations held in the Kantei on August 15, TPP Minister
Amari told the press that striking a deal by the end of the year “would be quite difficult.”
In addition to abolishing or lowering tariffs, the TPP talks on such subjects as intellectual
property had run into difficulties. Amari’s comment was based on the harsh reality of conditions
at the negotiating table. Meanwhile, Amari was preparing his team to prepare for the next round
of the TPP talks to be held from August 22 in Brunei. The areas to be covered in the round
would center on market access – tariffs – which Japan was quite concerned about (Mainichi:
August 16, 2013).
Meanwhile, the U.S. was keen to reach an agreement by the end of the year. The Asahi
speculated that with the mid-term elections coming up in the autumn of 2014, the Obama
administration, which has pledged to achieve economic recovery by increasing exports, wants to
deliver “tangible results.” The ministerial meeting in Brunei from Aug. 22 was seen as reflecting
the strong desire of the U.S. and it was expected that the U.S. pressure there would pressure TPP
members to accelerate the negotiations (Asahi: August 16, 2013)
Brunei and Beyond
The TPP talks entered a crucial phase at Brunei, as negotiators sought to reach an overall
agreement by the end of 2013. In the 19th round of TPP talks which ended in Brunei on Friday,
August 30, the 12 participating countries issued a joint statement to reaffirm their commitment to
speed up negotiations. The Brunei talks were the first round of negotiations which Japan
participated fully, with the Abe government under great pressure as a latecomer to make a
political decision on liberalizing sensitive items in a limited period of time. The joint statement
said that the APEC leaders’ meeting in October in Bali, Indonesia, “will be an important
milestone as the 12 countries work intensively to conclude this landmark agreement.”
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The TPP negotiators met again in Washington in mid-September to advance discussions on
controversial issues such as tariffs and intellectual property rights. Member countries were asked
to make concessions and compromises, but little progress was achieved, with the participants
each vying to protect their interests.
Japan started out with suggestions at the 70-80% level. It then proposed in August that it would
be willing to lift tariffs to 85 percent of trade items, excluding those in the five sensitive
categories. Other parties involved in TPP negotiations, however, insisted that Japan must
eliminate import tariffs on more items. Subsequently, the Abe government decided that it had no
choice but to lift tariffs on some products in the five sensitive categories. Japan subsequently
began to consider supporting a trade liberalization rate of 90% or so in the TPP talks.
Under existing economic partnership agreements (EPAs) with other nations outside the TPP,
Japan eliminated duties on only 84-88% of traded goods. Japan never allowed tariffs to be
scrapped on 834 agricultural product categories, including rice and sugar, and 95 industrial
products. Some of these untouched items may become subject to duty-free requirements if Japan
accepts a liberalization rate of 90% or higher. To get to that stage, the government had to
negotiate with agricultural and other trade groups behind the scenes to obtain concessions. The
conventional wisdom by that time was that negotiations would ultimately require tariffs for TPP
members to be repealed on around 98% of goods (Nikkei: August 28, 2013). Japan was nowhere
near reaching such a level.
The ratcheting up of the liberalization rate continued into the fall of 2013. On October 10, the
government and the LDP leaders began to consider abolishing tariffs on about 220 food items.
That day, more than 100 lawmakers attended a meeting held jointly by the party’s TPP
committee and Headquarters for Regional Diplomatic and Economic Partnership. The suggestion
on the 220 items angered many LDP lawmakers, who charged the LDP leadership with reneging
on a campaign promise to exclude those items from TPP discussions.
During the Upper-House election in July, the LDP in its campaign platform had pledged that it
would not stay in the TPP talks when signing the agreement meant violating the "sacred items"
in the five categories of rice, barley and wheat, sugar crops, dairy products, and beef and pork.
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The five sectors, covering a total of 586 food items, were considered crucial to the survival of
agriculture in Japan. The bottom line for agricultural organizations and related interest groups
was for the government to maintain tariffs on all such agricultural products. But the LDP
leadership now wanted to persuade the party members to agree to abolish or reduce tariffs on
some 40 percent of the protected food items. This would allow TPP discussions to conclude by
mid-November.
Ironically, for some of these protected products, Japan is heavily dependent on imports, because
domestic consumption of these far exceeds the production volume in the nation. For example,
more than 90 percent of beef tongue consumed in Japan, popular at grilled-meat restaurants, is
imported. If the current tariff of 12.8 percent is eliminated, consumers will be able to enjoy more
affordable beef tongue, while the tariff abolition will have only a limited impact on domestic
beef producers. Such tariffs arguably should be scrapped.
