US President Barack Obama started a week-long Asia tour last week by visiting Japan, an event highly anticipated by some US allies in Asia. Many believed that this trip symbolized the US’ determination to revitalize Obama’s pivot to Asia or rebalancing to Asia strategy with concrete action, after various distractions arising from US domestic politics and upheaval in other regions, such as Syria and Ukraine.
In a strategic sense, the US would also like to take the opportunity of Obama’s visit to reassure Asian allies of the US’ unwavering commitments in the region, while aiming to dissuade any miscalculated military aggression by China. The fear is China might be influenced to attempt a risky duplication of Russia’s annexation of Crimea in Asia. US reluctance to take decisive action over the crisis in Crimea, in the eyes of many Asian countries, has undoubtedly exposed its weakness and undermined its credibility, which may stir up more provocative moves in the region.
To boost Japan’s confidence in the US and to strengthen the cohesion of the two countries’ security alliance, Obama has made an unequivocal statement regarding the US position on the disputed islands in the East China Sea. He became the first US president to pledge publicly that US defense obligations, based on the US-Japan security treaty, “covers all territories under Japan’s administration, including the Senkaku Islands [the Diaoyutai Islands (釣魚台)].”
Although this security guarantee is targeted at easing Japanese anxiety over the risk of a military clash with China, Obama has also made clear that the US does want good relations with China and hopes each party does nothing to escalate tensions. In other words, Obama implicitly asked Japan to refrain from any provocative action toward China.
In contrast with the unambiguous statement by the US to safeguard Japan’s security, on the economic front, there was a failure to make any significant progress between Japan and the US over the Trans-Pacific Partnership (TPP), the centerpiece of Obama’s push to expand the US’ presence in Asia, before Obama left for South Korea.
Despite the US-Japan joint statement deliberately downplaying the unresolved divergence between the two, asserting that they “have identified a path forward on important bilateral TPP issues,” and that “this marks a key milestone in the TPP negotiations,” the reality is that the US and Japan remain conflicted over farm goods and vehicles.
Since the US began taking the lead in TPP talks in 2009, the complexity and intricacy of this multilateral negotiation process have been broadly recognized, given the wide range of products it covers, regulations, new and sensitive issues, such as labor, the environment, state-owned enterprises investment protection, and intellectual property rights, etc.
As a result, even after more than 20 rounds of negotiations, there is no end in sight to the resolution of the TPP treaty negotiations.
For the US, the TPP serves a multifunctional purpose to further its national interests. Strategically, it plays a crucial economic element in support of the US pivot to Asia policy, by bolstering US economic involvement and relevance in the region. Economically, the TPP is viewed as an effective instrument to accomplish Obama’s economic objectives of creating more US jobs, boosting US exports and eventually stimulating its economic growth. Hence, leveling the playing ground by dismantling tariffs and non-tariff barriers among TPP members has been highly emphasized and prioritized by the US.
Nevertheless, Japan’s entry into the TPP has dramatically increased difficulties in TPP negotiations, given its substantial tariff protections on sensitive agricultural products. In addition, TPP negotiations have also transcended the traditional multilateral trade talks, since the TPP allows its members to settle their differences via bilateral negotiations, while simultaneously undertaking multilateral talks.
These characteristics imply that a chief negotiator of each TPP member has to make an accurate assessment of ongoing multifaceted negotiations and utilize leverage effectively to boost bargaining power in order to maximize profits and minimize costs on both the bilateral and multilateral fronts.
Furthermore, this chief negotiator is also forced to engage in battles on both the domestic and external fronts. On one hand, the negotiators might want to transform domestic opposition against the trade deal into a bargaining chip to ask for concessions from negotiating counterparts. On the other hand, they might also want to strategically translate external pressure on opening the domestic market during the negotiation process into positive momentum to undertake critical economic reforms, which would have been impossible in the previous sociopolitical environment.
Indeed, all of the TPP negotiations have been undertaken in this multi-level, intertwined, and dynamic environment. For example, in the US-Japan bilateral trade talks, Washington’s primary goal has been persuading Japan to open up its market to US agricultural products, while Tokyo has persisted in protecting five sensitive agricultural categories from foreign competition: beef and pork; dairy products; sugar; rice; and wheat and barley.
To break through Japanese resistance, the US Trade Representative, in charge of US external trade negotiation, has adroitly utilized multiple strategies. US Trade Representative Michael Froman has argued that all TPP members expect Japan to allow market access to agricultural products, in order to move the TPP negotiations forward.
