Pacific bloc looks to lure Japan

The United States, Australia and nine other Asia-Pacific countries are meeting in Singapore this week and next week to try to add more impetus to negotiations to liberalise a big portion of trans-Pacific trade and business. They will have a new participant in mind: Japan.

The Trans-Pacific Partnership economies already account for 30 per cent of global output and 20 per cent of the world's exports of goods and services. If Tokyo joins, it would give the bloc added heftiness in both regional and international affairs. Japan is the world's third largest economy, after the United States and China.

Following a long period of hesitation, Tokyo is seriously considering joining the 11 Asia-Pacific countries in talks to form the TPP. In addition to the US and Australia, countries already in the negotiations are Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Tokyo's sharpened interest follows a recent US-Japan summit in Washington at which President Barack Obama made a concession to enable Japan's new Prime Minister, Shinzo Abe, to sell the TPP deal to critics in his Liberal Democratic Party.

They fear free trade will crush relatively small but politically sensitive sectors of the Japanese economy, including farming, forestry and fishing. These sectors are protected by high tariffs and onerous non-tariff barriers. The LDP platform says the party will oppose Japan joining the TPP if blanket tariff elimination is required.

Mr Obama and Mr Abe agreed that because the final outcome would be determined by the TPP negotiations, Japan did not need to make a prior commitment to unilaterally eliminate all tariffs on joining the TPP process.

A joint statement issued by the White House after the US-Japan summit on February 22 also said that should Japan participate in the TPP negotiations, all goods would be covered and Japan would join other participants in achieving a ''comprehensive, high-standard'' agreement.

Washington wants Japan, a key ally in Asia, in the TPP for both economic and geopolitical reasons. Japan's participation could help attract other leading Asia-Pacific economies, including South Korea, Indonesia, India, the Philippines and Thailand.

This could make a competing trade bloc sponsored by ASEAN and backed by China less attractive. Beijing sees the TPP as part of US-led move to contain China.

Negotiations to form the other trade group, known as the Regional Comprehensive Economic Partnership, are due to start soon. Australia and some other economies in the TPP talks are hedging their bets by taking part in the 16-nation RCEP negotiations as well as the TPP negotiations.

Although the RCEP does not include the US, it is appealing to many potential Asia-Pacific participants because it is expected to have easier joining terms than the TPP and make fewer demands for painful reforms.

In addition, the RCEP's cornerstone, China, is the top trading partner and an increasingly important source of investment, aid and tourists to virtually all East Asian economies.

Three years ago, Singapore's elder statesman Lee Kuan Yew outlined the stakes involved in the push-and-pull of Asia-Pacific trade politics. He wrote in an article for Forbes magazine, published on December 20, 2010, that China's policies over the previous three decades left ''little doubt that it has every intention of bringing its three northern neighbours - Korea, Japan and Taiwan - as well as the ASEAN countries into its economic fold.''

Mr Lee suggested that the US should ''counter China's attraction'' by negotiating a free trade agreement with other countries in the region. ''This would prevent these countries from having an excessive dependence on China's market,'' he said. ''Without an FTA, Korea, Japan, Taiwan and the ASEAN countries will be integrated into China's economy - an outcome to be avoided.''

Mr Lee explained that as the Chinese economy had expanded rapidly, Beijing had become more assertive on international issues, prompting its neighbours to take China into account when making their policy decisions.

''There is no direct intimidation, but, by denying access to its huge consumer market, China can punish those who are against its interests,'' he wrote. ''Therefore, none of these countries wants to be viewed as antagonistic. Increasingly, the same pressure is being felt worldwide.''

The Singapore round of TPP negotiations is the 16th and is scheduled to last until March 13. Before Japan can join, its admission must be approved by all existing participants. While the US is keen to see Tokyo in the TPP talks, there are concerns that giving Japan a seat at the table could complicate and delay the negotiations.

Australia, New Zealand and other major agricultural exporters in the TPP negotiations are concerned that inclusion of Japan would strengthen pressure to allow free trade exceptions and protect subsidised farming. New Zealand's Prime Minister, John Key, whose government hosted the last round of TPP talks in December, issued a pointed reminder when he said recently that negotiations were at an advanced stage.

Clearly, balancing the economics of an enlarged TPP with its politics in a way that is acceptable to all members will be a delicate task.

The writer is a visiting senior research fellow at the Institute of South East Asian Studies in Singapore.