Q & A: What Farmers Should Know About a Potential Trans-Pacific Trade Agreement

The proposed Trans-Pacific Partnership (TPP), which is currently under negotiation, aims to create a comprehensive, high-quality trade liberalization agreement that unites many of the Pacific Rim countries. At the present, 12 nations are involved: the United States, Canada, Mexico, Japan, Australia, New Zealand, Vietnam, Brunei, Chile, Malaysia, Peru and Singapore. These participants account for nearly 40 percent of U.S. agricultural exports, making TPP a highly promising opportunity for expansion of agricultural trade.

Major trade negotiations are complex, and one challenge in the TPP discussions has been differences between the United States and Japan on agricultural issues. These have been the subject of extensive bilateral negotiations between the two countries, but progress has been slow. Japan, however, will hold general elections on Dec. 14 for members of its House of Representatives, which could have broad implications for the progress of the TPP talks.

This week the U.S. Grains Council (USGC) asked Floyd Gaibler, USGC director of trade policy and biotechnology, to comment on the status of the negotiations and the implications of next week’s elections in Japan.

Q: What are the long-term stakes for U.S. agriculture in the TPP talks?

A: TPP has the potential to address many of the non-tariff barriers and market access constraints that have inhibited the ability of U.S. agriculture to fully access the large, growing Asian markets. In addition, if TPP reaches its full potential as a high-quality, 21st century trade agreement, it will provide the trade policy framework for other important markets, such as South Korea and Taiwan, both of which have expressed interest in joining. The agreement has the potential to create a broader free trade area in the Asia-Pacific. The outcome of the TPP talks will also influence the quality and breadth of addressing agricultural market access and non-tariff trade barriers in other major trade agreements such as the U.S.-European Union negotiations on the Transatlantic Trade and Investment Partnership (T-TIP) negotiations.

Q: Why are the U.S.-Japan bilateral talks such a stumbling block?

A: Every country is protective of its agriculture sector, including the United States and Japan. While the United States has been a leader in moderating the trade disruptive aspects of its agriculture commodity and trade policies, most aspects of Japanese agriculture remains highly protected. This is particularly acutefor Japan’s so-called “sensitive commodities” (rice, wheat, dairy, beef, pork and sugar). The political sensitivity of these products and an aging farm population have raised concerns that TPP will open Japan’s domestic market and devastate local industries, especially agriculture and food production.

Q: Why should U.S. farmers be interested in next week’s Japanese parliamentary elections?

A: Japan’s economic growth rate has lagged for a number of years. In order to jumpstart Japan’s economy, Japanese Prime Minister Shinzo Abe has built his “Abenomics” platform on three policy areas: fiscal, monetary and structural reform. Implementation of the first two elements has produced mixed results. Structural reform of Japan’s major economic sectors, including agriculture, will be necessary to fully restore Japan’s competitiveness. If the election strengthens Abe’s parliamentary support, it is likely to provide a greater mandate to address the difficult political, economic and cultural impacts involved with reforming the agricultural sector. This may, in turn, help provide long-term meaningful and increased market access through TPP.

Q: Many people in Japan are concerned that highly protected Japanese farmers will not be able to compete with United States agricultural exports if a comprehensive, high quality TPP is achieved. Is this a realistic fear and is there an upside for Japanese agriculture in TPP?

A: The Council contracted a study in 2012 to assess the impact of Japan’s participation in TPP. The study revealed that with significant reductions in tariffs and other non-tariff barriers, U.S. exports of most agricultural livestock, dairy and poultry products to Japan would increase. At the same time, however, significant reforms could position the Japanese agricultural sector to build off of its reputation for high-quality and safe food products (e.g., Wagu beef) and become a net exporter of high-value foods, particularly within its own region. The study provided numerous recommendations on how the Council could assist the Japanese livestock, dairy and feed industries in transitioning to a net exporter of high-quality finished food products.

Q: Japan is not the only TPP country trying to overcome internal political dissension. A key issue in the United States is whether Congress should grant the president trade promotion authority (TPA). Why is this important, and why is the issue emerging front and center now?

A: TPA is critical as it would provide the Obama Administration the formal authority to negotiate trade agreements with other countries. That authority provides maximum leverage to the administration to achieve the best possible outcome with negotiating partners who understand that, with TPA the final agreement cannot be amended by Congress but must be considered on a straight up-or-down vote. TPA also allows Congress to set overall priorities and provides the mechanisms to consult with the administration during the negotiating process.