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U.S.-Japan Remain Divided on TPP Deal Weeks Before Obama Visit

11:22AM Apr 11, 2014

The U.S. and Japan still face "considerable" differences in reaching an agreement on the Trans-Pacific Partnership regional trade pact two weeks before President Barack Obama pays a state visit.

"Our teams arrived expecting that the talks would be tough and our expectations have been met," U.S. trade representative Michael Froman said at the end of two days of talks in Tokyo. "We understand the challenges. These changes relate to fundamental reforms and the market opening of sectors in Japan that have traditionally been closed."

He said there was some progress, but that "considerable differences remain in our positions on key issues."

The U.S. is pushing to conclude an agreement this year on the TPP, which seeks to link the economies of 12 Pacific nations with combined economic output of about $28 trillion. The TPP goes beyond usual trade deals that focus on traditional goods such as agriculture and seeks to establish rules for digital commerce and include environmental standards and protection for companies that compete against government-backed businesses.

Differences over agricultural products and automobile tariffs have held up a possible deal that could provide a boost to U.S.-Japan relations with Obama set to pay his third visit to the country on April 24-25. A deal would also burnish Prime Minister Shinzo Abe’s reform credentials, after he took Japan into the talks despite the risk of alienating farmers who have traditionally backed his ruling Liberal Democratic Party.

Economy Minister Akira Amari, told reporters it was not time to say whether or not an agreement in principle will be possible when Obama meets Abe.

Beef Tariffs
Froman said that negotiators will keep discussing autos and agriculture this week. Japan is considering cutting tariffs on U.S. beef to the high single digits from 38.5 percent, the Nikkei newspaper said on Thursday, without saying where it got the information. Froman declined to comment on the report. The U.S. side is pushing for a larger cut, the paper said.

Japan this week reached a trade agreement with Australia that involved cutting tariffs on Australian frozen beef by almost half over 18 years and abolishing levies on Japanese car exports. Rice, a particularly sensitive political issue in Japan, was excluded from the deal.

While Japanese officials said they hoped the Australian agreement would provide an incentive to break through the deadlock in talks with the U.S., Froman said it would have no impact. "We’re looking for a level of ambition that is significantly higher than that," he told reporters on his arrival in Tokyo on April 8.

Risk of Collapse
Hiroshi Oe, Japan’s ambassador to the talks told reporters on April 7 that the treatment of beef, pork and milk were among the issues that remain unresolved in bilateral talks.

Abe warned in an interview with BS Fuji television on April 8 that failure to reach agreement between Japan and the U.S., by far the two largest economies among the 12 members of the talks, could mean the collapse of TPP. Kyodo News said on April 4 there would be no joint declaration signed between Obama and Abe at their summit this month, due in part to lack of progress on the bilateral TPP talks.

The inclusion of Japan in the TPP talks sparked opposition from the U.S. auto industry. Points of contention also remain with other countries, such as Malaysia, where intellectual property and state enterprises are a concern, International Trade and Industry Minister Mustapa Mohamed said in February.

Australia, Brunei, Canada, Chile, Mexico, New Zealand, Peru, Singapore and Vietnam are also party to the TPP talks, which missed a deadline for agreement at the end of last year. A round of ministerial talks in February also ended without a deal.