On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
No. 71 of 2016
Filed from Portland, Oregon

Click  here for Tuesday's quote on Brexit and Agriculture.

"It's very important for us [Japan], as a country, to show ideal rules that we believe the world should aim for."

Last Friday, December 9, the Upper House of the Japanese Diet ratified the Trans-Pacific Partnership Agreement.  That followed the ratification of TPP in the Lower House on November 10.  So, in Japan, the deal is done. The governments of Australia, New Zealand, and Singapore all seem to be moving towards ratification.  But Japan has led the way.  It has done it.

All political actions are collective, especially in democracies, with lots and lots of people having roles to play, arguments to make, and votes to cast.  Still, it is more than reasonable to credit Japan's approval of the agreement to the leadership and determination of Prime Minister Shinzo Abe.

Today's quote from the Prime Minister is from a story on the Upper House vote in The Japan Times.  The same story included another quote from Prime Minister Abe, one which indicated that holding TPP ideals aloft was not his only goal.  Speaking of Japan's TPP ratification he said, "It will also positively impact the US, which is now in a transition period."

That "transition" could hardly be more challenging for Mr. Abe and other supporters of TPP.  Throughout the Obama Administration, TPP has been seen as part of President Obama's pivot to Asia, a way to lock in America's commitment to the region by strengthening the economic ties among the 12 TPP countries. 

President-elect Trump, on the other hand, ran against TPP as a bad deal for America, and in a statement to the American people on November 22, he put getting out of TPP at the top of his to-do list for the first 100 days.  The President-elect said:

"On trade, I am going to issue a notification of intent to withdraw from the Trans-Pacific Partnership - a potential disaster for our country.  Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back on to American shores."

And he said he would do it on his first day in office.  In light of such unambiguous opposition to TPP, and given that, as written, TPP cannot go into effect without the participation of the United States, it is understandable that some see Prime Minister Abe as a romantic rather than a visionary - more Don Quixote than Moses.  We would put Kazunori Yamai in that category.  On the day that the ratification legislation went through the Diet's Lower House, Mr. Yamai said:

"It will be completely incomprehensible for the Japanese public and the whole world that the bill is railroaded [through the Lower House] right after the TPP's coming into force is made difficult with Trump winning the Presidential election."
It would take a tome that would put War and Peace to shame to deal with all the strands to this issue.  Some we will get to in other entries.  Three we will touch on now: i) the Trump agenda, ii) TPP and the other eleven, and iii) TPP and the United States.

The Trump Agenda.  For us, the key to understanding that agenda is not the action item on TPP noted above but this from Mr. Trump's December 1 Thank-you Rally in Cincinnati:

"Our goal is to strengthen the bonds of trust between citizens, to restore our sense of membership in a shared national community.  Global is wonderful, but right now we want to focus on our national community."

Is there a strain of economic nationalism there? Of course.  Is it tantamount to isolationism and a rejection of trade?  We don't think so. 

Our guess is that the readers of these pages are, most of them, frequent flyers and are more than familiar with the protocols of air travel.  We're thinking of that part of the before-take-off crew instructions where the flight attendant tells you about those oxygen masks that will drop down if you need them and says, "Be sure to put on your own mask before assisting others."  The thought is clear enough.  The parent or good Samaritan must look to his own strength first if he wishes to be effective in aiding others, and it has some relevance here.

One can argue about whether America needs any shoring up, any special in-ward focused attention.  Assuming it does, however, that shoring up is more likely to come from areas outside of trade, such as tax and regulatory policy.  If that is the case and if the Trump Administration is successful on those fronts, then the world may see more flexibility on trade. 

TPP and the Other 11.  Japan has ratified TPP and, as we mentioned, three others are clearly moving in that direction, namely, Australia, New Zealand, and Singapore.  We are not sure about the remaining seven.  It might not be possible to get all of them to go along with a TPP that did not include the United States, especially since, in effect, there would have to be a new agreement, one that could be implemented without the United States. 

In an earlier entry, we highlighted with approval Claude Barfield's call for a rump TPP.  There is merit in such a project, and it should include as many of the original 12 as possible. But, as The Wall Street Journal pointed out in a recent editorial, it won't be easy:

"It's ... not impossible for the other 11 signatories of the TPP to revise the treaty to leave out the U.S. That would take some fancy diplomatic footwork to avoid reopening the terms of the treaty. But if it worked, it would preserve the progress to date and leave the door open to the U.S. to join later."

The U.S. and TPP.  Even in the simplest commercial terms, opting out of TPP will not be a cost-free exercise, especially for American farmers.  To cite just one example, the Japan Australia Economic Partnership Agreement went into effect in January 2015, and Australia's beef and wine producers are already seeing the benefits.  We haven't looked at the numbers, but it is a fair guess that America's producers of those same products are now facing stiffer competition in Japan's rich market.   That situation is only likely to get worse as more agreements come on stream.

There is some irony here.  TPP has been praised most loudly as a landmark agreement because of its behind-the-border provisions, such as the disciplines on state-owned enterprises.  In the first instance, however, its absence will be felt most acutely by those Americans whose access to foreign markets will now be second-rate at best. 

By definition, President Trump's first day in office will be only the beginning.  Our guess - and of course it is only that - is that down the road joining TPP may seem a better option than it does now.  Even so, it may require a change or two so that the Trump Administration can put its own stamp on it.  But what?   We wonder:  Are there elements that could be modified without doing injury to the interests of the other 11, while improving the agreement from the standpoint of a new, Republican administration?  We don't know, but it's worth thinking about.

Thank You in Cincinnati is a YouTube tape of President-Elect Trump's Thank You rally in Cincinnati, Ohio, on December 1, 2016, which is the source for the quotation from Mr. Trump above.

The First 100 Days is a link to the YouTube video by President-elect Trump on November 22, 2016, in which he listed actions he plans to take within the first 100 days of his administration.

Japan's Trade Leadership is a link to the editorial from The Wall Street Journal editorial mentioned above (posted on December 13, 2016.)

TPP Pushed Through is The Asahi Shimbun article of November 10 with the quote given above from Kazunori Yamai.

From Detroit is a link to the TTALK Quote of December 1, which highlighted the November 21 speech by Australia 's Ambassador to the United States at the Detroit Economic Club.  TPP featured prominently in his remarks.

Barfield on a Rump TPP takes you to Claude Barfield's argument in favor of implementing TPP, even if it means doing so without the United States.


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R. K. Morris, Editor