With Japan agreeing to join the Trans-Pacific Partnership (TPP) free trade negotiations, an anxious China is watching from the sidelines and still intent on striking its own deal with its major Asian trading partners.
On March 9, then Chinese Foreign Minister Yang Jiechi said in Beijing, “We have launched official negotiations toward a free trade agreement (FTA) among China, Japan and South Korea and a regional full-scale economic partnership. This is significant.”
He made the remark in a news conference during the session of the National People’s Congress, equivalent to the Diet in Japan.
By praising himself for the launch of the tripartite FTA, Yang showed China’s stance of positively promoting the negotiations.
The remark was in a sharp contrast with the Chinese foreign minister's criticism of Japan over their dispute of the Senkaku Islands in the East China Sea.
“Japan illegally stole China’s territory,” he said.
On March 26, the first working-level meeting to hammer out a tripartite FTA will be held in Seoul. Behind a sense of urgency from China is the TPP, whose negotiations are currently being conducted under the initiative of the United States, which is hoping to reach an agreement by year-end.
The TPP is an “open framework,” viewed by China as U.S. tool to exclude it. However, it is unrealistic for China to join the negotiations among the 12 nations because it has many state-run companies. In addition, given China's level of development, it is difficult for the country to drastically reduce tariffs.
Vietnam is already participating in the TPP negotiations. The Philippines and Taiwan have also expressed their interest in the free trade arrangement. Each has tense relations with China over territorial disputes.
In mid-February, the European Union announced that it will begin negotiations with the United States to reach the Transatlantic Trade and Investment Partnership (TTIP) arrangement. The EU hopes to conclude it in 2014.
In November 2011, the EU and the United States decided to set up a high-level working group for the promotion of free trade. Only a year and three months later, they announced that they will begin talks for the TTIP.
“The (possible) closer relations between Japan and the United States through the TPP led the EU to rush negotiations with the United States (for the TTIP),” said a Japanese official.
The EU will also begin talks with Japan as early as next month to conclude an economic partnership agreement (EPA). The EU apparently wants to conclude the TTIP with the United States before Japan and the United States can reach an agreement in TPP negotiations.
By concluding the TTIP, both the EU and the United States can set trade and investment rules, which are beneficial to both of them, before the conclusion of the TPP. As a result, they can both jointly pressure Japan for deregulation from stronger positions.
PURPOSE OF TPP COULD BE WATERED DOWN
The Doha Round of the World Trade Organization (WTO) broke down in late 2011 after 10 years of negotiations. As if in expectations of a breakdown, the countries were already accelerating negotiations for regional free trade pacts.
The movement has produced a concern that the world economy could be divided into blocks. The TPP agreement, however, is expected to include economic powers such as the United States and Japan.
Therefore, an Australian government official said that the TPP will help provide motivation in talks for other regional free trade arrangements to be made and, as a result, also push the WTO to become active again to promote free trade.
However, there is no guarantee that TPP will serve as a mechanism for spreading free trade between participants.
The joint statement issued after the Japan-U.S. summit in February declared that all goods are subject to consideration for elimination of tariffs, for Japan to participate in the TPP negotiations. However, it also clarified that “sensitivity” (important items) exist. It was the first time that exceptions to the elimination of tariffs were publicly expressed concerning TPP negotiations, in which interests of countries conflict.
Behind the move exists not only circumstances in Japan but also those in the United States.
The U.S. administration of President Barack Obama, which has pledged to boost the country’s economy by increasing exports, has put top priority on the expansion of the TPP.
The U.S. government also has a strong sense of crisis on the efforts of China to set up an economic zone in Asia that excludes the United States, such as the Regional Comprehensive Economic Partnership (RCEP). A total of 16 countries from Asia and Oceania have already launched negotiations to conclude the RCEP arrangement.
Therefore, the United States wants to include Japan in the TPP negotiations and conclude the free trade pact as soon as possible, even if there are some “exceptions.”
However, the price for allowing the exemptions to removal of tariffs at such an early stage could be high.
A U.S. magazine specializing in trade reported earlier this month that the textile industry and shoemakers of the United States and the dairy industry of Canada are regarding Japan’s participation in TPP negotiations as beneficial to themselves.
That is because they can also enjoy exceptions if Japan, which is strongly requesting them, joins the negotiations.
If the move that seeks exemptions spreads among countries participating in the TPP talks, the trade pact's purpose of eliminating tariffs will be watered down. There is also a possibility that the TPP negotiations end in failure as participating countries cannot agree on which goods should be excluded from tariff eliminations.
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