With the U.S. and Japan nearing a deal and Republicans in control of Congress, could 2015 be the TPP’s year?
Last week, U.S. President Barack Obama traveled to Beijing for a series of bilateral meetings and to participate in the annual APEC Summit – his first since 2011. One of the many newsworthy items to come out of that forum was a leaders’ meeting of the Trans-Pacific Partnership (TPP), a regional free trade agreement that is a key pillar of Obama’s rebalance to Asia policy. In remarks before the meeting, the president struck a hopeful tone, heralding the “good progress” made by negotiators to resolve “several outstanding issues,” and encouraging his fellow leaders to “break some remaining logjams.” He also reiterated the high priority his administration places on this agreement, and the immense economic benefits it would bring to the countries involved.
Public optimism notwithstanding, the negotiations themselves have been anything but smooth sailing, hampered by thorny issues such as state-owned enterprise reform and intellectual property rights. Obama has also faced resistance from his own party, which tends to resist trade liberalization on the grounds that it harms U.S. workers. These and other factors caused negotiators to miss several stated deadlines, and the talks are now more than halfway through their fourth year. The future is not all doom and gloom, however. The U.S. and Japan are very close to reaching a deal on market access, which would resolve one of the primary remaining stumbling blocks and add momentum to the negotiations writ large. On the domestic front, prospects for congressional cooperation improved with a resounding victory for the generally pro-trade Republican Party in this month’s midterm elections. With political will, a deal may be within reach next year, possibly even in time for the 5th anniversary of the TPP’s launch on March 15. Nonetheless, significant challenges yet remain.
One crucial sticking point is the U.S.-Japan parallel negotiations on market access for agricultural and automotive products. The issues are historically fraught, as U.S. auto producers have long maintained that non-tariff barriers restrict their entry into a lucrative market, while high tariffs on Japanese agricultural imports result in exorbitant prices for consumers and low productivity among Japanese firms. In particular, the “sacred sectors” – beef, pork, rice, wheat, dairy, and sugar – have powerful political lobbies that command outsized influence in the Japanese Diet, which last year passed a resolution forbidding the administration of Prime Minister Shinzo Abe from zeroing out tariffs on any of these products.
For these reasons the talks have been consistently difficult and often acrimonious, but they now appear headed toward a denouement. Ambassador Hiroshi Oe, who heads working-level negotiations on agriculture for Japan, told reporters following a round of talks with his U.S. counterparts that the “sky is clearing considerably” and that 90 percent of the work may now be resolved. Meanwhile, Abe stated in a recent interview with the Washington Post that the talks have reached a “final stage.” On the U.S. side, Ambassador Michael Froman noted in a post-APEC call with reporters that “the end of these landmark negotiations is coming into focus.” Japanese media reports now suggest officials are aiming to reach broad agreement by February 2015.
Of course, even if the two sides reconcile in the negotiating room, there is no guarantee of a complete deal reaching fruition. Obama remains hamstrung by his lack of Trade Promotion Authority (TPA), a temporary power that allows the executive to present a concluded trade agreement to congress for a yes-or-no vote without amendments or procedural obstructions. Historically, TPA has been an important tool for presidents negotiating trade agreements, as it gave negotiating partners confidence that the agreed terms would not suddenly be altered during the domestic political review process. Moreover, influential industry groups such as the National Pork Producers’ Council have been active on Capitol Hill in recent months, encouraging lawmakers to reject a deal that falls short of dramatic market liberalization. If U.S. trade officials are unable to assuage the concerns of politically connected stakeholders, the deal could be in danger of falling through.
Japanese negotiators privately acknowledge that they would be much more willing to strike a deal if they can be certain of TPA passing congress, which is more likely with Republican majorities in both the Senate and the House of Representatives. Indeed, in back-to-back press conferences following the midterms, both Obama and incoming Senate Majority Leader Mitch McConnell spoke of trade as a potential area of cooperation. There is concern in some quarters, however, that Republicans will use TPA as a bargaining chip to exact concessions on other issues, such as tax reform and executive action on immigration. A New York Times report suggesting that the president could take action on immigration as early as this week makes the outlook for TPA somewhat murkier.
Further adding uncertainty to the mix are the difficult political circumstances currently facing Abe. Two separate opinion polls released last week by NHK Television and the Asahi Shimbun found the prime minister’s approval rating at 44 percent and 42 percent, respectively, nearly a double-digit drop from last month. Part of this damage is attributable to an unpopular consumption tax increase that plunged the country into recession, but the cabinet was also hit recently by a string of high-profile scandals and resignations. Mired in the worst political crisis since the start of his second term in 2012, and with snap elections now scheduled for next month, Abe may require further sweeteners from the U.S. side before he can afford the high political price tag of a TPP deal.
As in any trade negotiation, then, the endgame will require a concerted effort at the highest levels of government. As one senior U.S. trade official noted recently, “there is no substitute” for a political push from the leaders. According to Frank Januzzi, president of the Mansfield Foundation and longtime specialist in U.S.-East Asia relations, one important indicator to look for in this regard is Obama’s State of the Union address. “My hope would be that Obama, at his State of the Union Address, would say to Congress ‘we may disagree on a lot of things, but here’s an area where we agree. Let’s get it done, and let’s get it done sooner rather than later.’” This would also reassure Japan and other negotiating parties that the president remains committed to pushing this agreement through Congress. Whether it would be enough to seal a deal by next spring, though, is by no means guaranteed.
Elliot Waldman is a journalist based in Washington, D.C., focusing on U.S. foreign policy and East Asian regional affairs.
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