At the October 10 meeting, when TPP committee chairman Koya Nishikawa introduced the
government’s latest decision, politicians there expressed concerns that considering eliminating
tariffs on the five sectors would erode public confidence in the ruling party. “It is impossible to
even imagine how (the latest decision) will undermine trust in the LDP,” said a lawmaker during
the gathering.
Still, the 100 politicians by the end of the meeting accepted the government's decision. There still
remained concerns, though, that the abolition of tariffs on the 220 articles might lead to pressure
to eliminate the tariffs on even more sacred food items. “I fear ‘the line of defense’ will become
blurred amid the consideration work,” said Toshio Yamada, an Upper House member of the LDP,
backed by the political organization of Japan's farming industry JA-Zenchu (Central Union of
Agricultural Co-operatives), after the meeting (Asahi Shimbun, October 11).
Japan believed that the maximum it could reach -- and be on par with the rest of the TPP member
nations -- would be a trade liberalization rate of around 95 percent, the percentage of items
whose tariffs a country pledges to eliminate. If Japan retained tariffs on all the 586 articles, it
could raise its trade liberalization rate at most to 93.5 percent. If Japan gave up all of the 220
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items then being considered, its trade liberalization rate would rise 2.4 points, to nearly 96
percent (Ibid.).
Meanwhile, to protect domestic farmers, the government and the LDP leadership intended to
make every effort to retain tariffs on the remaining 370 articles, including unpolished rice,
polished rice, wheat, refined sugar, beef other than tongue and liver, ham or pork leg and butter.
The government controlled imports of such food items by law, as well as established special
systems to raise tariff rates on them when the volume of imports surged
But the agricultural lobby argued that the abolishment of tariffs on such food items would likely
result in an influx of cheaper foreign products, hurting the livelihoods of more than 1.5 million
farm families in the nation. And many of the LDP lawmakers at the meeting at party
headquarters October 10 accused the government of breaking its campaign promise and cutting
into the five sacred areas. “Since (the government) has long protected the 586 items in the five
categories to date, it is necessary that it safeguards them in the (TPP) negotiations as well,” said
a LDP member during the meeting. “I want (the government) to consider withdrawing from the
talks, when it feels it will not be able to protect (the five categories),” said another LDP member
(Ibid.).
TPP Loses Momentum as Obama Misses APEC in 2013
Although all 12 TPP participants strove for a general agreement by the end of 2012, such was not
to be the case. The absence of President Barack Obama from the APEC meeting because of the
partial government shutdown slowed down the momentum significantly. Obama sent Secretary
of State John Kerry to fill his chair. He was joined by U.S. Trade Representative (USTR)
Michael Froman and Commerce Secretary Penny Pritzker. Secretary Kerry and USTR Froman
met with trade ministers from the 11 other countries negotiating the TPP agreement on the
sidelines of APEC. President Obama had planned to use the APEC forum to urge negotiators to
speed up TPP negotiations in the hopes of reaching an agreement by the end of the year.
Obama’s absence meant he was not able to use his personal influence to press for progress. The
impasse in Congress over the government budget has also cast doubts over the United States’
ability to get legislators to ratify a completed TPP agreement.
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TPP negotiating partners have expressed mixed views on when negotiators should be able to
complete hammering out the pact’s details. Malaysian Prime Minister Najib said he was doubtful
that negotiations could be completed by the end of the year, citing a need for further review
within his government. USTR Froman was optimistic, however, saying that significant progress
indeed had been made during his negotiations with the 11 member countries just before the
APEC summit.
China’s President Xi Jinping meanwhile pushed countries on the sidelines of APEC to commit to
the Regional Comprehensive Economic Partnership (RCEP), an agreement between ASEAN and
six other countries with which it has bilateral free trade pacts: Australia, China, India, Japan,
New Zealand, and South Korea. Although the RCEP was considered a far less comprehensive
and lower-quality trade agreement than the TPP agreement, it was easier for countries not ready
for such high-level liberalization to accept. RCEP negotiations began earlier in 2013 in an effort
to harmonize the different trade agreements within the region. The participants aim to complete
it in 2015. The United States, which does not have a trade agreement with ASEAN, is excluded
from the negotiations, but would be allowed to seek entry once the pact is completed.
