April 25 (Bloomberg) -- President Barack Obama left Japan without agreement on how to wrap up a 12-nation Trans-Pacific Partnership trade pact, a centerpiece of U.S. efforts to retain economic and security influence in the region.
The two countries said in a statement that “there is still much work to be done” on outstanding issues, which relate to the agricultural and auto sectors. Japanese Finance Minister Taro Aso earlier told reporters there was also no guarantee any pact would pass the U.S. Congress.
U.S. and Japanese officials held a flurry of negotiations before and during the trip in an effort to show progress. In the statement, issued as Obama left for Seoul on the second leg of his Asian tour, both governments said they were marking a “key milestone” in their talks, which are crucial to concluding the broader pact, with discussions set to continue at a lower level.
The pact, which doesn’t include China, would link an area with about $28 trillion in annual economic output, or 39 percent of the world total, and would be the biggest trade deal in U.S. history. In addition to the U.S. and Japan, nations seeking the deal are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The TPP goes beyond usual deals that focus on tariffs and traditional goods such as agriculture. It would establish rules for digital commerce and include environmental standards and protection for companies that compete against government-backed businesses.
“In any case, there will be no resolution on TPP until after the midterm elections” in the U.S. in November, Aso said. “Obama does not have the domestic power to pull it together. I don’t think they can reach a conclusion before the midterm elections. I think they will continue all kinds of talks in the meantime.”
Akira Amari, the minister leading the talks, told reporters he had not struck an accord with his counterpart, U.S. Trade Representative Michael Froman, because the issues involved were “a matter of life and death” to both nations. He said there was progress, without an agreement, on autos and five areas of agricultural produce Japan has designated as needing protection, such as pork and rice.
“After months of non-stop U.S.-Japan bilateral TPP negotiations and now President Obama and Prime Minister Abe not announcing a breakthrough, TPP should be ready for burial,” Lori Wallach, director of the Global Trade Watch program at Washington-based Public Citizen, said in a statement. The summit was supposed to be a “do-or-die moment” on the accord, which has been marked by missed deadlines and disagreements among the negotiating nations and U.S. lawmakers, she said.
The Tokyo talks did in fact lead to a breakthrough on market-access issues, according to a senior administration official who spoke with reporters flying with the president to Seoul on Air Force One. Negotiators reached a set of parameters and trade-offs on agriculture to work with in further talks, the official said.
Japan and the U.S. found “a path forward,” Abe told reporters today. “I want Japan and the U.S. to take a leading role from now on in encouraging other countries to reach a conclusion on the TPP negotiations.”
The lack of a deal shows the need for Obama and Abe to show bold leadership and for both sides to make serious compromises, according to Tami Overby, the Washington-based U.S. Chamber of Commerce’s vice president for Asia.
“Without further progress from the United States and Japan it will not be possible for the overall TPP negotiations to advance, as the other countries are watching and waiting for a conclusion of the bilateral negotiations,” Overby said today in a statement.
Japan and the U.S. are not the only countries with outstanding issues on the TPP. Malaysia, which Obama will visit next week, has expressed concern about matters such as resolving investor-state disputes. Negotiators have no target date to conclude talks and may meet around mid-May, Malaysia’s International Trade and Industry Minister Mustapa Mohamed told reporters April 22.
The U.S. reiterated in the joint statement with Japan its commitment to the defense of Japan, including uninhabited East China Sea islands administered by Japan and claimed by China.
Similar remarks by Obama in a press conference yesterday sparked anger from China, which is not on his itinerary for this trip.
China opposes the islands being included in the security agreement between Japan and the U.S., Foreign Ministry spokesman Qin Gang said in Beijing yesterday.
“No matter what others say or do, they can’t change the fact that Diaoyu has been under China’s sovereignty, and it won’t shake the Chinese government’s determination and will to protect its sovereignty and marine interests,” Qin said, using the Chinese name for islands that Japan calls Senkaku.
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