Editorial: Japan must step up on TPP or be eased out

Barack Obama meets with John Key. Photo / AP

In large measure, John Key achieved the main objective of his visit to the White House. President Barack Obama recommitted the United States to the Trans Pacific Partnership as a comprehensive deal incorporating the elimination of all tariffs and imposed a November deadline. This signified that New Zealand's notion of a gold-standard deal still holds sway. The deadline, for its part, while far from the first, indicated the Americans were not content for the negotiations to drift. However, neither part of the President's statement addressed the steps that must be taken to reinvigorate proceedings. Therein lies the answer to what becomes of the TPP.

Allowing Japan to enter the negotiations appears increasingly to have been a mistake. While its economic clout would add much, its long history of protectionism runs counter to the ambitions enunciated by New Zealand, Singapore, Brunei and Chile three years ago when they began what evolved into the TPP talks. Whatever the lip-service paid by Japan to the ideal of free trade, there was always the likelihood that bad habits would resurface in the nitty-gritty of negotiations.

As much became evident in April when it signed a low-grade free trade pact with Australia. Rather than the reduction of all tariffs to zero within 10 years, as espoused by the TPP's initiators, there was, for example, a cut in the tariff in fresh beef to 23.5 per cent after 15 years. Australia might have been happy with what it considered a foot in the door, but the implications for the TPP were alarming. The pact showed the Japanese that at least one of the other prospective TPP signatories was willing to condone its protectionist instinct. That, in turn, made it easier for it to resist the higher ambitions of others.

President Obama discovered as much on a visit to Tokyo soon after the signing of the bilateral pact. In no meaningful way was he able to use his country's leverage to break through Japan's reluctance to open market access in what it considers its sacred agricultural sectors - rice, wheat, beef, pork, sugar and dairy products.

A decision must, therefore, soon be made. If there is, indeed, a continued desire for the TPP to be a gold-standard agreement, that, most logically, involves the jettisoning of Japan. Compromises must be made in any pact but Japan's involvement seems to promise only the likes of country-specific quotas. The danger there is that some New Zealand exporters could, relative to Australia and the US, end up being worse off under the TPP.

Japan must either quickly step up to the plate or be eased out of the negotiations. If neither of these things happen, this country would do best to walk away. It has options. The first is to join the other initiators of the proposed pact and others who continue to share their aspirations in forging a high-quality agreement, as originally envisaged. That would be far preferable to a limp and unambitious pact full of compromises and caveats.

In addition, there is potential in New Zealand's membership of the Regional Comprehensive Economic Partnership, which involves the 10 members of Asean and their free trade partners, including China but not the US. Talks there are in a relatively early stage but if the TPP stumbles, it could yet take the lead in creating a free trade area in the Asia-Pacific region. This might involve a two-stage process, one for ambitious free trade proponents and another speed for countries such as Japan.

Mr Key's visit to Washington should have concentrated President Obama's mind, not least on the consequences of the TPP negotiations leading nowhere. Crucial decisions must be taken soon if the negotiations are to stay on a course acceptable to New Zealand.