Mar 26, 2018 in Case Studies

Introduction

The proclamation of the Japanese Authority on delaying the 2011 resolution to whether to be part of the suggested Trans-Pacific Partnership Agreement (TPP) can be understood under consideration of the disaster that happened at Tohoku part of Japan. It is understandable that Japanese Government had to focus on the rebuilding of the nuclear plants. Nevertheless, the TPP members still believed that, despite the tragedy that had incapacitated Japan, it could at least make fundamental agreement with the Asia-Pacific Economic Cooperation. The Japanese participation in TPP is of immense significance for the TPP considering the economic power and the impact Japan has in the region of Asia Pacific. To this end, Japanese participation in TPP will enhance the Japan-US trade relationship by offering a platform for resolving their long standing issues related to economic competition. This participation will also involve economic giants that represent more than 36% of the world GDP in the trade relationship in a dynamic region (Surhone).

Importance of Japanese Participation in TPP

The early commitment of Japan to the TPP would be a crucial short-term indication to the entire world that Japanese are open to do business. On the other hand, in the long-term, the Japanese participation in TPP would be a terrific boost to its economic development and recovery that would usher in economic reorganization in key zones making the economy be much more dynamic and make Japan an attractive investment ground. Considering the international concern on radiation pollution of Japanese products, scientific standards will offer protection against biased discrimination. Consequently, the USJBC has offered a lot of support for the Japanese participation in TPP on condition that Japan is ready to abide to the terms and condition stipulated by TPP partners. The present TPP partners have agreed to get into an agreement so as to attain the century agreement on trade that is comprehensive in coverage and scope of agriculture. The 21st century agreement is inclusive in its commitment to the standards for investment and trade liberalization that entails tariff beyond the regional barrier that tends to inhabit trade activities (Commission).

The regional trade control will require Japan to make difficult economic reforms. It is only through some difficult economic reforms that Japan will fully benefit from its engagement to engage with the TPP. It is crucial for the Japanese government to put into consideration the reality that despite its Tohoku disaster, it should be ready to oblige fully to the terms and conditions of TPP without expecting any favor. Also, the Japanese participation will only be welcomed by other partners on the basis that it is a boost to the goals of TPP rather than being a drag undermining TPP’s ambition and scope (Simmonds).

It is clear that, in the event that Japan will participate in TPP, their main trade partner will be the US; however, at the onset of 2010 President Obama announced that the US would increase it exportation 5 folds within a period of five years. There are possibilities due to which the US government lead a low rate of the dollar to attain this end. If Yen get stronger as compared to the US dollar, then the exportation from Japan will be difficult for TPP members. To this end the hollowing out of Japan’s domestic market get to progress, domestic employment decline, and Japanese economy deteriorate.

Demerits on Steel Industry

By 2011, Japan had reached EPA (an Agreement about Economic Cooperation) agreement with about 6 nations that are participating in TPP. The FTA (Free Trade Agreement) has focused on the elimination of regulations and tariffs of service industry. Contrary, EPA has focused beyond regulations and tariffs into protection over intellectual properties and consolidation of investment conditions. According to the data from Japan Steel Federation, in 2010, Japan’s steel and iron industry exported steel products in excess of US $45 billion. The countries that have agreed to TPP are the US, New Zealand and Japan. Among these nations, the US has no regulations and tariffs to steel and iron. Therefore, it is only the exportation from New Zealand and Australia that are likely to increase. Nevertheless, their steel importations are significantly small, whereby their combined exportation amount is to 1.2 of the Japanese steel and iron shares. Going with these facts, it is evident that TPP will not boost the Japanese exportation of steel and iron. Therefore, Japan’s steel industry is not likely to benefit much from TPP (Jensen).

In spite of the possible demerit that might accompany the Japanese engagement with TPP, such decline of steel market and opening Japan’s economy to the world, and some positive economic reforms, there are significant merits that are involved in the agreement. In the current work, the focus will be on some of these merits.

TPP in Japan

Even after nuclear disaster at Tohoku in Japan, it is crucial for the Japanese government to focus on the realistic of the two main areas before concluding whether it should engage in TPP. While TPP negotiation may have room for adjustment on the commitments, Japanese should be ready to meet all the requirements just like other TPP partners without expecting some exceptions, and secondly, its participation will be appreciated, if it will be a boost to the TPP efforts.

