Trouble in Paradise

  • National Newswatch

Trade expert Peter Clark was in Lahaina, Hawaii, for the recent talks at the Trans Pacific Partnership Ministerial meeting.  As the clock ticks toward the 'deadline' for an agreement and as pressure to conclude a deal continues, he is continuing to provide updates on the state of negotiations.

The extreme secrecy of the Trans‑Pacific Partnership (TPP) negotiations has generated much criticism from those on the outside trying to look in.  Post Maui has been a busy week for TPP negotiators.  Early assessments of work to be done have been scrapped.  A USTR briefing to Congress has provided an unprecedented glimpse at how much remains undone.The chickens have come home to roost – at a  very awkward time.The secrecy combined with the US hub-and-spoke approach to the negotiations led to impasses and delays which have thrown a very large monkey-wrench into the works.Akira Amari, Japan's minister responsible for the TPP, is now less confident there will be another Ministerial in August.  Given the extent of unfinished work it was never a realistic target date.  Indeed, the US has also told Congress that August is not possible.  September or later is  current speculation.The pressure to conclude the deal at Maui was intense.  There were round the clock negotiations.  The negotiators have been running on adrenalin.  Vacations were deferred until after Maui. Sleep and real rest of any sort was a luxury they couldn't afford.  Now most negotiators will take a much-needed break to  recharge their batteries so that they can come back to the job fresh - even if frustrated and a tad pessimistic.Despite spin that the deal was at hand the remaining issues could not have been resolved even if the Japan-USA deal on automotive products had not exploded.According to a USTR post-Maui briefing to Congress, problems remain on market access, agriculture, autos and biologic drugs.  Imposing International Labour Organization standards on Vietnam and several other Asian countries needs some work, as does textiles.Hollywood is not pleased with changes in the recently leaked Intellectual Property text pertaining to finding a better balance between intellectual property owners and users.  Score one for Google in this round.  Don't expect Hollywood to give up easily.  One does not mess with the film and TV moguls at the best of times, and certainly not on the eve of an election.The IP text is claimed by some to be a 'non-paper'.  Good try – it certainly looks like a negotiating text.  The spin doctors denied existence of offers that have since been confirmed by several countries.Heavily subsidized California rice producers are not satisfied with Japan's offer for market access on rice.  Japanese farmers think it is too generous for a product they are not shy to suggest is not fit for human consumption.  Rice is special to the Japanese people.  It is an intrinsic part of Japanese culture.A Japan Times editorial called on the Abe Government to reconsider the TPP and to assess costs and benefits.The Japan Times suggests that too much has already been conceded on Japan's market access to five sacred sensitive agricultural products.  The former cheerleaders for the deal are now focused.  They are concerned with the differences between benefits (which have been shrinking) and with losses and disruption that the deal would impose on Japan's farmers.  The Abe administration is being called upon to use the delays to reassess what Japan stands to gain and lose from the talks, and then to carefully decide how to proceed.  Such delays at this stage risk being the kiss of death.Malaysia needs more time to deal with changes to Government procurement, Investment, State Owned enterprises and possible restrictions on the availability of generic medicines flowing from additional protection of pharma patents.Canadians will be interested in what the new transparency reveals about the dairy offer – and automotive trade.   A deal was also made difficult due to differences over the opening of dairy markets.  New Zealand's call for the elimination of tariffs on dairy products met with strong opposition from Canada and Mexico - both countries expect to suffer losses from the rise in imports.The Japanese press does not mention Japan's concerns about “extortionate” demands from New Zealand.  New Zealand dairy farmers have their own problems with much unloved super co-op Fonterra.On dairy and poultry,  Inside U.S. Trade (IUST) confirmed its earlier reports that Canada has tabled an offer or offers on market access for dairy and poultry.  IUST reported Assistant USTR Barbara Weisel told Congress that USTR viewed Canada's proposal in Maui as a “serious offer,” but insufficient.  The first offer is never sufficient for any experienced negotiator – first offers are simply opening positions.  But how much is a “serious” offer?IUST reports that Ms. Weisel considers this was not Canada's final offer and gaps needed to be filled, adding that Canada remains committed to the negotiation during the election campaign.That Canada would make on offer should not come as a surprise.  Canada considered a deal could be done at Maui.  The cat is now out of the bag – or as Larry Herman suggests, the genie is out of the bottle.Then there is the automotive impasse – and potential US-Japan friction.Prime Minister Abe was shocked to learn that Ambassador Froman had not pre-sold the automotive rules of origin package to Canada and Mexico.  Japan takes negotiations very seriously.  It will not simply watch its automotive deal unravel.It now seems clear that Canada and Mexico will, as they should, participate in determining the original rules and local content requirements for automotive trade.  Revising the agreement in their interest can only dilute significantly the surprise package which Froman and team concluded with Japan.  Renegotiation could unravel the US-Japan market access agreement and subject politically sensitive concessions by Japan to challenges as being excessive.Nor is Japan pleased with US determination to employ very long phase-out of automotive tariffs.The inexcusable mess on autos comes on top of revelations about US electronic eavesdropping – on Japan – with some degree of focus on the Trade Ministry.  Oops!  Pesky Whistle Blowers!  Mischievous Wikileaks.  Does anyone believe the intercepts have not been used in the TPP?This is all the beleaguered Japanese Prime Minister needs.  His popularity is already in free fall.  Imbalance in the TPP could be the straw that breaks PM Abe's back.Signing the TPP at the upcoming APEC Ministerial no longer appears to be the target date – at least some Japanese are claiming that Japan should not put all of its eggs into the TPP basket.There is simply too much yet to complete and too little time to do it.The TPP will cover a large share of world trade.  And Japan has common interests with the USA in defense in the region.  But should/will this lead Japan to make costly compromises for a deal?  As details of the deal (both what's done and yet to be done) emerge, we can expect more calls to assess whether the concessions required to conclude the TPP and benefits to Japan would be in Japan's net interest.The Japan Times urged: “Japan should not solely concentrate on the TPP in its free trade agenda.  The government should spend more energy on other ongoing free trade talks with East Asian countries and Europe, which might produce larger economic benefits than the TPP.”The Maui missteps and failure may cause the negotiations to drift for some time.  Other participants know that the best hope for selling TPP in the US  is with President Obama.  The 90 days between giving notice of intention to sign and signing is only the beginning of the process.  Congress has 90 legislative days to approve or reject the agreement.  That is closer to five months than to three.Is Prime Minister Abe being urged to make haste slowly, or to back away from a deal which will not be beneficial to Japan?The TPP is important and needs to be done soon.  Japan has been a strong supporter but Abe cannot accept renegotiations which undo important concessions. 'Face' and protecting it and saving it are important in Japan.  So it appears Japan has adopted a different approach -- and its new reluctance may be the only way to protect its interests.The other potentially explosive 'face' issue is US intelligence gathering which the US and Japan are trying to keep low key in public.  The reaction inside the Abe Administration is not benign, as reflected in the strongly worded (for Japanese diplomacy) reaction of Prime Minister Abe.Prime Minister Abe travels to Washington in September to meet President Obama.  There must be a lot of advance fence mending.  Resolving TPP differences will be high on that agenda.  The cost of resolution will likely weigh most heavily on Washington.Peter Clark, president of Grey, Clark, Shih and Associates, is one of Canada's leading international trade strategists. His clients in Canada and around the world include governments, corporations and trade associations. He is a frequent media commentator and columnist.  Follow him on Twitter at @jpclark14