Japan Trade Deal May Revive Globalization
By the Editors
The U.S. and Japan agreed to terms last week allowing Japan to join talks on the Trans-Pacific Partnership, another step toward creating the world’s most important free-trade initiative. The emerging pact has far- reaching implications for domestic policy in Japan and elsewhere, and could offer a new approach to global as well as regional trade liberalization.
Japan’s participation would widen the TPP to 12 members, accounting for 40 percent of global gross domestic product. The Japanese economy is bigger than all the other non-U.S. members combined. By taking part, Japan is making a commitment to long- overdue domestic economic change. Supply-side reform is one of the “three arrows” Prime Minister Shinzo Abe has promised will revive Japan’s stagnant economy (the others are monetary stimulus and fiscal expansion). In the long term, it’s the one that matters most — and it’s the one that the TPP can provide.
Abe deserves much credit for pressing this part of his program so determinedly. Special interests, especially farming, have supported protectionism in Japan for years. (Rice farmers are shielded by tariffs approaching 800 percent.) The TPP will mobilize Japan’s manufacturing exporters, which will gain directly from the deal, as a countervailing political force.
According to the government’s estimate, annual farm and marine production might decline by 3 trillion yen ($30.3 billion) under the TPP, though other sectors would expand more than twice as much, raising aggregate GDP by 3.2 trillion yen. That’s probably an underestimate, because the benefits would build over time. One independent study puts Japan’s potential gain at more than $100 billion a year (2 percent of GDP) by 2025. ….
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