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No Pacific trade deal without the U.S., says Japanese envoy

By Peter Mazereeuw      

Chinese-led negotiations may be Canada’s last chance at a regional agreement.

Japanese Ambassador Kenjiro Monji has touted his country's steadfast support of the Trans-Pacific Partnership to Canadian MPs and members of the press. He also says Japan won't likely renegotiate the agreement if the U.S. backs out. The Hill Times photograph by Marie-Danielle Smith
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Japan’s ambassador has nixed the possibility of a trans-Pacific trade deal without the United States, scuttling the hopes of members of Canada’s official opposition and others who have called for the remaining members of the TPP to push for a new deal if U.S. president-elect Donald Trump makes good on his promise to pull out of the agreement.

“If the United States is out, I think it is very difficult to strike a deal again. Because the whole background conditions are totally different, so what we have negotiated may not apply to areas,” Ambassador Kenjiro Monji told The Hill Times last week.

The Trans-Pacific Partnership’s ratification formula effectively requires both Japan and the United States to implement the deal for it to come into effect. Mr. Trump has signalled that won’t happen, and Mr. Monji signalled that Japan has no interest in renegotiating the deal with the remaining 11 members.

Japanese Prime Minister Shinzo Abe also said last week the TPP would be “meaningless” without the U.S.

The “background conditions” Mr. Monji referred to are the concessions and gains Japan agreed to in order to make a deal with the U.S. and other TPP partners, he said.

If the TPP cannot be saved, the ambassador said Japan will continue negotiating a trilateral deal with China and South Korea and another with the RCEP—Regional Comprehensive Economic Partnership—that includes China, members of ASEAN, and India, Australia, New Zealand, and South Korea.

RCEP looming larger

Mr. Monji told the House Trade Committee last month, before Mr. Trump’s election, that Canada should also ratify the TPP to send a message to the United States, where both presidential candidates and Democratic congresspeople were wavering on or opposed to the deal.

Canada’s government also has not yet committed to ratifying the TPP, though it did sign the deal in February.

The Japanese envoy declined to say whether Canada should explore joining the RCEP, during his interview with The Hill Times, but stressed that Japan values the TPP because it covers areas such as intellectual property and the behaviour of state-owned businesses.

Proponents of the TPP including the U.S. Obama administration have suggested that the TPP is necessary to lay down trade laws across the Pacific in those areas, in order to prevent China from trading through an economy heavily influenced by state-owned firms and without strictly enforced intellectual property provisions. Without the TPP, the RCEP—a simpler deal focused on tariffs—would set trading norms for the region, assuming the 16 members can agree to a deal.

If that were to happen, Canadian exporters could face stiffer tariffs in RCEP member states than competitors based in Australia or other countries within the deal.

However, Conservative MP Gerry Ritz (Battlefords-Lloydminster, Sask.), his party’s trade critic, warned that if Canada were to join the RCEP, it would be on the terms of the countries already in the negotiations.

Canada also joined the TPP negotiations midway through, though well before the crucial final stages of the negotiations.

Mr. Ritz has long called on Canada’s government to ratify the TPP, and to seek a deal without the United States if necessary by rewriting the deal with the remaining partners.

A Windsor chapter of the Unifor labour group protested the Trans-Pacific Partnership, negotiated by the previous Conservative government, and the local Conservative candidate for Essex, Jeff Watson, in the month before the 2015 election. Mr. Watson was defeated by NDP MP Tracey Ramsey, a union ally and TPP opponent. Photograph courtesy of Unifor.

A Windsor chapter of the Unifor labour group protested the Trans-Pacific Partnership, negotiated by the previous Conservative government, the party of the local candidate for Essex, Jeff Watson, in the month before the 2015 election. Mr. Watson was defeated by NDP MP Tracey Ramsey, a union ally and TPP opponent. Photograph courtesy of Unifor

Patching together a post-U.S. TPP is a better option for Canada than pursuing bilateral deals with the various TPP members, said Mr. Ritz in an interview, which include Japan, Vietnam, Peru, Brunei, Australia, Chile, Malaysia, New Zealand, Singapore, as well as Mexico and the United States, which already have free trade with Canada through the NAFTA.

The economies of scale of a large agreement provide a better incentive for countries to open up more than they would in a bilateral deal, he said.

“We will not get the same level of access in a bilateral [with Japan] as we will in the TPP,” he said.

It’s not clear exactly how TPP supporters could make a deal without the U.S. The TPP chapter on entry into force dictates that at least six of the original 12 members, representing 85 per cent of the combined GDP of those members, must ratify the deal within two years of it being signed.

Trade Minister Chrystia Freeland (University-Rosedale, Ont.) repeated those terms in the House last week, called Mr. Ritz “ill-informed” about the agreement, and said that there would be no deal without the U.S.

Mr. Ritz, who helped to guide the TPP negotiations during his time as agriculture minister in the previous government, told The Hill Times that Ms. Freeland’s position was a “misnomer,” and said the deal’s terms could simply be adjusted to exclude countries that fail to ratify from the base calculation for the group’s GDP, if the remaining members were to agree to it.

However, NDP MP Tracey Ramsey (Essex, Ont.), her party’s trade critic, said she also believed that the TPP without the United States, Canada’s largest trading partner,“does not make a lot of sense.”

Ms. Ramsey and the NDP have opposed the TPP since before the last federal election. She said pursuing another regional deal with the remaining members wouldn’t benefit Canada. She also disagreed with Mr. Ritz’s assessment of the benefits of multi-party trade agreements, saying a bilateral deal with only Japan could allow Canada to more specifically address non-tariff barriers to trade between the two countries than would be possible in the text of a deal designed for several countries.

Canada-Japan talks still on hold

Mr. Monji was cagey about committing to restart bilateral trade talks with Canada, which went seven rounds before being put on hold in 2014 as the TPP heated up. Mr. Monji stopped just short of committing to jump back into the Japan-Canada negotiations immediately if the TPP failed, saying Japan’s government was focused on ratifying the TPP—which is still before the upper house of Japan’s parliament—and that committing to bilateral negotiations with Canada would “give the wrong signal” to the Japanese parliament and other countries about Japan’s dedication to the TPP.

“It is natural that, if something is going wrong [with the TPP]…then we have to discuss how to promote free trade and how to promote trade between our two countries. We have already agreed to conduct bilateral negotiations for that purpose. But the TPP came in. Now we will see how the TPP will go from now on,” he said.

Mr. Monji also said Japan and Canada should team up to fight global trade protectionism, echoing the words of Prime Minister Justin Trudeau (Papineau, Que.), who used a speech at the G20 Leaders’ Summit in China in September to rail against economic protectionism and anti-globalization.

“The biggest message is: we hope to lead free trade, and fight against protectionism with other countries, including Canada,” said Mr. Monji. “For that purpose, we pursued TPP, and Japan is still pursuing, because if we drop, it will be completely dead. But the very objective is to pursue free trade together.”

peter@hilltimes.com

@PJMazereeuw

Canada’s Pacific free trade agreements

In force: Korea, Panama, Costa Rica, Peru, Honduras, Colombia, Chile, United States, Mexico

Negotiated: TPP – Malaysia, Japan, Brunei, Vietnam, Singapore, Australia, New Zealand, Chile, United States, Mexico, Peru

Regional Comprehensive Economic Partnership members

Thailand, Vietnam, Cambodia, Myanmar, Laos, China, India, Japan, Korea, Malaysia, Indonesia, Philippines, Brunei, Singapore, Australia, New Zealand

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