Obama-Abe Summit in April 2014
Although it was hoped that significant progress would be made between Japan and the U.S. in
TPP talks by the time President Obama and Prime Minister Abe held a summit meeting in April
2014, such was not to be the case. Abe was still in a position to seal a deal with the U.S., and
apparently, the best the Prime Minister and President Obama could do was to exchange
generalities in their summit meeting, as summarized in the Japanese press:
Abe, Obama: The TPP is a framework for creating an economic sphere in Asia and the Pacific
and making new rules by nations sharing the universal values of freedom, democracy, and the
rule of law. It is of tremendous strategic significance for the region as a whole.
Abe: The responsible cabinet ministers have engaged in energetic and sincere negotiations on
pending issues between the two countries to coincide with this summit meeting. We would like
to instruct the two ministers to step up their efforts and work for an overall TPP agreement at an
early date.
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Obama: The TPP is important for trade and growth in Asia and the Pacific. We will ask the two
ministers to negotiate further (Yomiuri, April 25, 2014.
Still, USTR was happy with the progress achieved to date in talks with Japan. In early April, it
looked like the U.S. and Japan had cleared away most of the early issues that blocked a final
agreement between the two countries. Talks that had been going on for almost a year appeared to
have been fruitful.
In an announcement on April 12, Acting U.S. Trade Representative Demetrius Marantis
announced that bilateral consultations with Japan over “four baskets of issues” had reached a
successful conclusion. On the automotive sector, the U.S. and Japan agreed that U.S. tariffs on
automobiles and trucks would be phased out over time. Japan would also more than double to
5000 a year its imports of cars under a streamlined import procedure. Parallel auto negotiations
would take place parallel to the TPP to settle other issues regarding Japan’s auto market.
The second basket of issues on which agreement was reached was in the area of insurance. In
particular, the negotiations addressed long-standing U.S. concerns in the insurance sector about
U.S. companies and private sector companies being able to compete on a level playing field with
Japan Post in Japan's insurance market. The Japanese government agreed not to issue two types
of insurance products that foreign companies wished to sell in Japan.
The third basket of issues -- non-tariff measures – would be addressed in parallel negotiations.
The last basket of issues has to do with Japan's readiness to live up to the high standards in the
TPP agreement. Japan had given assurances that it strive to conclude a comprehensive, highstandard 21st century agreement.
Marantis stated:
“Based on our ability to address those four baskets of issues, we have become comfortable with
joining a consensus of among the other TPP members to welcome Japan into the TPP. Now, you
should know that in terms of next steps, the next steps are for all of the TPP countries to decide
by
consensus
whether
to
bring
Japan
in.”
(http://www.ustr.gov/about-us/press-
office/speeches/transcripts/2013/april/dep-nsa-froman-amb-marantis-cc-tpp.
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In short, although the Japanese and U.S. governments failed in April 2014 to reach a “basic
agreement” in the TPP, negotiations, they managed to sort out the remaining issues and laid the
groundwork for further negotiations. But political forces in both countries were not going to
make those talks easy.
Behind-the-scenes report on U.S.-Japan TPP talks in Tokyo
During the U.S. Japan summit meeting on April 24, President Barack Obama reportedly was the
one who suggested an extension when they were unable to reach an agreement on the TPP.
Obama told Abe: “We’re almost there. We want to hold discussions up to the last minute. How
about asking the two of them to leave this meeting and negotiate somewhere else?” “The two of
them” referred to TPP Minister Akira Amari and USTR Michael Froman, who had been talking
until 3:00 a.m. on the morning of the summit and had not even had time to sleep before joining
the meeting. Obama told them: “You two look sleepy. Go get some coffee.”
That afternoon, Froman said to Amari: “I have something for you from the President.” He gave
him a cup of Starbucks coffee. The two met at the Cabinet Office for two hours. This was their
third meeting since Froman arrived in Japan on Apr. 23. It is extremely unusual for the issuance
of a joint statement to be delayed after bilateral summit talks end because negotiations have been
extended. There had been signs on the previous evening that this might happen when Abe and
Obama had their well-publicized sushi dinner at Sukiyabashi Jiro, an upscale sushi restaurant on
the Ginza. The topic of conversation at the 90-minute dinner was mostly the TPP talks. Sitting
beside Abe at the sushi counter, Obama said several times while eating his sushi: “Now is the
time.” Obama asked Abe to make concessions, but Abe countered with: “Both sides need to
compromise; let’s ask the two of them to negotiate some more” (Asahi Shimbun, April 29, 2014).
It is clear from the conversation that both leaders agreed on the goal of creating a new economic
architecture led by the U.S. and Japan and on negotiating for it up until the last minute.
