Tuesday, February 19, 2013
EDITORIAL: As U.S., EU Come Together, TPP More Urgent
TOKYO (Nikkei)--The U.S. and the European Union have announced the start of negotiations on a free trade agreement, an economic alliance that has profound implications for Japan.
The move by the world's two biggest economic areas makes it imperative for the government of Prime Minister Shinzo Abe to focus anew on Japan's trade policy, a task neglected by the previous Democratic Party of Japan government, by analyzing what a free trade pact between the U.S. and Europe would mean for Japan and Asia as a whole.
There is also no time to waste for Japan to join in negotiations for the Trans-Pacific Partnership trade accord. If a new set of trade rules is fashioned primarily by the U.S. and Europe, Japan may find itself at a disadvantage. To balance the trans-Atlantic trade developments, an alliance in the Pacific-rim region, based on cooperation between Japan and the U.S., is urgently needed.
This Time Lucky?
Plans for free trade between the U.S. and Europe have been floated repeatedly since the 1990s, but failed to materialize because both sides have their own preferential trading zones that they try to protect with tariffs. Widely differing technological standards and rules on investment, safety and the environment are another barrier to progress.
Talks aimed at integrating these two gigantic economic zones will not be easy; any move toward free trade between the U.S. and Europe will have high political costs for both and require painful structural reforms. This explains why political leaders on both sides have been reluctant to put forward a concrete plan for an FTA.
Nevertheless, the U.S. and EU will begin talks, eager to seize the opportunities for economic growth offered by freer trade. Europe's domestic demand is unlikely to grow much for a while, given the fiscal constraints it is under. It is therefore eager to boost exports.
With the global outlook still cloudy, the U.S. and Europe are desperately trying to restart their economic engines, raising the question of whether Japan shares their sense of urgency.
Abe, who will visit the U.S. later this week for talks with President Barack Obama, has said he will explore the possibility of making exceptions to the scrapping of tariffs, as called for in the TPP talks, at the Japan-U.S. summit. That is a parochial position for the leader of a major economic power.
The U.S. and Europe, which hope to increase trade and investment flows through a trans-Atlantic FTA, are also looking to East Asia and for ways to take advantage of the region's strong growth potential. The U.S. and Europe hope their own trade liberalization will spur similar moves in Asia.
Given China's tendency to treat its own interests as paramount, it is particularly important for Japan, the U.S. and Europe to work together to encourage China to comply with international norms.
Two decades after the World Trade Organization was created, its rules are becoming outdated, making it necessary to work out a new trade order now.
The TPP could become the foundation for the next generation of trade rules. As a responsible economic actor, Japan should promptly join the TPP negotiations.
(The Nikkei, Feb. 19 morning edition)