American Mood Swings and the Overdue Japanese Moment: From TPP to CPTPP

Aakriti Sethi
January 26, 2019

 

Way before Donald Trump announced his candidacy for the 2016 presidential elections, his loud concerns about Trans-Pacific Partnership (TPP) and its potential ill effects on the American economy was gracing his twitter page. This stance was further cemented during his presidential campaign with the promise of pulling America out of a “bad deal” that doesn’t check “Japan’s currency manipulation” and possibly provides China a “back door to TPP”. Keeping his word, on the third day in the White House, President Trump signed an executive order and withdrew the American membership from the TPP successfully. The vacuum left by America was felt by the 11 members who were still part of the deal. The sporadic discussions on the future of the deal post America’s exit between the members were fairly evident. On one end leaders like PM Shinzo Abe from Japan stated that TPP without the Americans would be “meaningless”, whereas PM Malcolm Turnbull from Australia voiced his commitment towards pushing TPP and floated the idea of a possible Chinese membership.

Proving the TPP eulogists wrong, the members kick started the process to assess all the viable future options. Senior officials of the member states met at Hakone, Japan and then later at Sydney and Tokyo in 2017. This phase of negotiations gave a special opportunity to a country like Japan that has forever hesitated to be at the center. The historically delayed yet timely Japanese leadership came in the form of PM Abe’s dedicated attempts to lay a road of rules to accomplish Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP). The March 2018 meeting in Santiago, Chile by TPP-11 and the signing of CPTPP agreement is not just path breaking on the lines of trade but also symbolic reassurance by these states and especially Japan that they can go ahead without the American participation.The Japanese chief TPP negotiator Kazuyoshi Umemoto went on record to say that for the first time Japan is taking a “leading role in trade negotiations”.

Since the end of the Second World War, Japanese have closely aligned themselves with the Americans and have shied away from economic deals that don’t include the latter or the Western powers, like the East Asian Economic Caucus proposed in 1997. With the American exit from TPP, Japan unexpectedly found itself leading the negotiations by coming out of the American shadow. Japan’s potential to be a leader in economic trade deals has expanded beyond CPTPP, with its forging of EU-Japan Economic Partnership Agreement in July 2018. Both the economies together stand for roughly 30 percent of the world economic output and has been touted as the largest trading bloc ever. Japan has resolved to safeguard the liberalized open trade order at the time when ironically Americans have turned towards protectionist measures.

The first hints of Trump’s possible rethink over TPP came at the World Economic Forum in January, 2018, and later stated that “…if we did a substantially better deal, I would be open to TPP”. In April he officially instructed his top administration to look into the possibilities of joining TPP. Even though this news created buzz in various media reports, it was a possibility envisaged by TPP-11. The feasible membership of America in future has been a conscious thought in the minds of senior officials from countries especially Japan and Australia while renegotiating the deal. In the renegotiating process of TPP becoming CPTPP, member states have kept provisions that could let America rejoin. Even though many major issues pushed by Washington DC in the original document like intellectual property rights and environmental regulation have been either completely removed or relaxed to a certain degree in the new version, one of the biggest issue cited by Trump over TPP, i.e. Investor State Dispute Settlement or ISDS, has been majorly tweaked. ISDS has been criticized by many in America as it gives foreign corporations the provision to challenge American rule of law and drag the issue in front of international arbitration panels. ISDS mechanisms in CPTPP have been greatly narrowed down, which more or less addresses Trump’s concerns.

However, President Trump and his administration’s inclination towards bilateral agreements over multilateral ones, presents a bleak possibility for America to rejoin CPTPP in the near future. Furthermore, Trump’s uninhibited actions of imposing tariffs on close allies like Japan, can make the rejoining talk more complicated. In the meantime, as CPTPP has come into effect since December 30, 2018 and has been ratified by Canada, Japan, Australia, Mexico, New Zealand and Singapore, it has generated low-key yet positive reaction in the region. Countries like South Korea, Thailand and the Philippines have shown interest in joining CPTPP in future. Recently, Taiwanese officials have approached Japan to endorse its membership in CPTPP which further adds credibility to the Japanese leadership.

Japan’s challenge to keep its interests intact while hesitatingly moving towards a possible US-Japan FTA presents a dilemma to a nation that is otherwise interested in multilateral engagement. The issue of agriculture and the auto sector has been a thorn in the US-Japan economic relations since a long time. In this light, Japanese leadership and economic ambitions to set a free market order has further strengthened its intention to push for a China-Japan-South Korea free trade agreement. American exit from CPTPP and its shunning of potential Asian economic partners due to its inward projection has effortlessly opened avenues for countries to look for economic partners “apart from America”. In such a scenario, the onus to lead a rule based free market order has fallen on America’s “traditional allies” (Japan, EU, Australia etc.) in the wake of China’s aggressive political and economic moves, which eventually sets the stage for unprecedented regional and global changes.

 

*** The author is currently a PhD Student at Center for Canadian, United States and Latin American Studies, Jawaharlal Nehru University, New Delhi. She acquired her Bachelor’s degree in Political Science honors from Jesus and Mary College, Delhi University. For her post graduation studies, she pursued Masters of Arts in Geopolitics and International Relations from Manipal University, Karnataka. She later worked as a research intern at the North America division of Institute for Defence Studies and Analysis, IDSA, New Delhi. Her M.Phil is in United States Studies from Center for Canadian, United States and Latin American Studies, School of International Relations, Jawaharlal Nehru University, New Delhi. Currently, she is pursuing her PhD at the same. Her areas of interests include US foreign policy, US domestic politics, US-Japan relations, US-China relations, Indo Pacific studies, UN issues and India’s foreign policy. ***

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