Yet, the last minute talks produced no “basic agreement”, for such wording was lacking in the
joint statement issued right before Obama left Japan. It merely says the two sides “have
identified a path forward on important issues.” Amari’s take on this was: “We were able to sort
out issues to be dealt with by the bureaucrats and issues that need political decisions.” Discussion
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of specific figures for tariff reduction, the most contentious issue, was put off to later talks. On a
TBS TV program on the morning of April 26, Amari likened the negotiations to mountain
climbing. “I think we are at the seventh or eighth stage. As you get closer to the peak, the air
becomes thinner and it gets harder to climb” (Ibid.).
Froman and Amari met for a third time after the summit meeting on the morning of April 24, and
the release of the joint statement was put on hold pending those talks. But Froman surprised
Japanese negotiators, who had hoped that the U.S. might compromise, by coming up with a new
list of several hundred demands relating to tariffs. The list had actually grown from the previous
day (Ibid.).
Amari said on the TBS program: “Although there was no substantial or basic agreement, we
agreed on a tariff formula.” The sticking points were about the “sensitive agricultural sectors” –
rice, wheat, beef and pork, dairy products, and sugar – and autos. The two sides were at
loggerheads over the schedule and extent of tariff reduction; and the criteria for invoking
“safeguard” import restrictions as an emergency measure to deal with a sharp increase in imports.
The linkage between tariff figures and the agricultural products continue even now to complicate
matters.
Agenda-setting Farm Interests Start Seeking Reforms
During the summer of 2014, Japan’s powerful agricultural interests began to show signs of
supporting TPP entry, as long as certain safeguards to protect vulnerable products were in place.
At his office in Sakura City of his home constituency of Tochigi Prefecture, Kyoya Nishikawa,
chairman of the Liberal Democratic Party’s TPP Committee, told visiting municipal assembly
members expressing concern about the course of the TPP talks: “Even if the tariffs on pork and
beef are lowered, there will be no problem because emergency import restrictions will be
implemented.” Nishikawa sought their understanding (Nikkei, August 14, 2015).
Although Nishikawa is a powerful member of the Diet policy clique tied to the agriculture,
forestry and fisheries industries, the so-called norinzoku, he was eager to conclude the TPP talks
even if tariffs on farm products had to be reduced. He even visited TPP member nations to hear
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their views.
The Prime Minister was able to count on Nishikawa to help him move the
intransigent farm lobby forward on the TPP issue.
During the LDP’s heyday in the past, a number of powerful policy cliques in the LDP [zokugiin]
openly challenged government policies and even controlled the purse-strings of related ministries
and agencies through the budget process. But over the years, the clout of such groups has waned,
in part through attrition, but also thanks to the efforts of the DPJ administrations (2009-2012) to
move away from such a system. The agricultural zokugiin, however, remain still a formidable
political force, although policy-making is now centralized in the Kantei or the Prime Minister’s
Office. Even the agricultural zokugiin now know that unless they show a positive stance toward
reform, it will be unlikely that any of them will be appointed as cabinet ministers.
Nishikawa was not the only member of the agricultural clique to take a positive stance toward
reform. LDP General Council Acting Chairman Hiroshi Moriyama, another member, surprised
the audience at a meeting of agricultural organizations in Kagoshima City on August 1, 2014, by
saying, “I think the Central Union of Agricultural Cooperatives (JA Zenchu) should put an end to
its political activities” (Ibid.).
In June 2014, as part of its draft agricultural reform plan, the Abe administration called for the
abolishment of JA Zenchu. Moriyama strongly resisted it. As a result, he was viewed as a
supporter of the organization. He did not want JA Zenchu to disappear but he agreed with Abe’s
contention that in its current state, it was not beneficial to Japan’s agriculture and should be
reformed. In an effort to fall in step with Abe’s intentions, Moriyama urged the command centers
of agricultural cooperatives that have built close ties with the LDP to implement the planned
reforms (Ibid.).
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U.S-Japan Talks Break Down in September
With the APEC meeting in Beijing as the unofficial deadline, Japanese and U.S. negotiators met
regularly throughout the summer, but a successful conclusion proved elusive. Ministerial talks on
the TPP between the Japan and U.S. in Washington on Sept. 23 and 24 ended without making
any concrete progress. Japanese Minister for TPP Amari walked out of the meeting when USTR
Froman stated that the U.S. planned to keep intact the tariffs now imposed in the auto parts
sector, which Japan had hoped would be abolished. As a result, the ministerial meeting of the 12
TPP participating countries that was held in late October ended with no overall agreement. The
consensus was that it would be extremely difficult for the TPP talks to conclude within the year.