On the domestic front, several members of the US Congress across the aisle have signed a letter to the US Trade Representative and the US Department of Agriculture, urging them not to make a TPP deal with Japan if the latter refuses to eliminate tariffs and non-tariff barriers on agricultural goods. US Congressional House Ways and Means Committee chairman Dave Camp, a Republican, even contended that the US should exclude Japan from the TPP if it declines to eliminate tariffs.
Obama and US senior trade officials have announced on different occasions that any breakthrough in TPP negotiations would send a positive signal to Congress on granting the Trade Promotion Authority fast-track negotiation power over the Obama administration. In other words, Washington has tried to transform its domestic discord on the TPP into pressure on other TPP members, especially Japan, to obtain more concessions.
Washington has also attempted to take the window of opportunity provided by Obama’s visit to finalize this trade deal with Japan by also applying political and diplomatic pressures in other areas. Nonetheless, it has proved to be a failure, since Japanese Prime Minister Shinzo Abe has repeatedly demonstrated that Japan under his leadership will not be as obedient an ally as in the past. Nearly 150 Japanese lawmakers paid a visit to the Yasukuni Shrine on the eve of Obama’s arrival in Tokyo, which, to some extent, suggests a failure of mutual trust.
Facing mounting pressures from Washington, Japan has strived to set a bottom line for the concessions it will tolerate by concluding the Australia-Japan Economic Partnership Agreement (EPA) in early April.
Tokyo’s strategy is to provide Australia, a US competitor on agricultural products, with an early and acceptable range of market access to Japan, in order to persuade Washington to consent to its terms as Australia did. By doing so, Tokyo intended to sabotage a possible coalition gathered by TPP agricultural exporting members to jointly push Japan for more comprehensive market access on multilateral TPP negotiations.
The strategy of “divide and conquer” will give Japan more leeway to focus on demands from the US and New Zealand, respectively, while not severely damaging the core political support of Abe’s ruling party, as well as continuing to execute Abe’s economic structural reforms domestically.
As for Australia, its strategy is to get “two bites of the cherry” by negotiating with Japan through a bilateral economic partnership agreement and the multilateral TPP. In other words, signing an EPA with Japan does not mean that Australia has waived its right to request Japan for additional market access in the TPP negotiations. Furthermore, it is reported that the Australia-Japan EPA also includes a most-favored nation clause for cheese products, which would ensure Australia enjoys the same treatment, if Japan provides better access to other counterparts in the same sector in future trade treaties.
Additionally, the formation of the Australia-Japan EPA is partly derived from Canberra’s political calculations. Despite Japan’s rejection of expansion of agricultural market access in the EPA, Australia’s assent to Japan’s terms might be attributed to the following reasons.
First, the administration of Australian Prime Minister Tony Abbott, led by the Liberal Party, which came to office in September last year, has been eager to make tangible achievements in contrast with the former Labor Party government.
Second, the Abbott administration has publicly declared its objective of concluding free-trade agreements with South Korea, Japan and China by the end of this year. As a result, it is crucial for Australia to sign an EPA with Japan before the deadline.
Finally, an Australia-Japan EPA can provide Australia’s agricultural products with a first-mover advantage in Japanese market, which will favor Australia’s products over others and will not sabotage its future claims for more market access to Japan.
The above short example on US-Japan agricultural negotiations illustrates the intricacy and complexity of ongoing TPP negotiations.
The dynamic process of TPP talks, coupled with both bilateral and multilateral bargaining approaches, requires negotiating members to devote enormous amounts of time and resources to observe the actions of their counterparts’ vigilantly, in order to generate sagacious and foresighted decisions.
Given that Taiwan has not handled these kinds of multilateral free-trade negotiations since entry into the WTO in 2002, the demanding features of the TPP process will pose a critical challenge to Taiwan’s negotiating capabilities.
It is doubtful if the Taiwanese government has prepared sufficiently to address this challenge with adequately trained personnel and the relevant input of resources. In addition to the overflowing rhetoric highlighting the significance of membership of the TPP, it is vitally important to undertake a more comprehensive socioeconomic impact analysis across relevant sectors and to formulate corresponding policy adjustments before hastily plunging into TPP talks.
After all, any free-trade deal cannot be a panacea to cure Taiwan’s ailing economy or boost its global competitiveness, since its major function is to level the playing field. If we hope Taiwanese industries will shine in a future world without borders, we should search for the jewels in our crown first.
Eric Chiou is an assistant professor at National Chiao Tung University.
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