Feb. 22 (Bloomberg) -- The best news that Japan’s Prime Minister Shinzo Abe and U.S. President Barack Obama could announce after their meeting on Feb. 22 is that the U.S. wants Japan to join it in talks on the proposed Trans-Pacific Partnership trade pact -- and that Japan has decided, belatedly, to take part.
The TPP is a big deal in every sense. The envisaged partnership already includes 11 countries -- Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam. Japan and South Korea have been thinking about it. A 13-member TPP would account for 40 percent of global output and about 30 percent of world trade.
As much as the scale, it’s the ambition. This is the real surprise. More than a dozen rounds of negotiations have moved quickly since they began almost three years ago, yet the agenda has stayed bold. So far, the partners have chosen not to exclude sensitive sectors -- agriculture, typically, but each country has its own -- and a far-reaching deal is possible. The TPP, whose next set of talks opens March 4 in Singapore, is on course to be not just wider but also deeper than existing regional and bilateral free-trade agreements.
With the Doha Round of multilateral trade talks all but dead, the TPP has become the best chance to advance liberal international trade. As the partners themselves stress, it’s an opportunity for like-minded countries to set a new benchmark for 21st century trade agreements -- one that goes beyond earlier deals by including cross-border investment, competition policy, intellectual property and the role of state-owned enterprises.
Japan’s participation at the outset is important, first, because it advances that bigger vision and, second, because adding an economy of this size (it’s bigger than the 10 non-U.S. members added together) substantially boosts the benefits of the initial TPP. The benefits for Japan itself would be large, too, but here’s the problem: They’d be large because they’d force a faster pace of domestic economic restructuring.
Resistance to the TPP has been strong in Japan up to now. The powerful rice-farming lobby rightly fears the TPP agenda. Attempts to confront the lobby have been sporadic and lacking in conviction.
Japan’s taking part in the TPP would tilt the balance of interest-group politics in Tokyo in a helpful direction, by setting exporters’ potential gains against farmers’ potential losses. That wouldn’t guarantee the rice lobby’s defeat, of course. It wouldn’t be riskless for the other TPP members either: Conceivably, it could start a reciprocal process of sector-by-sector carve-outs that diminishes the whole project. On balance, though, it’s better for all the partners -- and especially for Japanese consumers -- if Abe brings his country in.
Japan’s leaders have calculated that there’s no hurry: They can let the TPP take shape and join later in the process.
So they can. A notable feature of the TPP is that the planned membership has expanded during the negotiations: Canada and Mexico signed up only in October, for instance. A TPP could and should embrace China in due course, and become the Free Trade Area of the Asia Pacific. In fact, so long as the TPP stays open to new members willing to join on the same terms -- a crucial principle -- it could be the model for a new global trade system.
But digesting an economy as big as Japan’s late in the process is difficult. The longer the delay, the more it’s apt to slow and perhaps derail the talks. If Japan waits even longer, with the aim of joining a fully formed TPP, it will put itself at a disadvantage as well as deny the project its full initial momentum.
The U.S. should send a strong message that it wants Japan to join, and Abe should seize the moment.
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