Discussions on September 23 hit a snag from the very beginning. At the working-level talks
preceding the ministerial in the afternoon, the U.S. side informed Japan that it would be “difficult”
to abolish the tariff on auto parts exported to the U.S. “for 20-30 years.” The two sides had
previously agreed to eliminate the tariff in stages. Tariff abolition is also included in the free
trade agreement (FTA) the U.S. signed with the ROK.
Japanese officials believed that the U.S. had toughened its stance out of consideration for the
United Auto Workers (UAW) and the auto industry, which are part of the Democratic Party’s
political support base, ahead of the mid-term elections on November 4.
Furthermore, in the negotiations to reduce tariffs on beef and pork, the U.S. insisted on
“reverting to the position prior to the agreement reached at the Japan-U.S. summit last April”
with regard to the conditions for invoking “safeguards” that restore tariffs to original levels in the
event of a sharp increase in imports. Japan had intended to settle such pending issues as
conditions for allowing Japan to implement safeguard measures to raise tariffs on U.S. beef and
pork temporarily if imports surge (Mainichi Shimbun, September 24, 2014).
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Key remaining points in Japan-U.S. trade talks over TPP (Nikkei 1/12/15)
Items (tariffs)
Beef
Japan’s proposal
Offered to lower tariffs by
more than half under the
(38.5%)
condition
of
invoking
safeguard measures if annual
imports hit 200,000 to 300,000
tons
Pork
Offered to cut the tariff below
100 yen under the condition
(482 yen per kilogram for that the tariff will be
reintroduced when imports
inexpensive pork)
rise; proposed removing 4.3%
tariff on high-end pork
Rice
Pointing to the difficulty of
importing foreign rice due to a
glut of the grain at home
Auto parts
Demanding an immediate
removal of tariffs
(2.5%)
!
Demands from the U.S.
Demanding tougher conditions
for safeguard implementation
Demanding tougher conditions
for safeguard implementation
Demanding an increase in
imports of rice for human
consumption
Proposed removing tariffs
over 10 to 20 years
Japanese negotiators believed even before the ministerial-level meeting that “the U.S. has no
desire to reach an agreement,” even though TPP Minister Akira Amari had come to the talks
intending to make this “the last Japan-U.S. ministerial.” After being informed of this by
subordinate officials, Amari wanted to cancel his talks with USTR Michael Froman right before
they were scheduled to start. As a result, the meeting began 90 minutes behind schedule. Talks
on Sept. 24, which had been scheduled for a full day, were shortened to just one hour (Ibid.).
U.S. agricultural groups and the Congress had been closely monitoring the TPP talks. The
Obama administration was hoping to obtain trade promotion authority (TPA) for the President –
i.e., strong trade negotiation powers -- after the mid-term elections, but the Republican Party had
insisted that “an agreement favorable to the U.S. is necessary for the TPA to pass Congress,”
according to a House of Representatives member. So a pre-election compromise deal with Japan
would have killed the President’s chances for a smooth TPA process in the Congress (Mainichi,
September 24, 2014).
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American Agricultural Interests Want Japan Out of the TPP
The Japanese press blamed USTR for the breakdown in negotiations in late September. Amari
had thought victory was near prior to the meeting with Froman, but walked out after when he
encountered an unbending U.S. position. As a result, negotiations on forming a new free trade
framework have come to a standstill at the final stage. Since neither side was willing to
compromise, the APEC talks of all 12 partners were merely a pro-forma exercise, with
substantive talks put off until early 2015 (Ibid., Nikkei, September 24, 2014).
Japan-U.S. ministerial on TPP fails to narrow gap
A Yomiuri Shimbun editorial on September 26 assessing the collapse of talks, blamed the “U.S.
hardline policy” toward Japan as the problem.
“Negotiations on forming a new free trade framework have come to a standstill in their final
stage. In order to move forward the negotiations, drastic concessions are imperative.
“A Japan-U.S. ministerial meeting on the Trans-Pacific Partnership (TPP) initiative was held in
Washington, but it ended with no agreement, although they intended to settle pending issues,
such as conditions for allowing Japan to implement safeguard measures to raise tariffs on U.S.
beef and pork temporarily if imports surge.
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“After meeting U.S. Trade Representative Michael Froman, Minister in charge of the TPP talks
Akira Amari said, ‘We made a flexible proposal, but no progress was made,’ thus indicating that
the U.S. side’s concessions were insufficient.
