Asia-Pacific News

Japan, US tiptoe into new phase of Pacific trade talks

The United States and Japan are edging into a new phase of trade negotiations after U.S. President Barack Obama and Japanese Prime Minister Shinzo Abe's summit, people with knowledge of talks to create one of the world's biggest trade pacts said.

Talks on the Trans-Pacific Partnership, a 12-nation bloc which would span 40 percent of the world economy and extend from Asia to Latin America, have been deadlocked as the United States and Japan stared off over farm and auto exports.

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Japan's Prime Minister Shinzo Abe and U.S. President Barack Obama.
Yves Herman - Pool | Getty Images

Although Obama and Abe did not announce an end to the stalemate at Thursday's meeting in Tokyo, a joint statement issued shortly before Obama left on Friday said the two countries identified a "path forward" on key issues, a contrast to the "gaps" highlighted after previous talks.

Briefing reporters on the president's plane from Japan, a senior U.S official said negotiators set the parameters for agreement on Japan's sensitive sugar, beef, pork, rice, dairy and wheat sectors, involving which trade barriers to eliminate, which to reduce, and over which time period.

"There are these parameters, and there are trade-offs among parameters. The deeper the cut in the tariff, the longer time it may take to get there," he said.

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A U.S. congressional aide briefed on the negotiations said there was momentum heading into TPP negotiations in Vietnam in May, where concrete trade-offs could be made.

"That's the first time we have seen the Japanese moving in our direction," said the aide, who declined to be identified because of the sensitive nature of the discussions.

We were on a path of gridlock and now there seems to be a path forward, if you're a trade negotiator you've got to be excited about that."

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Nikkei down on TPP disappointment: StanChart
Nikkei down on TPP disappointment: StanChart

Trade experts said the administration comments pointed to a long phase-out period for tariffs Japan was prepared to move on such as beef, which it agreed to cut in a deal with Australia weeks earlier, while allowing continued protection for sectors such as rice.

"That's something that the United States can do, because U.S. negotiators are not under extreme political pressure to get a comprehensive reform on rice," said Peterson Institute for International Economics trade analyst Jeffrey Schott.

Officials from other TPP countries noted U.S. recognition of the role market access played in persuading other TPP partners to sign up to common rules on issues such as intellectual property, important to the United States and Japan.

For big agricultural exporters such as Canada, New Zealand and Australia, access to Japan's markets might offset doubts about the intellectual property rules.

"Once it's clear that there is going to be a U.S.-Japan deal that is perceived to be a good deal for everybody ... there will be decisions made," the aide said. "There will be trade-offs, trade-offs not just in the market access talks but trade-offs within the rules package as well, across the entire agreement."

The joint statement also called on other trading partners to take steps needed to conclude the agreement, making clear the United States and Japan do not want to bear the burden alone.

"It's going to take all 12 countries, not two, in order for TPP to cross the finish line," said Alston & Bird policy adviser Eric Shimp, a former U.S. Trade Representative negotiator.

But Japan would likely have to go into more detail about its concessions to prompt Canada to open up its dairy and poultry markets.

"It's hard for me to see Canada offering more market access, or showing its hand, before Japan does. The sequence is fairly clear," said McDermott Will & Emery partner Jay Eizenstat, also a former USTR negotiator.