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 A central element of Obama's strategic shift towards Asia, the
Trans-Pacific Partnership (TPP) could accelerate global economic
growth, boost U.S. exports and level the playing field between
emerging and rich nations in one of the world's biggest trade pacts,
covering about one-third of global trade.
The White House had hoped to complete the deal, which aims to cut
tariffs and set common standards on other issues, last year. But
that didn't happen and negotiators fly into Singapore on Saturday
for three days of talks on the 12-country pact.
Significant challenges remain, including U.S. frustrations over
Japanese protection of sensitive agricultural products, such as
rice, and U.S. automakers' fears of increased competition from
Japan.
At the start of U.S.-Japan working-level talks this week, a Japanese
cabinet minister said Tokyo could make concessions on tariffs on
some sensitive farm products, but negotiators said big gaps remained
between the two sides.
Japanese Prime Minister Shinzo Abe, who took office 14 months ago
pledging to revive the world's third-largest economy, has made the
trade pact a key part of a growth strategy known as the "Third
Arrow" of his "Abenomics" recipe. The other two "Arrows" are
hyper-easy monetary policy and fiscal spending.
"Abe has told international society he would go ahead with TPP so he
has to make progress," said a Japanese official familiar with the
matter. "It is not so easy to accept failure."
While the United States and Japan agree on many issues, they remain
at odds over politically sensitive sectors for both countries.
Washington has been pressing Tokyo to scrap all tariffs in the five
categories of rice, beef and pork, dairy products, wheat and sugar.
These include 586 product lines.
Japan wants the United States to set a timeline for scrapping
tariffs of 2.5 percent on imports of passenger cars and 25 percent
on light trucks.
"The negotiations present extremely high hurdles for Japan, and
considerable gaps remain between Japan and the U.S," Economy
minister Akira Amari, in charge of Japan's delegation, told
reporters on Friday before flying to Singapore. But he said Abe had
told him to do his best to reach a deal.
An agreement between the United States and Japan would set the tone
for the other countries engaged in the TPP: Australia, Brunei,
Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore and
Vietnam.
"LITMUS TEST"
The stakes are high for Obama as well. Internationally, he needs to
make good on TPP as a key element of his promised "rebalance" of
economic and security policy to Asia at a time when many in the
region question his commitment to the region.
His planned visit to Asia in April is seen by some experts and
negotiators as a target for a preliminary draft deal for TPP that
would send a signal Washington wants to add economic substance to a
pivot strategy otherwise largely about shifting some military forces
to Asia to counter a rising China.
"If the TPP is not realized, it will deal a major blow to the U.S.
rebalancing strategy," said Bonnie Glaser, senior associate at the
Center for Strategic and International Studies and a consultant for
the U.S. government on East Asia.
"A lot of countries are seeing this as a litmus test."
Two New Zealand officials with knowledge of negotiations say an
in-principle deal might be unveiled during Obama's April visit but
that it would paper over significant differences, leaving those to
later.
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New Zealand's negotiators, one official said, are adopting a "more
realistic" view of the TPP process after Obama faced resistance
within his Democratic Party on a proposal to give the White House
power to fast-track trade deals — so-called Trade Promotion
Authority (TPA) — which would deny U.S. lawmakers the opportunity to
amend the pact.
"The worry among the other countries is: 'What if everything we've
negotiated on is pointless and we have to re-negotiate it to get it
past Congress'?" said Deborah Elms, who has regular talks with TPP
negotiators as head of the Temasek Foundation Centre for Trade and
Negotiations, a Singapore think tank.
Others said such concerns were overdone. Former White House
international economic adviser Matthew Goodman said talk of
countries unwilling to seal a deal because Obama lacks fast-track
approval was "more of a negotiating tactic" and once a pact was
agreed, getting it through Congress would get easier.
Illustrating the challenges, some countries such as Malaysia have
little chance of securing a deal due to intense domestic opposition
and could ultimately drop out of the pact.
Malaysia's government has faced a debilitating backlash over the TPP
both from the political opposition and from powerful traditionalists
within the ruling party.
Malaysian Trade Minister Mustapa Mohamed listed at least seven areas
where negotiators still have significant concerns, including
intellectual property, state-owned enterprises, labor union rights
and the environment.
"It's just a matter of time that these issues will have to be dealt
with. The issue is when," he said on Thursday. "In a way if you are
not part of this, we may miss the boat."
Even if negotiators reach a draft agreement, passage of TPP for many
countries could drag on for more than a year. But the pact is at a
pivotal juncture.
"I don't know if we are ever going to do this deal or not and if we
are going to do it, whether the essential political bits will come
together in the next few days, but it has the smell of reaching a
moment of truth," said New Zealand Trade Minister Tim Groser.
Some experts worry that a lack of U.S. will to clinch the deal would
give China — which is not part of the TPP talks — a chance to fill
the vacuum. "The U.S., in particular, we don't think has been as
engaged as it might have been," said Bryan Clark, director of trade
and international affairs at the Australian Chamber of Commerce and
Industry.
China is consolidating its position as the largest trade partner
with most Asian countries and its direct investments in the region
are surging, albeit from a lower base than Europe, Japan and the
United States.
(Additional reporting by Krista Hughes and David Brunnstrom in
Washington, Gyles Beckford in Wellington, Matt Siegel in Sydney, and
Stuart Grudgings in Kuala Lumpur; writing by Jason Szep; editing by Raju Gopalakrishnan)
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