All boats rise when trade agreements help reduce trade barriers. And in the words of Sen. Chuck Grassley, R-Iowa, 12 countries are committed to promoting trade within the Trans Pacific Partnership.
“We’ve got one country - Japan – that feels entitled to keep five sacred cows off the table,” he said in a media call with agricultural groups March 13.
USTR Michael Froman, who recently returned from Pacific Rim trade talks in Singapore, said the TPP talks, which formally began four years ago, are much further along, but he would not commit to any deadline by which the negotiations with Japan, Vietnam and nine other countries could be concluded.
Froman did say the talks have “momentum” after the Singapore sessions, but Japan remains reluctant to open its agriculture markets, and that is a major stumbling block.
On a joint press call with Agriculture Secretary Tom Vilsack, Froman noted that good progress has been made on the agricultural market access side, particularly with Vietnam and Malaysia, which have tariffs of 20%, 40% and 50% on agricultural products.
Vilsack said the countries currently negotiating the TPP trade agreement represent 39% of global gross domestic product and 42% of current U.S. exports.
“We have concern at (the U.S. Department of Agriculture) that if we can't get this finished, other countries within TPP will negotiate bilateral agreements or other multilateral agreements, which will put American agriculture at a disadvantage,” Vilsack said.
Froman added that USTR continues to work hard to open markets in Japan and Canada, noting, “We've got to make progress on that front before we can bring a deal home.”
Vilsack said USDA stands ready to work with Japan and Canada to “work through these difficult and sensitive issues on a wide range of agricultural products.”
However, Vilsack added, “It does take two to tango, and it does take a willingness on the part of Japan and Canada to be realistic and reasonable about how open their markets need to be in order for us to have that high-standard agreement.”
Japan’s asking for too much
Japan’s five cows really could be defined as eight. In current negotiations Japan has said it cannot accept lower tariff lines in the categories of beef and pork; dairy; sugar; wheat and barley; and rice and starch.
Japan wants to exempt from tariff elimination 586 tariff lines, or 11% of its tariff schedule. If you’re comparing apples to apples, in the 17 other FTAs the United States has concluded this century, only 233 tariff lines total were exempted from tariff elimination.
Japan’s decision to enter the TPP talks last fall was met with great excitement from the agricultural community. Japan is the fourth largest market for U.S. agriculture which shipped $13.5 billion of food and agricultural products to the island nation in 2012.
Much more is at stake beyond just the increased market access for the U.S. with one of our largest trading partners. Most notably Nick Giordano, vice president and counsel for international affairs at the National Pork Producers Council, explained if Japan is allowed to classify agricultural products as sensitive others countries currently in the talks as well as others who may join in the future such as China would try to make similar demands. And the United States could be tempted to try to restrict some of our own agricultural sectors, setting a poor precedent all around and weakening the goals of a 21st century trade agreement that would have trade implications for the next 25 years.
Exempting food and agriculture is not a wise idea, Giordano said. “Exempting food from trade deals would be upward pressure on food prices and undermines global security.”
Surprisingly agriculture represents a tiny share of Japan’s total gross domestic product at just 0.5%, and half of that is rice. Giordano said Japan’s agriculture sector is ready for reform and should follow the lead of how Korea dropped virtually all of its agricultural tariff lines in the recent U.S. FTA.
Walter Powell, chairman of U.S. Wheat Associates joint international trade policy committee, explained that the hope is Japan would come to the table on removing all its barriers. But he said if now isn’t the time, to go ahead and conclude TPP without Japan.
“It’s better to have a clean TPP rather than remove flaws sometime in the future,” he said.
Grassley noted that TPP would still be valuable without Japan, but “many more times” with the GDP superpower in the mix. Grassley said he didn’t want to send any signal that the U.S. shouldn’t try to keep the agreement as broad as possible.
Giordano added he doesn’t see Japan’s prime minister’s current party’s view as “insurmountable.” He added, “I applaud our trade officials for holding firm. I do believe if we continue to push, Japan will relent.”
In the end, Grassley said it will be important for U.S. negotiators to hold Japan’s feet to the fire. Agriculture being satisfied is very important for final U.S. approval of a trade deal. “Agriculture tends to be the locomotive that brings along manufacturing and services when an agreement is before the Senate,” he said.
But the other big piece of the puzzle is approving Trade Promotion Authority which allows for an up or down vote without amendments through Congress. With recent skepticism from Congressional Democrat leaders, Grassley said President Obama will needs to show he wants TPA and will need to “spend some political capital” to get it through.