Japan, Britain and the New Trans-Pacific Partnership

Japan, Britain and the New Trans-Pacific Partnership

Japan is now the leading economy in the CPTPP framework and is seeking to open doors to newcomers amid the rise of protectionist moves under US President Trump’s “America First” policy. Apart from ratifying the bill, Japan has been promoting the benefits of multilateral trade deals after the abrupt US withdrawal from the original TPP. Take for instance, in July 2018 – Japan signed a free trade agreement with the European Union (EU).

As the US moves out of regional groups and pushes its economy towards more protectionism, trade wars seem set to explode on the global stage. The trade face-off with China is almost complete; America’s sanctions on Iran and Russia (through CAATSA) have made the latter two countries’ traditional allies to re-think trade policies with them. But apart from individual blockades, the US has pulled out of the Trans-Pacific Partnership (TPP) accord – a deal which America, under the former President Barack Obama – had taken a lead on. The TTP is made up of 11 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – which make up 13.4 percent of the world’s wealth.

As the current American President Donald Trump pulled his country out of the TPP, the remaining nations remained firm on their commitment to essentially convert the Asia-Pacific region into a mega free-trade zone and signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 8 March 2018. The CPTPP is a new trade agreement suspending the application of certain provisions set out in previous negotiations on the TPP. But with the US out, who’s going to take the pact to fruition?

Why is the CPTPP Important?

The CPTPP, once implemented, would help in developing a seamless supply chain in Asia Pacific through increased levels of liberalization as well as better trade and investment rules. These, in turn, will lead to reduced costs, better efficiency and creation of employment opportunities – thus strengthening economic growth in the region and the world. Moreover, the agreement also protects and enforces labour rights and promotes high levels of environmental protection through obligating the CPTPP countries to adopt the International Labour Organization (ILO) declaration and multilateral environmental agreements.

Given the importance of the pact, it seems justified that those involved in drafting it up, would not want it go to dust. While Japan, Mexico and Singapore have already ratified the pact; New Zealand, Australia and Vietnam are expected to follow within this year. Looking at it one way, it seems that the US pulling out of CPTPP has actually opened up opportunities for Japan to take a lead role in carrying the trade agreement forward.

Japan, Britain and the New Trans-Pacific Partnership
British Secretary of State for International Trade Liam Fox is greeted by economic revitalization minister Toshimitsu Motegi before their meeting in Tokyo. Source: The Japan Times

Japan: Can it take the Lead Role?

Japan is now the leading economy in the CPTPP framework and is seeking to open doors to newcomers amid the rise of protectionist moves under US President Trump’s “America First” policy. Apart from ratifying the bill, Japan has been promoting the benefits of multilateral trade deals after the abrupt US withdrawal from the original TPP. Take for instance, in July 2018 – Japan signed a free trade agreement with the European Union (EU).

Another perfect example of Tokyo taking the lead in promoting global free-trade can be seen in Japan engaging with the UK to join the CPTPP. On 31 July 2018, the British Secretary of State for International Trade, Liam Fox, met Japan’s Economic Revitalization Minister, Toshimitsu Motegi, in Tokyo. During this meet, Japan reiterated its support for Britain joining the CPTPP by offering to “provide the necessary information and act as an intermediary”.

UK and CPTPP: To Join or Not to Join?

It is true that Britain joining the CPTPP would help promote multilateral trade systems that are “free, fair and rules-based”. Not only would it strengthen the trade relations between the Britain and Japan, but UK’s potential accession to CPTPP would also enhance the EU-Japan EPA (Economic Partnership Agreement) into a new and stronger relationship.

However, Britain cannot formally engage in trade negotiations until its exit from the EU is official. While UK Prime Minister Theresa May and her government are committed to leaving the single market and the customs union, given the red lines the UK has established, the EU is saying that the best it can offer is a free trade agreement, along the lines of the EU-Canada deal (known as Ceta) which came into force last year.

Conclusion:

Despite both Japan and Britain seeking to promote free and rules-based trade, the CPTPP will only enter into force after 60-days after at least six signatories complete necessary domestic procedures. Only then can the forum look to add more members. As for Britain, it cannot formally engage in trade negotiations until Brexit is official. It is also a known fact that the more independent your national trade policy is, the more difficult it is to negotiate completely barrier-free access to any other country.

Hence, Japan could continue to play its leadership role strategically in the international trade arena while Britain must wait and watch how its domestic policies will affect its international pacts and then accordingly make a move. However, there would be no harm in setting the stage beforehand, as the talks in Tokyo showed. This bilateral relationship will continue to be of interest to international political economy enthusiasts.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

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