March 16, 2013 in Business

Japan welcomes talk on trade agreement

Long-sheltered economy would open up to foreign investment
Elaine Kurtenbach
 
Associated Press photo

Farmer protesters rally against the Trans-Pacific Partnership in front of the Diet building in Tokyo on Friday with a banner reading, “We absolutely oppose Japan’s participation to TPP.”
(Full-size photo)

TOKYO – Prime Minister Shinzo Abe announced Friday that Japan will join talks on a Pacific trade pact that would oblige the country to open up sheltered industries including farming, long a bastion of protectionism.

The decision to seek participation in the U.S.-led Trans-Pacific Partnership raised protests from farmers, traditional supporters of Abe’s Liberal Democratic Party.

Many in Japan, however, see the pact as a way to overcome stubborn resistance to reforms essential for reviving the stagnant economy. In a national address, Abe said Japan has no choice but to opt for the growth that comes with freer trade or lose out to other countries that are capitalizing on such market openings.

“Japan has run into a big wall — low birthrate, aging and lingering deflation — and we have turned inward looking,” he said. “If Japan becomes the only one that turns inward, there is no chance for our growth. No businesses would want to invest in such a country and talented people would not be interested.”

“Joining TPP would be the beginning of a new Japan,” Abe said.

He repeatedly pledged to guard Japan’s national interest and ensure that the trade pact would benefit farmers as well as other Japanese.

“What we really should fear is doing nothing,” Abe said. “I promise you that we will guard our sovereignty as we pursue our national benefit through these negotiations.”

Despite such promises, Japan’s tariffs on farm products would likely have to come down: The average tariff on imported rice is nearly 800 percent, while rates for butter and sugar are more than 300 percent.

The decision to join the talks dovetails with his “Abenomics” economic strategy, which is based on easing monetary policy, boosting public spending and longer-term reforms.

“TPP is a core issue for Japan right now. The main thing is that ‘Abenomics,’ the plan of getting Japan moving and growing again, does not only depend on printing more money or on fiscal spending, but really depends on liberalizing the economy,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo.

“For that, TPP is a core part because it involves all sectors, from energy, to agriculture, insurances, the car industry as well. That would be a big step for Japan,” Schulz said.

Japan’s agricultural lobby is small but politically powerful. However, after two decades of stagnation, calls by big business groups such as the Keidanren to join the trade pact or miss out on easier access to key export markets appear to have outweighed objections from farmers.

The average age of Japanese farmers is 66 and hundreds of thousands will retire in the coming years.

“If we don’t do anything about this, we cannot protect our villages or our beautiful countryside,” Abe said. “And that is the reality we face, whether or not we join TPP.”

News reports Friday said the government estimates that joining the Pacific trade agreement would boost Japan’s GDP by as much as $31 billion a year, equal to about 0.7 percent of GDP in the first year.

With Japan’s participation, the free-trade zone “would cover basically 40 percent of (world) GDP. It would be a very, very big area and it would have a significant impact,” Schulz said.

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