[A2k] Bloomberg: Kan May Put Free-Trade Talks on Hold After Quake in Setback for Obama Goal

Thiru Balasubramaniam thiru at keionline.org
Fri Mar 25 08:37:36 PDT 2011


http://www.bloomberg.com/news/2011-03-24/kan-may-suspend-free-trade-push-after-quake-in-setback-for-obama.html

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<SNIP>

Restore Japan’
Nippon Keidanren, a Tokyo-based business group representing more than  
1,200 companies, said in a Dec. 6 report the government should join  
the TPP “in order to restore Japan.” The group’s members include  
Mitsubishi, the country’s biggest industrial supplier, Takeda  
Pharmaceutical Co., Asia’s largest drugmaker, and Toyota, the world’s  
biggest carmaker.

<SNIP>>

The disaster gives him an opportunity to redeem himself in the eyes of  
the public and push through farm subsidy changes down the road, said  
Shujiro Urata, a professor of economics at Waseda University in Tokyo  
and a former World Bank economist.

“He has a better chance now than before the earthquake,” Urata said.  
“If he can use this opportunity to regain popularity and support, then  
he has a very good chance of pushing through the TPP and other reforms.”




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Kan May Put Free-Trade Talks on Hold After Quake in Setback for Obama  
Goal
By Daniel Ten Kate and John Brinsley - Mar 25, 2011
Japan’s strongest-ever earthquake may derail Prime Minister Naoto  
Kan’s push to join U.S.-led trade talks after the resulting tsunami  
devastated farmers.

Kan had set a June deadline to decide on whether to join the talks  
toward slashing some of the world’s highest agricultural duties,  
including a 778 percent tariff on rice. Two lawmakers from Kan’s  
ruling Democratic Party of Japan said the Trans-Pacific Partnership is  
off the table for now as the government focuses on quake victims and  
the nuclear crisis.

Failure to pursue a trade deal may hinder companies such as Mitsubishi  
Corp. and Toyota Motor Corp. in competing overseas and set back Kan’s  
efforts to modernize Japan’s economy. President Barack Obama aims to  
wrap up a U.S.-South Korea trade deal before July while attempting to  
build the nine-country TPP into an Asia-wide pact.

“Corporate Japan is really pushing, as they know Japan’s failure to  
enter the TPP would be a further step towards second- or third rate  
nationhood on the global stage,” said Jesper Koll, head of equity  
research at JPMorgan & Co. in Tokyo. “Changing agriculture policy  
faces big opposition.”

Urging Caution
About 100 members of Kan’s party signed a statement in October urging  
caution on the trade talks, reflecting the political power of the  
country’s 2.5 million farming households. The area devastated on March  
11 by the 9.0-magnitude earthquake and subsequent tsunami accounts for  
more than a quarter of the country’s rice production, government  
figures show.

“The Japanese have sympathy for those who had damage in rural areas,”  
said Masayoshi Honma, a lecturer on agriculture policy at the  
University of Tokyo who supports the accord. “It’s not the right time  
to talk.”

Japanese farmers derive 47 percent of their revenue on average from  
subsidies, price supports and restrictions on imports, according to  
the Paris-based Organization for Economic Cooperation and Development.  
That compares with 10 percent for the U.S. and 24 percent for the  
European Union.

Japan’s support for farmers totaled $46.5 billion in 2009, according  
to the latest available data from the OECD. The comparable figure for  
the U.S., with a population more than twice Japan’s, was $30.6 billion.

Diet Staple
Rice is the staple of the traditional Japanese diet and until the late  
19th century was the basic measure of wealth. The word for “meal” is  
“cooked rice.” The world’s first futures market was Osaka’s Dojima  
rice market in the early 18th century.

Agriculture Minister Michihiko Kano on March 22 announced a delay in  
forging plans to bolster the farm sector to withstand foreign  
competition, a prerequisite to join the TPP. It would be “considerably  
difficult” for Kan to stick with his June deadline, DPJ lawmaker Isao  
Matsumiya said by phone.

“All that talk has been completely wiped out,” fellow ruling party  
legislator Hiroshi Kawauchi said about the TPP.

Kan’s administration has hinted at a delay without formally announcing  
one. Staying out now doesn’t preclude Japan from joining later, said  
Jeffrey Schott, a fellow at the Peterson Institute for International  
Economics in Washington.

‘Without Regard’
“The global trend toward free trade is proceeding without regard to  
the situation in Japan,” Chief Cabinet Secretary Yukio Edano said  
today in Tokyo when asked about the government’s position on the TPP.  
“Right now we’re focusing all our efforts on the earthquake and  
nuclear power plant situation. We have to assess the entire damage  
before making any political decisions on our agenda.”

Kan’s DPJ ousted the Liberal Democratic Party 18 months ago after more  
than 50 years of almost unbroken control. The LDP for years imposed  
protective tariffs to win the support of the Japan Agriculture  
Cooperatives Group, the country’s dominant distributor of rice and  
vegetables.

The group postponed rallies set for this month and next opposing the  
trade accord and farm policy changes because of the disaster,  
spokeswoman Eriko Narikiyo said by phone.

‘Bite the Bullet’
“You can’t have a TPP or a U.S.-Japan FTA unless you bite the bullet  
on agricultural reform, and they’re not even close to doing that,”  
said Gerald Curtis, a professor of Japanese politics at Columbia  
University in New York.

Besides the U.S., the TPP includes Singapore, Brunei, Malaysia,  
Vietnam, Australia, New Zealand, Chile and Peru -- an eight-country  
grouping with a combined gross domestic product about a third the size  
of Japan’s. Adding Asia’s second-biggest economy would make the TPP  
the U.S.’s biggest free trade area by GDP, topping the North American  
Free Trade Agreement.

The sixth round of talks is set for March 28 in Singapore.

“As some degree of normalcy returns, we will of course re- engage with  
Japan as it makes important decisions on the economic and trade  
policies it will pursue in the wake of this tragedy,” Carol Guthrie, a  
spokeswoman for the Office of the U.S. Trade Representative, said in  
an e-mail.

Goods trade with Japan reached $181 billion last year, or 5.7 percent  
of the U.S.’s global commerce in goods, according to the Commerce  
Department. Obama, aiming to double exports in five years, will  
discuss the deal at November’s Asia-Pacific Economic Cooperation  
meeting in Hawaii.

‘Restore Japan’
Nippon Keidanren, a Tokyo-based business group representing more than  
1,200 companies, said in a Dec. 6 report the government should join  
the TPP “in order to restore Japan.” The group’s members include  
Mitsubishi, the country’s biggest industrial supplier, Takeda  
Pharmaceutical Co., Asia’s largest drugmaker, and Toyota, the world’s  
biggest carmaker.

Kan is struggling to jumpstart an economy burdened by deflation,  
rising social welfare costs and the world’s largest public debt at  
more than 200 percent of gross domestic product.

Fewer than one voter in four supported Kan’s government in a poll a  
week before the earthquake by Yomiuri newspaper.

The disaster gives him an opportunity to redeem himself in the eyes of  
the public and push through farm subsidy changes down the road, said  
Shujiro Urata, a professor of economics at Waseda University in Tokyo  
and a former World Bank economist.

“He has a better chance now than before the earthquake,” Urata said.  
“If he can use this opportunity to regain popularity and support, then  
he has a very good chance of pushing through the TPP and other reforms.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate at bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg in  
Hong Kong at phirschberg at bloomberg.net

®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.


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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru at keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997








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