“Amari said, ‘Japan will accelerate bilateral talks (with countries other than the U.S.),’ but as
long as Japan and the U.S., which lead the TPP talks, remain unable to reach a formal agreement,
the overall TPP negotiations involving 12 countries will not move forward.
“Now that the latest Japan-U.S. ministerial meeting failed to reach an accord, it has become even
more uncertain for the two countries to attain the goal of reaching a broad agreement in
November. Japan and the U.S. should quickly resume negotiations and reach a final accord.
“In the run-up to off-year elections on Nov. 4, it has become difficult for Washington to make
concessions to Tokyo. Voices calling on the government of President Barack Obama to assume a
tough stance in negotiations with Japan are growing louder in Congress and industrial groups.
“Among others, livestock groups and lawmakers lobbying for such groups’ interests are urging
the government to exclude Japan from the TPP talks if the nation refuses to eliminate tariffs on
its key agricultural products.
“President Obama will be tested over whether he can demonstrate leadership to rebut radical
arguments in the U.S. for a hardline policy against Japan and conclude the TPP talks.”
“Even if Japan and the U.S. strike a deal in bilateral TPP talks, the accord could be scrapped in
the face of opposition from Congress. We hope President Obama will step up efforts to enact the
TPA bill at an early date by persuading the Democratic Party to support it.
“It is significant to create in the Asia-Pacific region a broad economic zone that accounts for
nearly 40% of the world’s gross domestic product (GDP). The TPP initiative is expected to
contribute to revitalizing the economies in the region as a result of lowering tariffs and
introducing common rules on trade and investment. There is also the strategic aim of applying
pressure on emerging China and eventually stabilizing the region.
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“It stands to reason that in international negotiations countries make assertions to protect their
interests. In the endgame, however, it is important for nations to make concessions from a broadbased perspective to reach an agreement.”
A Nikkei editorial on September 26 concluded:
“Brinkmanship is common in trade negotiations. However, negotiators sometimes differ in their
perception of when the final phase of negotiations has been reached. It’s a shame that Japan and
the U.S. were not on the same page at the ministerial meeting on the Trans-Pacific Partnership
(TPP) held in Washington.
“Unless there is a will to reach an agreement and mutual trust amid the fierce maneuvering, this
may be perceived as a breakdown in negotiations. While the two sides were not able to conclude
their talks this time, they are only one step away from wrapping up the negotiations. They must
not give the wrong message to the world by being concerned only with their domestic audiences.”
Conclusion: In the End All Trade Talks Are Political
Prime Minister Abe’s party, the LDP, easily won a snap election in December 2014, forming a
solid two-thirds majority in the Lower House with its coalition partner the Komeito. The main
purpose of the election was to seek the approval of the electorate for Abe’s economic policies,
given that the country has slipped again into recession. The TPP talks with the U.S. have been
postponed until early 2015, so joining TPP was deliberately avoided as a campaign issue by the
LDP, although it did come up in certain farm localities, such as Miyazaki Prefecture. However,
Abe may have concluded that if Japan had conceded to the U.S. on tariffs and other protectionist
measures in order to seal a TPP deal with USTR prior to the APEC meeting in November, it
could have spelled disaster in the upcoming election if the over-represented rural prefectures, for
the most part anti-TPP, voiced their disgruntlement by voting against the LDP. The party
remains beholding to the farm vote, and many of the LDP Diet members strongly uphold those
interests.
Immediately after the election victory, however, the Abe administration began to set the stage for
a TPP decision, starting with a legal full-court press on JA. Agriculture Minister Koya
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Nishikawa said on December 16 that the government planned to submit a bill to revise the
Agricultural Co-operative Society Law to the Diet in February at the earliest, although
cautioning that it could be delayed due to diverging views in the ruling coalition and pressure
from agricultural coop groups.
Wide gaps exist among those bodies, especially on the auditing authority of central and
prefectural agricultural unions over primary farm co-ops (JAs). While LDP lawmakers who have
close ties to the agriculture industry and the JA group want to maintain the legal authority, the
Cabinet Office and the government’s Regulatory Reform Council are calling for the abolishment
of such authority.
Taking into account such differing views, Nishikawa said it might be “quite difficult” to compile
the bill as early as he hoped. He said the government would step up efforts to reach agreement
with the LDP and the JA group, considering that the process has been already delayed by the
snap election held earlier this month.
