The TPP Trade Negotiations Need More Japan and Less Detroit

If you harbor any doubts that the parameters of U.S. trade policy are defined by a few politically-important domestic industries, take a look at the debate over whether Japan should be allowed to join the Trans-Pacific Partnership trade negotiations.

Did you miss it?  That’s because there really hasn’t been much debate; there has been near-unanimous support for the idea in the United States.

In December 2011, the Office of the U.S. Trade Representative requested comments from the public about Japan’s expression of interest in joining the TPP talks.  In response, 115 submissions were filed on behalf of various U.S. interests (small to large companies, trade associations, unions, and other NGOs).  Five of the responses flat out rejected the idea of Japan’s participation; five expressed a willingness to support Japan’s participation with conditions, and 105 expressed no-strings-attached support for Japan joining the talks.  In other words, 91 percent of the respondents were unequivocally in favor of Japan’s participation in the negotiations.

Yet, four months after reviewing those comments, the Obama administration is equivocal about the matter.

With 91 percent in favor, the only formula that could produce executive equivocation is one that weights extremely heavily the views of those expressing opposition to Japan’s participation.  Which of these five dissenters’ views are likely to be getting extra special consideration from the administration on this matter: Humane Society International, the National Marine Manufacturers Association, the Maine Citizen Trade Policy Commission, the Central Union of Agricultural Cooperatives, or the American Automotive Policy Council (hint: the lobbying arm of the “Detroit 3” – Ford, GM, and Chrysler)?

Yes, the same GM that American taxpayers bailed out and are still involuntarily vested in to the tune of $27 billion has interest in seeing those same taxpayers denied the enormous benefits of liberalizing trade with the world’s third largest economy.  And yes, this is the same Chrysler that masquerades as an American company (remember the Clint Eastwood Super Bowl ad), but is owned by the Italian automaker Fiat. Add that little detail to the fact that GM produces more cars in China than it does in the United States and one has to question how, exactly, the process of U.S. trade policy formulation is reality-based.

There is nothing wrong with companies investing across borders and producing wherever they can to serve demand across the globe.  Indeed, freedom of capital, trade, and labor should be the rule, not the exception that it is today.  Likewise, it is to be expected that companies will respond to incentives and if policy is perceived as malleable, the incentive to influence favorable outcomes will motivate companies to lobby.  And as entities beholden to the fiduciary duty to maximize profits for shareholders, these companies try to influence the rules to their own advantages.  But who’s watching over the hen-house here?  Policymakers have a responsibility to the public interest, not to specific industries or companies.

What is proper, democratic, or civic-minded about U.S. policy formulated with the views of a few politically-favored companies – companies that are lobbying foreign governments on some of the very same issues – trumping the opinions of a diverse 91 percent of respondent interests?  If the goal of trade policy is to deliver the benefits of trade liberalization to a broad cross-section of Americans, then why is there this egregious imbalance of influence on the process? What is the point of collecting comments from the public on such matters, if not just to create the illusions of policy accessibility and transparency?  The whole exercise renders trade policy indistinguishable from corporate welfare and gives trade a bad name.

Consider the realpolitik of the matter.  The Chinese government sees the TPP negotiations as a U.S.-led effort to counter China’s growing influence, a perception the administration has not been shy about helping to cultivate.  Presumably, the Chinese government would like to see those efforts fail, and one way to undermine the TPP is to ensure that Japan stays out.  How might China accomplish that?  GM and Ford have big and growing stakes in a Chinese auto market that has been subject to various regulations to control rapid demand growth and stifling traffic congestion.  Might GM’s and Ford’s adamant opposition to Japan’s joining the TPP negotiations be animated by these considerations?  The argument put forward by the American Automotive Policy Council that Japan should be excluded from even negotiating because it has allegedly impermeable non-tariff barriers seems to miss the whole point that negotiations are where those barriers are discussed and, ultimately, dismantled.  It’s like disqualifying someone for a haircut because he wears his hair too long.  To my mind (and I neither offer nor have any proof), the adamancy of AAPC’s opposition whiffs of their trying to uphold their end of a bargain with Beijing.

Another explanation put forth for official U.S. equivocation over Japan is that the administration wants to proceed quickly, but the Japanese government itself has not decided whether it even wants to join the negotiations.  Even if Japan were entirely committed to the negotiations and had no domestic opposition to overcome, the process would be slower.  But there is domestic opposition in Japan, so, in fairness, the Obama administration’s concern for Detroit’s feelings doesn’t present the only obstacle.

Getting the deal done quickly is a valid reason to oppose Japan’s participation if the administration sees the TPP only as a means to a political end: having a deal – a relatively minor one, no doubt – to tout before November.  But this isn’t going to be done before November 2013, let alone November 2012.  And the economics of a Japan-less deal are, frankly, underwhelming.

Japan is the world’s third largest economy and the fourth largest trading partner of the United States.  The $6 trillion Japanese economy is more than double the size of the economies of the eight current U.S. negotiating partners combined.  The $200 billion in two-way trade between the United States and Japan equals that of trade between the United States and all of the eight current negotiating partners combined – and the United States already has free trade agreements with four of them.  If there are good reasons for pursuing a trade agreement with the eight, the reasons are much stronger if Japan is included.


Just a few short weeks ago, U.S. Trade Representative Ron Kirk waxed in the Wall Street Journal about the importance of the U.S. services sector industries.  In a piece titled “Rethinking ‘Made in America’,” Ambassador Kirk made the point that the United States is a services-exporting powerhouse and that industries in those sectors would drive growth and job creation in the 21st century. He wrote:

A commitment to services exports is why services and investment are a [sic] cornerstone of the current nine-country Trans-Pacific Partnership negotiations, in which the U.S. is seeking broad, nondiscriminatory market access for a wide range of services.

There isn’t a bigger ready-market for U.S. services in the world than Japan’s, but as of this moment an icon of the 20th century’s manufacturing economy is in the driver’s seat of this 21st century agreement.

Those who claim to want to move fast assert that Japan can always accede to the agreement at a later date – when it is good and certain that it wants to join.  But there are no guarantees that Japan would want to get into the club on terms undoubtedly less favorable than those it could secure as a charter member.  Rather than view the TPP as a model for the region, Japan, Korea, Indonesia, Canada, Mexico, China and even Europe might create their own alternative.  If the TPP is to have guaranteed drawing power, it needs the anchor of a large Asian economy.  And adding Canada and Mexico makes the endeavor all the more worthwhile.