TPP can't settle for second best like Australian deal.
Japan, the world's third-biggest economy, has a long and notorious history of protectionism. If Australia cannot be accused of the same, it has hardly been a pin-up boy for free trade. Its low-grade pact with the United States, signed 10 years ago, was most notable for the dearth of American concessions in areas such as dairying. More recently, it was a latecomer to the Trans-Pacific Partnership negotiations. It is, therefore, hardly surprising that the free trade agreement signed this month between Australia and Japan falls far short of the gold standard being espoused for the TPP. In the normal course of events, that may not matter. But while it may be a plus that Japan has even signed such a pact, the shortcomings in that document do the TPP negotiations no favours.
The Japanese have tried to suggest otherwise, arguing the bilateral pact would actually accelerate the TPP talks. Japan's ambassador to those negotiations, Hiroshi Oe, said there would now be a gap in tariffs between Australian beef and US beef. "That will be very difficult for the US beef industry," he said. "It would be good if that became an incentive for reaching an early agreement" on the TPP. That appears to have cut little ice with the other 10 nations involved in those negotiations. Sharp criticism from the Americans confirmed they saw mainly negatives. Key among these would have been a revived suspicion about just how far Japan is prepared to go in meeting the goals of those involved in the TPP talks.
When New Zealand, Singapore, Brunei and Chile initiated that exercise in 2011, their ambition was a comprehensive agreement, with all tariffs reduced to zero within 10 years. The agreement between Japan and Australia comes nowhere near to meeting that. Japan's 38.5 per cent tariff on frozen beef will, for example, be reduced only to 19.5 per cent on full implementation, and it will take 18 years to get there. Similarly, the tariff on fresh beef will be cut to 23.5 per cent but only after 15 years. Far from setting precedents, Japan has made it clear that old habits die hard and that it is still minded to be strongly protective of its agricultural producers if given the opportunity. This pact is more about trade-offs than free trade.
Australia and Japan will, however, be satisfied that some sort of agreement is in place. That, in itself, imposes pressure to complete the TPP pact, not least on behalf of New Zealand beef farmers who, like their US counterparts, will eventually be at a considerable disadvantage if nothing comes of the negotiations. The US attitude is pivotal to what happens next. If the TPP is to fly, it must apply the leverage that is part and parcel of being the world's largest economy to extract greater concessions from the Japanese. In that regard, nothing much has changed. That leverage was what persuaded this country to admit Japan to the TPP negotiations despite reservations that its attitude would slow the process. An inkling of what lies in store will be apparent when Barack Obama visits Tokyo tomorrow.
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New Zealand must hope the US President reaffirms his commitment to achieve a TPP agreement of the highest standard. Compromises will be necessary, as with all such pacts, but they should be restricted to areas of special cultural value to the Japanese, notably the traditional rice-farming industry.
The protection of other agricultural produce should be phased out in 10 years. Australia may have been ready to settle for second-best, unlike this country which walked away from talks in 2008 when it became apparent Japan would not meet its standards.
The Trans-Pacific Partnership must be equally single-minded.