At a press conference held on Monday, Dec. 15, a day after the election, Prime Minister Abe
stressed that his government would take decisive action to deregulate the sectors including
agriculture. On the following day, Haruko Arimura, minister of state for regulatory reform, told
the press conference that a gap exists between the Japan Agricultural Co-operatives (JA) group’s
self-reform plan and the government’s view but that the government would continue to press for
reform of the group’s system centered on central and prefectural unions.
Politics trumps national interests in Japan, and the Prime Minister, despite his sincere desire to
join TPP, must walk a tightrope in order to satisfy to a certain extent agricultural interests while
meeting the minimum requirements for joining the TPP. Having won the national election
handily will buttress Abe’s hand in making the final TPP decision in the spring. But politics in
Washington, as we have seen, plays a major role in setting the agenda for the TPP talks, as for
example keeping intact the auto and truck tariffs imposed on Japan for the sake of the Congress
and the U.S. auto industry. JAMA, Japan’s automobile manufacturers association, has been
actively promoting its interests in the U.S. with reports and literature detailing the contributions
of Japanese auto investments in the U.S. to the economy and local jobs.
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At this writing, Japan and the U.S. are set to resume TPP negotiations on January 14, 2015. The
focus will be whether Tokyo and Washington can find common ground on the key remaining
elements in the bilateral talks that include Japan’s import tariffs on pork, beef, and other farm
products. The U.S. delegation led by Acting Deputy U.S. Trade Representative Wendy Cutler
will meet for two days in Tokyo with a Japanese team headed by Hiroshi Oe, deputy TPP chief
negotiator. “It is important to lay a foundation for the TPP ministers to meet by spring,” said
Akira Amari, minister in charge of economic and fiscal policy, at a Jan. 9 press conference. “To
that end, Japan and the U.S. need to reach a consensus” (Nikkei, 1/12/15).
Import conditions on beef and pork remain major impediments to the bilateral negotiations.
Japan has already proposed lowering the current 38.5% tariff on beef by more than half after a
certain period of time. Japan has also offered to cut tariffs on inexpensive pork to below 100 yen
from the current tariff of 482 yen per kilogram at most, under the condition that it will implement
safeguards if pork imports surpass a certain level. The U.S. is demanding that Japan not resort to
this measure in principle. Tokyo and Washington have yet to reach a consensus.
The two countries are also divided over rice imports. Washington has been renewing its call on
Japan to open its market since last autumn. Japan is rejecting this demand, saying that there is
little room for accommodating foreign rice due to a serious glut of the grain at home (Ibid.).
As argued in this paper, policy processes under the DPJ and LDP administrations were not that
dissimilar when it came to TPP decision-making in the sense that the party played a major role in
both cases in setting the parameters for Japan’s membership in the TPP. But in the case of the
DPJ, the party was never able to bring its internal debates to closure and as a result, the Prime
Minister was never able to make the final decision to formally join the negotiations. In the case
of the LDP, Prime Minister Abe was given a free hand by the party to participate in the talks, but
the understanding was that his negotiating stance could compromise but not to the extent that the
interests of the agricultural sector would be sacrificed for broader national interests. So far, the
Abe administration has held to that dictum, but in the end, it may have to go beyond the
limitations set by the ruling party in order to protect farmers. With the Lower House election
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behind him, Abe is likely to cross that Rubicon in the spring of 2015, but he must also take
special care that TPP as an issue does not intrude into the local unified election campaigns in
April.
As for the U.S., the Obama administration hopes to stress the successful conclusion of TPP
negotiations as its biggest success during the 2016 U.S. presidential election. The President can
count on backing for fast-track authority and the TPP agreement from the opposition
Republicans, who are staunch advocates of free trade. But the party is not eager to see Japan
emerge from the talks with a “good deal.” If unsatisfied with the results, Republicans may stick
to an earlier demand that zero-tariff rules must apply to Japan in the end. With both Japan and
the United States counting on an early conclusion to talks before political maneuvering again
gets in the way, talks from now until the spring should be dramatic.
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End Notes:
A portion of this study of DPJ and LDP policy making toward the TPP – mainly the introduction
-- comes from a paper on TPP and regional architecture presented at a Cato Institute conference
(see Brooks citation below).
Interviews
During a month-long research stay in Tokyo in June 2012 as a visiting researcher at the Tokyo
Foundation, and a two-month research stay at Waseda University as a visiting scholar in JuneJuly 2014, I interviewed extensively on the DPJ and LDP policy process. The sources remain
anonymous, but included members of the Diet from the DPJ and LDP, their staffers, former state
ministers, ministry officials, scholars and researchers, and journalists. Some of my notes from
those two occasions form the backbone of my argument on how the two parties, as ruling parties,
functioned and made policy decisions.
