Leaders of 12 countries involved in the Trans-Pacific Partnership (TPP) are set to discuss the future of the free trade deal on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit set to start in Peru on Nov. 17.
While U.S. President-elect Donald Trump vowed to scrap the TPP deal, some member countries have started to explore the possibility of putting the trade pact into effect without the United States, or forging a free trade agreement (FTA), an alternative to the TPP. Japan is becoming wary of a situation in which China takes over the leading role in trade negotiations in the Trans-Pacific region.
Economic and Fiscal Policy Minister Nobuteru Ishihara said during a session of the House of Councillors special panel on the TPP on Nov. 16, "There is no change in our policy of seeking the early effectuation of the TPP including the United States." But some member countries have started moving on the assumption that the TPP deal is destined to falter.
Mexican Economy Minister Ildefonso Guajardo said discussions should be made on changing the mechanism to prevent the free trade deal from not taking effect without ratification by the United States. Peruvian President Pedro Pablo Kuczynski touched on a new framework that includes China and Russia in place of the U.S. If the U.S. shuts its door to the TPP deal, momentum is likely to build on inviting China to form a mega FTA. Thus, TPP members are in disarray.
Japan, for its part, aspires to contain such movements and ensure solidarity among the 12 TPP member countries. Talks on how to establish a free trade framework without the U.S. will inevitably run into rough waters, and therefore, the envisioned mega FTA will become less significant. If the TPP deal falls apart, it will be taken over by the Regional Comprehensive Economic Partnership (RCEP), which is comprised of the 10 members of the Association of Southeast Asian Nations plus Japan, China, South Korea, India, Australia and New Zealand as a mega FTA in Asia. The RCEP can easily reflect China's intentions. Some experts believe that there are only limited advantages for Japan partly because tariffs will not be reduced sufficiently and rules to protect intellectual property rights will be lax.
In a meeting with Malaysian counterpart Najib Abdul Razak on Nov. 16, Prime Minister Shinzo Abe heard the Malaysian leader say that Japan and Malaysia are "on the same page" over the TPP. Japan also hopes to coordinate with other countries such as Vietnam that are keen to take advantage of the TPP to expand their exports to the U.S. and hold China in check.
Nonetheless, it is not easy to prompt Trump to change his mind on the TPP. U.S. House Ways and Means Committee Chairman Kevin Brady said about the TPP deal on Nov. 14, "If we withdraw or abandon that field completely, we lose and China wins in a major way, so my advice to him (Trump) will be to not to withdraw (from TPP) but to renegotiate." That is a possible move to revive the TPP deal, but it is difficult to secure understanding and support from other countries of the idea to renegotiate.
Meanwhile, Chinese Foreign Ministry spokesman Geng Shuang tacitly expressed Beijing's willingness to play a leading role in building economic and trade rules, saying at a news briefing on Nov. 14, "I would like to reiterate that in principle, China is positive and open toward all trade arrangements that promote Asia-Pacific economic integration and liberalization and facilitation of regional trade and investment." The setback of the TPP, which is designed in some respects to contain China, is favorable for Beijing.
Prime Minister Abe is set to meet Trump on Nov. 17 ahead of the summit meeting on the TPP. Abe emphasized on Nov. 15, "The axis will shift to the RCEP (if the TPP fails to move forward). I would like to state my thinking (to Trump) that free trade is important." U.S. President Barack Obama vowed to review the North American Free Trade Agreement (NAFTA) during his presidential campaign, but he reversed his decision after taking office. While holding out slim hope for Trump's about-face, Japan is likely to step up its efforts to lobby U.S. Republicans who support free trade and U.S. industries that are keen to increase their exports.