As many of you likely know, the Trans-Pacific Partnership (TPP) is nearing its final negotiations. To give some basic background of the agreement, it's a free-trade deal between 12 major Asia-pacific economies.
But Japan and the US (two of the most important economies partaking in the agreement) are having difficulty agreeing on a few key points in major industries. This upcoming week, the Japanese Prime Minister, Shinzo Abe, will be meeting with President Obama and the TPP will no doubt be a main point of their discussions. The two key points about which the countries are in disagreement are:
1. Agriculture Policy
Japan imposes large "tariff-rate quotas (basically, a combination of taxes and annual import limits)" on several key farm products. One of those products is rice, and it's very well protected. Japan do not allow more than 50,000 tons of rice to be imported each year. US politicians don't expect to remove this barrier, "But American officials need to make it clear that there is much to be gained in smoothing agricultural commercial channels. Japan already consumes over $12 billion a year in U.S. agricultural products, the fourth largest amount in the world. Obviously, local consumers like what American farmers have to offer, even with these restrictions."
2. The Auto Industry
Long story short, Japan have barriers that increase the price of American cars up to 60%. As a result, imports represent just 6% of Japanese auto sales. That’s the lowest percentage among all major developed countries." But this does not represent the whole picture. In the US, Japanese auto makers sell more than one and a half million cars, representing a 40 billion dollar market. To US politicians, this situation is skewed and unfair, with Japan coming out on the much better end of the deal.
With arguments like these halting the TPP from being enacted, is it already tarnishing its reputation? Will trade between the countries involved really improve? What do you guys think? We haven't talked about Japan much, even though they're a very powerful economy.
I don't think that Japan will budge to reduce quotas for rice imports since that is such a large industry there; however, I do agree that trade in the Auto Industry with Japan is very unfair. Thus, I don't think that the United States job markets will benefit in both agriculture or the auto industries when trading with Japan. However, I do think that trade with the other 10 countries participating in the TPP will benefit the U.S.
ReplyDeleteI agree with Veeral that the rice tariffs are reasonable but not the auto ones. It's surprising that American cars only represent 6% of auto sales in Japan while Japanese cars are very popular here. I don't think an agreement should be made until Japan reduces this barrier to trade.
ReplyDeleteI find it difficult to believe that the US would agree to a deal with these current stipulations. Without offering much benefit in its current state, I would not sign the TPP. I do not think the benefit of the other small pacific countries would overcome the lack of trade with Japan, who is quite large GDP-wise. Until this is figured out I would hold on signing the TPP.
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