TPP pact controversial in US and Japan

Japanese Prime Minister Yoshihiko Noda has indicated that Japan will participate in U.S.-backed Trans-Pacific Partnership trade talks at the APEC summit next weekend in Hawaii. This has triggered emotional responses in both the U.S. and Japan, especially from farmers in Japan, and lawmakers in the U.S.

Japan hasn’t been self-sufficient in food since 1920. Japan currently imports roughly 60 percent of its food. The government has propped up and protected the rice industry at a high cost to consumers as a matter of national security. It is largely farmers opposed to the TPP pact who are influencing public opinion. They are concerned that cheap food imports will crush the fragile agricultural industry. More than 6000 protestors and 100 lawmakers from the ruling and opposition parties joined an anti-TPP rally Tuesday in Tokyo. Japanese politicians who oppose the pact claim the trade agreement promotes American economic hegemony in the Pacific. In an opinion poll conducted by Kyodo News, the Japanese equivalent of the Associated Press, 38.7 percent of Japanese support the pact, while 36.1 percent are opposed.

So far the pact involves the U.S., Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. However, American lawmakers are wary about Japan joining the pact. House and Senate bipartisan committees have expressed concern on Japan’s commitment to free-trade, fearing Japan will only honor the agreement as far as it serves Japanese interests.

In a letter to U.S. Trade Representative Ron Kirk, these lawmakers wrote: “Japan has long sheltered its domestic market from meaningful competition. … Autos, various agriculture products including beef, insurance, drugs and medical devices as well as a large number of other U.S. goods and services face serious market access barriers in Japan.”

Japan has a reputation for sometimes creating arbitrary barriers to foreign goods, such as banning Tylenol because it is “too strong for the Japanese,” foreign-made skis because “Japanese snow is different,” U.S. beef because “Japanese have longer intestines and can’t digest American beef,” or because of exaggerated fears of mad-cow disease. But these barriers haven’t been as significant as the fact that American companies simply haven’t been able to compete efficiently in Japan.

American businesses haven’t developed meaningful relationships with Japanese distributors, due partly to culture clash. Some American companies, such as Walmart, have failed to adapt their business model to Japanese culture, and automakers don’t produce cars that are suitable for Japanese driving patterns. Japanese driving is very stop-and-go. Streets are short and narrow, and Japanese don’t do much highway driving because of extortionately high tolls. Six-cylinder cars would be impractical in these conditions. American cars also aren’t sufficiently fuel-efficient in a country where gas costs 127 yen per liter ($6.21 per gallon).

These U.S. lawmakers also don’t seem to grasp the extent to which Japan is actually dependent on U.S. exports, especially of raw materials.

Japan is a resource poor country. It imports raw materials and exports them in the form of cars and consumer electronics. Its economy relies on adding value to cheap raw materials. For Japan to enjoy a level of employment high enough to sustain its population, it needs manufacturing industries. The problem with its high reliance on manufacturing is that the Japanese cultural value of frugality, along with the insanely high cost-of-living in Japan, suppress domestic demand. Since the Japanese can’t consume everything they produce, they need to export their products to keep their economy afloat and their people working.

Japan relies heavily on the U.S. for raw material imports (although not as much as it relies on the Persian Gulf, Australia or Indonesia), while Japan is simply one of many customers for U.S. raw material exports. In other words, Japan needs the U.S. much more than the U.S. needs Japan. If the U.S. simply decided to cut off Japan, as we did in the lead-up to World War II, a move the Japanese viewed as the U.S. prodding Japan into war, Japan would be left vulnerable. In fact, it wouldn’t take such a drastic measure to leave Japan vulnerable. Something as small as a temporary strike in the coal industry could devastate Japan, while going relatively unnoticed in the U.S.

The same could be said for exports. The U.S. is Japan’s largest customer for its exports, while Japan is only one of many suppliers to the U.S. Japan’s export economy is also vulnerable in the sense that it relies on Americans’ willingness to buy Japanese products. And I’m sure Prime Minister Noda is aware of this, hence his interest in joining the TPP.

In conclusion, American lawmaker’s concerns aren’t particularly well-founded, and opposition to the pact from some corners in Japan is self-defeating.