In Japan, Agricultural reform is a crucial area of reforms that Japan has to make. Considerable areas of its best producing agricultural land having been damaged by the radiation from Tohoku nuclear disaster, participation in TPP would present Japan with an optimal opportunity to improve food security. This would also make the agricultural sector dynamic economic factor by aligning in trade agreements with agricultural suppliers such as Australia, the US, and New Zealand. Japan will ensure a stable and safe supply of the low-cost grains, animal protein, and other food products to fill the gap caused by the nuclear disaster (Chow).

As Japan reduces the trade barriers as stipulated under TPP, agricultural policies will be changed from trade protection that distorts the structure of measures, which increases the scale of production and productivity by application of technologies and new techniques, as well as entertaining new entrant into the market. These reforms would promote the competitiveness of the agricultural sector, while reducing the prices and enlarging the consumer choice. The reform would reverse the scraping out of the Japanese rural areas that would be beneficial to Japan. Most significantly, unless the Japanese trading environment becomes more attractive to trade in, the foreign and domestic investors will continue to move to other attractive markets for development opportunities. The other reforms that would be beneficial to the Japanese TPP agreement would be: reduction of trading restrictions and regulations consistent to the international trading practices; reorganizing competition policies enforcement; providing legal and regulatory reforms in support of foreign direct investments, and streamlining the customs rules and processes. The reforms would further improve the Japanese Government transparency and processes of procurement, while establishing the leveled playing ground with equal competition conditions for both private and public sector to trade in.

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All of these processes are helped by the Japanese market in most of the time, though none of these measures are insuperable, and they would boost the Japanese economic development and competitiveness. The TPP agreement will be effective with or without Japan. In this light, if Japanese are to join the TPP, they must do it for their own benefits. Prior to the nuclear disaster at Tohoku, the Japanese government had made its market more open, through free trade agreement, and central element of the economic development strategy. The TPP strategy is of great importance than ever before, while the Japanese are seeking boosters of the post-Tohoku economic development. It should be noted that the long and mid-term economic benefits of taking part in TPP such as, increased economic growth, investment, and trade in Japan would be far overshadow any short-term implications. In case the Japanese fail to commit to the TPP, its economic recovery will even be vaguer. Of all positive efforts that is being done after the disaster to recover Japanese trade muscles, postponing of TPP may seriously destabilize such efforts. The rejection of the TPP agreement on the basis that such changes in Japan’s protected and semi-protected sectors of the economy will prolong Japan’s economy crash, and intensify the burrowing of the industrial and agricultural base (Dinwoodie).

The Feature and Benefit with TPP

Considering that the US-Japan trade value is in excess of US $200 billion annually, the development of the bilateral trade relative to the US has declined significantly. The two nations are crucial markets for the global investment, but their relative importance to each other has slowed down in the recent years considering the opportunities provided by the economic incorporation in Asia. Development in Japan’s economy and trading environment that results from TPP will be an opportunity for the US investors in technology and agriculture to venture in Japan, while solidifying Japanese interest in the US market (Dinwoodie).

As one of the most advanced and the second largest economy in Asia-Pacific, Japan plays a leading role in this region, through trade, development assistance, investment, as well as leadership in various regional initiatives and institutions. However, over the past few years, Japan’s leadership and engagement in this region have lagged behind China accompanied by the Japanese politics and fiscal challenges

By joining, TPP Japan would go reassume its leadership position in the Asia-Pacific economically and trade wise. More significantly, Japanese participation in TPP would allow the US and Japan to work mutually to extend a high-standard cultural and economic architecture in a rapidly developing and integrating region of Asia-Pacific. By joining the TPP, Japan would allow the TPP Agreement to serve as an important counterbalance to China-centric initiatives that exclude the US. Relying on the Free Trade Agreement and other improved bilateral agreements in the Asia-Pacific region, the US and Japan would cooperate via TPP to develop region-based safety and products standards, transparency, regulation frameworks and enhanced supply chains that tackle trade issues in ways that would be beneficial to the competitiveness of the Japanese and the US investors in the Asia-Pacific region. This trade relationship between Japan and the US would serve as a milestone for the two economies, whose security partnership has served as the cornerstone for the tranquility in the Asia-Pacific region (Buckley).

TPP Members and their GDP

The present members of TPP share various features in common. Most of the members are from small economies, combined, they account for approximately 0.5% of the global population, approximately 1% of the global domestic product (GDP), and about 3% of the global export and import. The other common feature is their high per capita incomes (with exceptional cases of such as Chile that has a high per capita income in America). The TPP members are open economies; this is evidenced by the high ratios of import and export to GDP. A specific case is Singapore, which plays the role of a region’s commercial hub. The openness of the TPP members’ economies is apparent in their low to zero tariff levels (Currie).

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