Can Japan resist the U.S. trade offensive with a new-version TPP?

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Editor's note: The article is an edited translation from a Chinese story originally published in the WeChat official account of China-U.S. Focus by Liu Junhong, director of the Center for Globalization Studies from the China Institute of Contemporary International Relations.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) held the first ministerial meeting in Tokyo on Saturday since the agreement came into effect on December 30, 2018.

Undoubtedly, CPTPP's coming into force is a major victory for the Abe government in the international economic game, as it could help Japan establish its economic and diplomatic power in the Asia-Pacific, demonstrating its leading role in the Asia-Pacific region, an aggressive goal Abe always dreams of.

Meanwhile, together with the EU-Japan Economic Partnership Agreement(EPAs), which is to be active on February 1, 2019, Japan seems to have a higher chance of winning in the fight against U.S. trade protectionism, as the total GDP of CPTPP and EPA accounts for 40 percent of the global economy.

Japanese Prime Minister Shinzo Abe addresses a meeting of the 11 countries taking part in the Trans-Pacific Partnership free-trade accord in Tokyo on January 19, 2019. /VCG Photo.

Obviously, the formation of the two major trade circles has provided significant business opportunities for Japanese companies.

In the context of the U.S. launching trade frictions around the world, especially the sharpening of China-U.S. trade frictions, these two trade circles should have become tools to prevent the spread of trade protectionism. However, the trade expansion effect that it should have, the original intention to create business opportunities for enterprises, and even the function of leading international rules, have been severely weakened.

First of all, it is difficult to have a “regional origin” effect without the TPP of the United States. The CPTPP freezes “key clauses,” which degrades its quality and function and weakens its regional influence. The exit of the United States means the GDP of 20.41 trillion U.S. dollars has withdrawn, accounting for 60 percent of the total TPP.

As a result, the global economic scale of CPTPP has decreased from 40 percent to 13.2 percent, and the trade share has also dropped to 14 percent. This geographically dispersed free trade agreement cannot form a “regional origin,” and the effect of trade expansion is greatly reduced, and it no longer has the function of leading the order in the Asia-Pacific region.

Secondly, the Japanese and European EPAs have avoided the non-tariff barriers and only reached a limited compromise on tariffs, which reduced the "high standards of developed countries" that they should have, presenting a feature of a diluted Free Trade Agreement (FTA).

Senior officials of the 11 member countries of the Trans-Pacific Partnership free trade accord attend a meeting in Tokyo on Jan. 19, 2019. /VCG Photo.

Trump triggered trade frictions, forcing Japan and Europe to abandon high standards and high quality, and instead compete for time and speed, to reach a framework agreement before bilateral negotiations with the United States.

However, to compete for advantages, both sides lowered the standards but ignored the functions of the framework agreement, so it is difficult to withstand the high standard rule offensive in the United States.

Third, in key areas and industries, the period of the abolition of tariffs is too long, which makes the two major frameworks dominated by Japan lack charm.

For example, it takes 16 years for Japanese beef import tariffs to fall from 38.5 percent to nine percent, and it takes 10 to 13 years for automobile tariffs exported to Vietnam to drop from 70 percent to zero.

Agriculture and automobiles are the two key areas for Japan to negotiate FTA. Protecting agriculture is a major task for Japan to negotiate FTA, which also results in Japan's zero-tariff coverage not reaching the level of developing countries.

Japan has not reached the level prescribed by the WTO in the CPTPP and Japan-Europe EPA framework agreements. Low-level and low-quality framework agreements are difficult to dominate regional cooperation rules, and it is even more difficult to overlook the international order.

Ministers of the 11 countries remaining in the Trans-Pacific Partnership hold a press conference after signing the revised free trade pact in Santiago, Chile on March 8, 2018. /VCG Photo..

According to the plan, the U.S.-Japan trade negotiations will be held in January 2019. The United States has made it clear that it will not accept the Japanese presupposed standards in the agricultural sector. The United States may follow the U.S.-Canada trade agreement and require Japan to accept “exchange rate clauses,” “quantity targets” and even “poison pills clauses.” Low-level and low-quality CPTPP and Japan-Europe EPA cannot withstand the U.S. offensive.

Both China and the United States are the largest export markets in Japan. To balance the United States in the trade war, it is difficult for Japan to establish a depth-strategy without relying on China. The East Asian economy, industry, trade and investment structure have undergone historic changes. Today, China-Japan-S.Korea trade has surpassed Sino-U.S. trade. China-ASEAN trade is also close to Sino-U.S. trade. China and ASEAN have become Japan's largest “direct investment income.”

In the future, the problem is not whether East Asia should join the Japanese-led CPTPP, but how Japan can find a path to return to East Asian cooperation.

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