Editorial: Japan must embrace competition

Fumio Kishida represents a Government that is said to be bringing new vigour to an economy that has been in decline for the past two decades. Photo / Getty Images

Opinion

Minister's visit a test of Tokyo's free trade policy.

A visit by a foreign minister of Japan would not normally attract more than polite interest in this country. But Fumio Kishida, who will be here at the end of this week, represents a Government that is said to be bringing new vigour to an economy that has been in decline for the past two decades. Prime Minister Shinzo Abe's plans are of particular interest to New Zealand because they have brought Japan into the Trans Pacific Partnership negotiations.

When Japan was admitted to those talks in April, this column expressed doubts about its value to the TPP, probably the most promising trade liberalisation effort in the world at present. Initiated by New Zealand, Singapore, Brunei and Chile, the partnership now comprises 11 countries, including the United States, and the goal remains a "gold standard" trade agreement, not a cosmetic one.

Japan's trade protection has been legendary. Even in its postwar manufacturing boom, when it was a factory for the world much like China is today, Japan fiercely protected its agriculture and maintained impenetrable bureaucratic barriers in other sectors. It entered trade talks for appearances and nothing changed.

This time its Government might be serious. Mr Abe has embarked on a policy of stimulation by deliberate inflation to jolt the country out of the deflation it has been suffering for the past 20 years. Inflation is dangerous in a protected economy. Costs can spiral out of control unless competition contains prices. Joining the TPP is Mr Abe's signal that competition is coming.

So far "Abenomics", as Japanese are calling his monetary and fiscal loosening, has lowered the yen, giving exporters a boost, and ignited the sharemarket. Latest figures show a lift in growth. But he has promised much more than another burst of export-led growth. Japan and the world economy would both benefit from sustained consumption growth within the country. The removal of job protection and other internal reforms are vital. The TPP offers a means to bring those about.

The Pacific initiative is not the only regional trade agreement giving renewed hope for progress in global trade rules. The US and the European Union are discussing a Trans-Atlantic Trade and Investment Partnership. And the more liberal Latin American trading nations - Mexico, Colombia, Peru and Chile - are proposing a "Pacific Alliance".

The World Trade Organisation's Doha round may be beyond revival but WTO principles are being applied in these big regional negotiations and any agreements reached are likely to be open to all countries prepared to sign up to rules that will cover investment, intellectual property, state procurement and trade in services as well as goods.

All countries will want to safeguard certain rights. New Zealand's state medicine purchaser, Pharmac, should be sacrosanct. Japan wants to retain "sanctuaries" for its rice farmers, a traditional industry of now ageing folk on small plots. They are a powerful lobby, particularly within the Liberal Democratic Party now restored to power.

Trans-Pacific partners could respect the high cultural value Japan reserves for home-grown rice but should insist the protection of other agriculture is phased out in 10 years. Australia and New Zealand have been the most wary of Japan's inclusion in the talks. Both have long struggled for access to that market for their farm products. If this visit provides further evidence that Japan's intentions are genuine, it will be most welcome.