Japan and the TPP: Optimism against Protectionism

Economic penetration, access to the US market, and enhancing domestic competitiveness are central to Japan’s ratification of the Trans-Pacific Partnership (TPP).

Japan, being a late entrant in the TPP negotiations, around 2013, is surprisingly the first signatory to ratify the TPP deal. The reasons behind the quick ratification lie deep in its foreign policy pertaining trade and commerce. Japan does not have a bilateral trade deal with the US, and with this deal it could receive an immediate reduction on about 80% of auto parts it exports to the US, a big gain for Japanese auto makers enabling to operate at low cost. Mutually, the US will gain access to Asia’s strongest economy to sell technology, electronics, and agriculture products. The mere presence of the US and Japan in the trade bloc accounts for 40% of the world’s GDP, covers 26% of world trade, and would conceivably generate global economic gains of close to $492 billion by the year 2030.

Rosy as it looks, the TPP has a hurdle, and that is the US, with as much as political opposition from the running candidates. With Obama undeniably pitching for the deal and trying to get it ratified through the lame-duck session its parliament entered on November 14th, before the final hand-off to Trump, it is highly unlikely to be ratified. International politics at play, Abe hurriedly ratified the TPP, to throw the onus back to the US. The trade bloc would be monumental only with the presence of US and Japan; otherwise, it is just another bilateral partnership. For the US, the deal draws a fine line between optimism and protectionism. Japan would be one of the biggest benefactor if the TPP is ratified and enforced, but all its expectations rely on the US.

Abe is considering to make Japan’s domestic agriculture market more competitive when US imports would force them to be price conscious and lead them to make better products for its citizens. Getting US in the deal and an exorbitant reduction of tariffs on all its auto parts company is a gigantic benefit for Japanese automakers who are beating US carmakers in quality, durability, and affordability.

Surprisingly, China, a close rival to the US, in business and currency, is not a part of the TPP. The TPP getting officially enforced will affect China-Japan trade tariffs, anticipating higher tariff imposition on Chinese imports. Japan, considering the size and potential of the US market, would defer to partner and embrace China. Thus, primary gains that motivated Japan to be the first to ratify the TPP is its sustained belief in economic globalisation, and liberalised trade deals through borderless transactions.

In times when de-globalization is gaining pace, observed in the Brexit event and Trump’s policy of regaining pre-globalization protectionism, the TPP deal will admittedly bring in new surprises, especially for those who provide compelling reasons for reversing globalization.

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