Media sources
I have extensively used the Japanese press – Asahi Shimbun, Nikkei, Yomiuri Shimbun,
Mainichi Shimbun, Sankei Shimbun, and Tokyo Shimbun – in detailing the chronology and
policy process of the Japanese government in dealing with the TPP negotiations. The specific
daily is cited in the text.
Books and articles consulted
1. Amako, Satoshi, et al, editors. Regional Integration in East Asia. New York, United
Nations University, 2013.
2. Asakawa, Yoshihiro. TPP-de Nihon wa sekai-ichi no nougyou taikoku ni naru (With TPP,
Japan will become world-class major agricultural power). Tokyo, KK Best Sellers, 2012.
3. Birkland, Thomas A. An Introduction to the Policy Process (Third Edition). Armonk,
New York, M.E. Sharpe, 2011.
4. Beeson, Mark. Regionalism and Globalization in East Asia (Second Edition). Palgrave
MacMillan, 2014.
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5. Brooks, William L. “The Great Political Debate in Japan over Joining TPP,” Paper
presented to a joint Cato Institute – Japan Economic Foundation (JEF) Conference on
U.S.-Japan Economic Relations, Washington, DC., February 14, 2013.
6. Calder, Kent and Min Ye. The Making of Northeast Asia. Stanford, CA, Stanford
University Press, 2010.
7. Destler, I.M. American Trade Politics (Fourth Edition). Washington, DC, Institute for
International Economics, 2005.
8. Ian F. Fergusson, et al. The Trans-Pacific Partnership (TPP) Negotiations and Issues for
Congress (Congressional Research Service, December 13, 2013).
9. Fuse, Katsuhiko, et al. Kore de wakaru! TPP no subete (Everything you need to know
about TPP). Tokyo: Shinyusha, 2012.
10. Kelsey, Jane, ed. No Ordinary Deal: Unmasking the Trans-Pacific Partnership Free
Trade Agreement. Crows Nest, Australia, Allen and Unwin, 2011.
11. Mulgan, Aurelia George. “The Farm Lobby,” Chapter 6 of Japanese Politics Today:
From Karaoke to Kabuki Democracy, edited by Takashi Inoguchi and Purnendra Jain.
New York: Palgrave MacMillan, 2011.
12. Nakano, Takeshi. TPP boukokuron (Argument that TPP will ruin our country). Tokyo,
Shueisha, 2011.
13. Ogura, Masayuki. TPP wa kuni wo horobosu (TPP will destroy our country). Tokyo,
Takarajima-sha, 2011).
14. Petri, Peter A. and Michael G. Plummer, “The Transpacific Partnership and Asia-Pacific
Implications.” Washington, DC, Peterson Institute for International Economy, June 2012.
15. Tanaka, Yuuji and Akira Uchiyama. TPP to Nichibei kankei (TPP and the Japan-U.S.
Relationship). Kyoto, Koyo Shobo Publisher, 2012.
16. Williams, Brock R., Trans-Pacific Partnership (TPP) Countries: Comparative Trade and
Economic Analysis. Congressional Research Service, June 10, 2013.
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Asia-Pacific Policy Papers Series
Contributing actively to public-policy debate in the nation’s capital, the Reischauer Center
publishes occasional papers disseminating its analytical work. Subjects of concern include:
the Korean nuclear crisis, Northeast Asian relationships with the Middle East; Asian energy
prospects; and assessments of Japanese economic reform.
No. 1
The North Korean Nuclear Crisis and American Policy
No. 2
Japan’s Stealth Reform: The Key Role of Political Process
No. 3
China’s Energy Diplomacy and Its Geopolitical Implications
No. 4
Stabilizing the US-Japan-China Strategic Triangle
No. 5
Enhancing Japan’s Energy Security
No. 6
Moving (Slightly) Closer To Iran
No. 7
Japan’s Asianism, 1868-1945
No. 8
The Politics of the Futenma Base Issue in Okinawa
No. 9
The Reischauer Heritage in the Twenty-First Century
No.10 Demystifying FTAs
No.11 Central Asia’s Oil & Gas Sector Since the 2008 Financial Crisis
No.12 Cracks in the Alliance? Futenma Log: Base Relocation Negotiations
No.13 A Changing Arctic and the Trans-Pacific Relationship: American Perspective
No.14 Toward a New Era of Trans-Pacific Energy Interdependence