Audrey Young

Audrey Young is the New Zealand Herald’s political editor.

Free traders wait for Japan to fall into line

Caroline Kennedy (centre) at the Senate committee hearing on her nomination as US Ambassador to Japan.Picture / AP
Caroline Kennedy (centre) at the Senate committee hearing on her nomination as US Ambassador to Japan.Picture / AP

When Caroline Kennedy - daughter of the late President John F. Kennedy - appeared at a United States' Senate confirmation hearing as the prospective ambassador to Japan, it was no surprise the Trans Pacific Partnership negotiations was raised.

The TPP is a crucial and sensitive issue in both the US and to Japan.

They are two of the 12 countries involved in the talks that will reach a critical phase at the Apec summit in Bali next week. It will be the first full meeting of TPP leaders in two years though the forum was dealt a blow yesterday when US President Barack Obama announced he would remain in Washington because of the federal shutdown. .

His choice of Kennedy had done her homework for the hearing. She answered enthusiastically about Japan's approach to the TPP, how impressed everybody had been that Japan had come to the negotiating table and was "willing to put everything on the table".

In keeping with the parochial nature of US politics, Kennedy was quizzed by a senator from Wyoming about soda ash - used in the manufacture of glass and steel - and Japan's 3.3 per cent tariff on US soda ash.

"As TPP negotiations continue, will you commit to me that you will advocate for the elimination of soda ash tariffs?" Senator John Barasso asked of her.

"I would definitely make the commitment," she said.

However, if the TPP is as comprehensive as the leaders declared it would be in their 2011 Honolulu statement, there will be no exceptions for anything - not cars, rice, milk powder, nor soda ash.

Japan's tariff on US soda ash at 3.3 per cent is almost negligible compared to, say, its 778 per cent on rice, 360 per cent on butter, 328 per cent on sugar and 218 per cent on milk powder.

It is little wonder that Trade Minister Tim Groser says while New Zealand has primarily looked at the TPP through the lens of a free trade agreement with the United States, the gains to New Zealand from liberalisation in Japan would probably be more significant than with the US.

Japan's entry was certainly a game-changer, turning the TPP into something bigger than Ben Hur or, as Groser tends to say, bigger than King Kong.

With both the biggest economy in the world, the US, and the third biggest, Japan, included in the negotiations, TPP economies in total accounted for $US27.55 trillion gdp in 2012.

A study undertaken by by Professor Peter Petri of the East West Centre in Hawaii, estimates that adding Japan to the mix would increase benefits of a TPP to New Zealand from $3.6 billion to $5.1 billion by 2025.

Groser has been in Japan this past week and talked to the Weekend Herald from the northern island of Hokkaido - the dairying centre of the country - before heading to Bali for an Apec Trade Ministers meeting.

"There are no really hard questions for New Zealand," he says. "It's all in other countries that are not liberalised on some of these issues. But putting them off until tomorrow doesn't make them easier."

He shares Kennedy's enthusiasm for the Japanese Government's enthusiasm and he says contrary to initial fears, Japan had not slowed down the negotiating process with the 11 other countries despite being late to join the party.

Its lead minister on the TPP talks is Akira Amari, the minister in charge of economic revitalisation in the Cabinet led by Shinzo Abe. Like Sir Roger Douglas, his economic reforms have been named after him, "Abe-nomics".

"They are not just approaching it as a trade negotiation," says Groser. "They are approaching TPP as one of the elements in a broad programme of economic revitalisation of Japan and this clear sense ... of a huge and growing sense of optimism in Japan, that the boldness of the whole of this programme called Abe-nomics is absolutely the right thing for Japan."

Groser said Japan had thrown aside conservatism to address the issue of deflation that had cursed the country for the past 20 years and it was leading to a sense of optimism.

As the third largest economy in the world, Japan's entry into the TPP talks was momentous for everyone. US sceptics began to see TPP more an opportunity for itself.

The decision to join was announced in March by Abe, who said: "The TPP is not a crisis; it's a big chance."

He promised that the Government would provide information "conscientiously" as the negotiation proceeds, although it must be noted that Japan has not released texts, as demanded of the NZ Government by a group of artists, musicians and activists including Jennifer Ward-Lealand, Te Radar, Don McGlashan, Moana Maniapoto, Willie Jackson and media commentator Russell Brown. The group has an online petition at itsnotright.org.nz and argue that in a democracy people have the right to know the detail of international agreements.

Moana Maniapoto.
Moana Maniapoto.

Abe went on to describe the decline of agriculture in Japan that had taken place without the advent of free trade - abandoned farmlands having doubled in 20 years and the average age - 66 - of the primary farming population.

Abe offered a sweetener, saying that following a meeting with Obama "a prior commitment to eliminate tariffs with no sanctuary is not a requirement for participating in the TPP".

The issues worthy of sanctuary have been defined by the governing party as rice, dairy, wheat, sugar and beef and pork, as well as maintaining the universal health insurance system. The real issue now has become what Japan means by the word "sanctuary" and whether it is for a period of time or a complete exemption.

Don MCGlashan.
Don MCGlashan.

Groser has a firm view: "I think they know perfectly well that it is totally unacceptable to define 'sanctuary' as exclusion from liberalisation."

New Zealand's view is very well known - that it has to be a comprehensive agreement, eliminating tariffs on all goods and services but it is also willing to have tariffs phased out over time.

"The real issue is, will it be full liberalisation - that is the most difficult issue and it has not yet been settled," he says.

He says he understands the concerns in Japan in places like Hokkaido because of New Zealand's experience in the 1980s.

"We looked across at a much strong Australia, and our uncompetitive industrial and agricultural industries like wine were completely opposed to liberalisation because they were legitimately scared.

"But of course, what happens in life is everybody under-estimates their own ability to change and adapt to competition."

Speaking in Tokyo at the Japan New Zealand Partnership Forum, Groser spelled out what he believed would be the impact of the TPP on Japan, a deal he says would lead to a deeper two-way commercial ties between it and other TPP countries.

Te Radar.
Te Radar.

"I am talking here not so much about export of farm products, but about new investment relationships, development of services, technology flows and co-operation is research and development."

For New Zealand's part, he saw room to develop partnership in food with Japan.

Following New Zealand's FTA with China, NZ was investing in 33 huge dairy farms when completed could produce a billion litres of milk a year.

"No one saw this clearly when we were negotiating the comprehensive FTA with China but trade and investment are firmly linked.

"I see every reason to believe it can happen between Japan and New Zealand - and in both directions."

First though, the TPP has to be completed. According to Groser, enough has been done for it to be concluded this year, but it is not yet a certainty.

"I don't think anyone will guess which way it will go, but it certainly can be done this year. I will be pushing this and the Prime Minister will be pushing this and let's hope it comes to pass."

* Political editor Audrey Young will cover the Apec summit in Bali for the Herald.

- NZ Herald

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