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Tide Changing on TPP Negotiations

Japan's elections could bring changed stance in stalled TPP talks.

Last year it was thought that the Trans-Pacific Partnership (TPP) could get wrapped up by the end of 2013 and passage of Trade Promotion Authority looked promising in 2014. A year later, we’re left with neither but the tide could be changing with Japan who has been dragging its feet on lowing tariffs and restrictions on agricultural and auto markets.

Darci Vetter, chief agricultural negotiator for the Office of the U.S. Trade Representative, said in a recent radio interview that negotiations are “entering the end game” although the timeline will be decided when tough issues can be resolved.

Chief negotiators were in Washington in mid-December and Vetter said those talks have entered the phase “where some tough decisions have to be made, and outlining some of those most sensitive commitments in the negotiations.”

Vetter said the discussions remain focused on issues like sanitary and phytosanitary measures, intellectual property and others, as well as key tariff negotiations on the market access talks.

The TPP is a regional trade agreement between 12 Pacific Rim countries including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States, which account for nearly 40% of global GDP.

Japan has not previously included agriculture in its free trade agreements or the economic partnership agreements, as it calls them, and so this is a new foray for Japan. Vetter explained this is a situation where Japan is willing to put its tariffs and quotas on the table for the first time, but it is taking some time.

Nick Giordano, vice president and counsel for international affairs at the National Pork Producers Council, said the lynchpin issue in the TPP negotiations remains market access in Japan. Japan’s current TPP market access offer exempts pork, rice, wheat, beef and dairy products from tariff elimination.

“If that nation is allowed an unprecedented amount of exemptions from tariff elimination, other TPP countries likely will pull back on both market access and rules, which would significantly diminish the benefits of the entire agreement and set a terrible precedent for future trade deals,” he said.

Giordano added it’s important to get the rules right within the TPP negotiations, before it expands and the U.S. voice gets diluted. “We’ve got to set the rules right. And right now, Tokyo really holds the keys to the car,” he said.

Japan is the number one export market for pork and third for beef, Vetter said, adding that the potential to boost trade is “quite vast” if the negotiations can dismantle some of the barriers currently in place.

Japan’s elections

Japan held its general elections Dec. 14, and Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) party and its junior coalition partner, Komeito, now hold 326 of the 475 seats in Japan’s lower house.

The election was viewed as a referendum on Abe’s economic policies, known as “Abenomics,” which have to date included a huge fiscal stimulus and massive monetary easing. With the resolute victory in hand, Abe is expected to continue his Abenomics campaign by implementing structural reforms – the third and final element of Abenomics – and agriculture is one of the top candidates for improvement, NPPC expects.

Japan’s agriculture industry is highly subsidized and protected. The government plans to overhaul its agricultural policies to create a more vibrant and competitive food sector. Reducing import barriers is one of the cornerstones to this objective.

TPA passage

Dave Salmonsen, senior director of congressional relations at the American Farm Bureau Federation, said the president’s recent call for passage of Trade Promotion Authority is positive for passage in 2015, and he expects Congress to take up a bill early next year.

TPA gives the President the ability to take any finalized trade deal to Congress for just an up or down vote.

Vetter said TPA is “critical to getting a trade deal across the finish line.” It allows negotiating partners to understand that whatever deal is agreed upon will be the one put into final action.

Leaders in the House and Senate have made strong commitments to advancing the legislation. She reported the administration is working very closely with both houses of Congress in a bipartisan fashion in hopes to move forward on TPA “early next year.”

Salmonsen added that technically TPA is a revenue bill, so will have to pass the House first. He expects the Senate could hold its own hearing prior to the House advancing a bill though.

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