Brian Fallow

The Economics Editor of the NZ Herald

Abe holds firm on TPP

PM answers questions on the eve of historic visit.

Japanese Prime Minister Shinzo Abe. Photo / AP
Japanese Prime Minister Shinzo Abe. Photo / AP

Japanese Prime Minister Shinzo Abe is unabashed by criticism of Japan's role in the Trans Pacific Partnership trade negotiations.

The hard line Japan is taking on agricultural market access and the threat that poses to an ambitious outcome for the talks have led to calls from farm lobby groups in New Zealand and the United States to conclude an agreement without Japan.

Prime Minister John Key came close to endorsing that view during his visit to Washington last month, though he emphasised that he would prefer to complete the deal with Japan.

"We were really clear with Japan and with Canada and Mexico when they came in that this was a comprehensive, high-quality deal, and they were the terms they came in on," Key reportedly told the US Chamber of Commerce on June 19, when asked whether Japan should be left out of the deal if it does not improve its market access offer.

"And if they can't meet those terms, and the other 11 partners can, then we should get on and do a deal that includes 11 partners," he added.

When the Herald asked Abe for his response to calls to "leave Japan behind", he pointed to the weight which the inclusion of Japan as the world's third largest economy gives to the strategic importance of the TPP.

"Japan has fostered close relations with the US and has also concentrated on developing mutual trust with countries in Asia.

"Japan is using this position to act as intermediary in overall negotiations and is making concerted efforts so as to make the agreement well balanced while maintaining its ambition," he said.

"Japan is maintaining the momentum gained at recent Japan-US negotiations during US President Obama's recent visit to Japan through conscientious discussions with other participating countries. Japan will continue to play its role in aiming for a timely conclusion for the comprehensive and high-level agreement."

Japan's heavily protected and inefficient agriculture sector is one of the areas targeted in the wide-ranging programme of structural reform dubbed the "third arrow of Abenomics".

The first two arrows were fiscal and monetary stimulus designed to haul the Japanese economy well clear of the deflation it has repeatedly slipped into over the past 25 years.

"In particular regard to agriculture we will abolish the so-called 'rice acreage reduction' which has been in place for over 40 years," Abe told the Herald, referring to a policy where the Government pays farmers to reduce rice output, in order to protect prices. Rice is one of the five sensitive sectors of Japanese agriculture, along with beef, dairy products, wheat and sugar.

"We will answer the challenge of reforming the agricultural collective system for the first time in 60 years, to transform our agricultural sector into a competitive growth industry," Abe said.

Reuters reports that Abe had promised to take a drill bit to the "solid rock" of vested interests such as the Central Union of Agricultural Cooperatives which oversees about 700 regional farming co-operatives, with a Cabinet reform panel in May calling for the abolition of the group.

But the plan's final draft released late last month simply says the body should reorganise itself within five years, with the Government to submit related legislation next year.

The powerful network of agricultural co-operatives is a staunch opponent of trade liberalisation which would open Japanese agriculture to international competition.

The sector is dominated by uneconomically small holdings and adverse demographics, with an average farmer age of 68 in 2010 and nearly a third aged over 75.

Other reforms include lowering the corporate tax rate and addressing rigidities in the labour market.

"We will overcome projected declines in our working population and so on by increasing women's participation in the workforce and by expanding our intake of foreign workers," Abe said.

- NZ Herald

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