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Minister Amari gives “inside story” of TPP talks

  • 2015-11-25 15:00:00
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(Bungeishunju: December 2015, pp. 244-253)

 

 By TPP Minister Akira Amari

 

 The ministerial meeting of the Trans-Pacific Partnership (TPP) negotiations in Atlanta ended on Oct. 5, and a basic agreement was reached.

 

 This was two years and seven months after I was appointed by Prime Minister Shinzo Abe as the minister in charge of the TPP talks. It had been a truly tough process, so I was overcome by emotion when the agreement came through.

 

 The TPP will create an enormous economic sphere comprising 40% of the world’s GDP. Goods, people, and capital will flow freely within this economic zone, which will also be able to handle new trade transactions. Strong economic ties will also contribute to stability in the Asia-Pacific region. It can be said that this was a historic moment for Japan.

 

 The ministerial meeting in Atlanta was originally scheduled for two days but extended several times. The announcement of an agreement came only on the sixth day.

 

 Normally, trade deals would be made through working-level talks, and when the ministers meet, things would be wrapped up without a hitch. However, in the case of the TPP talks, the ministers engaged in hours upon hours of heated exchanges each time.

 

 I would have to admit that it was stressful, both physically and mentally. However, I remained motivated by the trust Prime Minister Abe placed in me throughout the intense negotiations.

 

 An unwavering control tower is indispensable for negotiations with foreign countries. When I was named the responsible minister for the TPP talks, I told Prime Minister Abe quite clearly:

 

 “I need complete authority to do this. If any of the cabinet members or bureaucrats says anything contradictory to what I say, I will hand in my resignation immediately.”

 

 The TPP agreement involved numerous conflicting interests. Unless the government was solidly united, our negotiating partners would definitely take advantage of this weakness. If there were people interrupting the process, saying, “I’ll talk to the Prime Minister,” we could not possibly succeed in the negotiations.

 

 In light of my wishes, Chief Cabinet Secretary Yoshihide Suga also declared: “What Minister Amari says represents the consensus of the cabinet.”

 

 In the TPP talks, if outsiders had demanded to go to a higher level – “if the bureaucrats say no, let’s go to the minister” or “if the minister says no, let’s go to the Prime Minister” – the only answer would have been: “If Minister Amari says no, I also say no.”

 

 Prime Minister Abe’s strong leadership was the main reason why I was able to cooperate closely with officials of the Ministry of Foreign Affairs, Ministry of Economy, Trade and Industry, Ministry of Agriculture, Forestry and Fisheries, and other relevant offices to conclude the TPP talks.

 

 Stalemate at the Atlanta talks

 

 The last sticking point in the final round of talks in Atlanta was protection period for biopharmaceutical data.

 

 The U.S., which has many pharmaceutical companies selling new drugs, had originally advocated a protection period of 12 years to enable these companies to recoup R&D costs. On the other hand, Australia and other countries wanting to use generic drugs as soon as possible were proposing a shorter protection period.

 

 I think Japan played a major role in helping these countries bridge their gap.

 

 As soon as I arrived in Atlanta on Sept. 29, I went out to dinner with Australian Trade Minister Andrew Robb at a Japanese restaurant that evening.

 

 We had been friends for 20 years. When I visited Australia as a member of a supra-partisan delegation of junior Diet members, he was the chief secretary of the ruling party. I had even been invited to his home for dinner in the past.

 

 When we met each other again at the TPP negotiations, at first, I thought he looked familiar. He was the one who greeted me with: “Mr. Amari, you have been to my house before.” I immediately remembered, so I said: “Mr. Robb, I think you had a horse in your yard. How is he?” We then had a lively conversation.

 

 Of course, we talked about the pharmaceuticals issue at the Japanese restaurant. As we chatted over shochu, Mr. Robb told me frankly that “this is a difficult situation.” We talked until late into the night to see if there was a flexible proposal acceptable to both sides. The compromise that went into the basic agreement came out of the discussion we had at that time.

 

 Later, I also asked USTR Michael Froman to “come up with ideas.”

 

 I said: “Didn’t the two of us come up with a good idea to resolve the hopeless stalemate in the Japan-U.S. TPP talks on autos after talking until 3:30 in the morning?”

 

 However, Froman could not be bothered. He said the U.S. had already been sufficiently flexible on the pharmaceuticals issue.

 

 He explained: “I was taken to task in Congress for just shortening the original demand of 12 years to 8 years. It’s not possible to shorten the period any further.”

 

 Australia and others were demanding five years, so I told them sternly: “There can absolutely be no compromise.”

 

 Subsequent working-level discussions did not produce any progress. It would seem that the U.S. was prolonging the negotiations. I had to say to Froman furiously: “Why are you still playing games and maneuvering at this stage?!”

 

 In the end, after the U.S. and Australia talked, a protection period of eight years or protection by other means comparable to data protection “effectively for eight years” was agreed upon. I hate to brag, but Japan’s coordination ability helped produce this balanced agreement.

 

 “Hey, we’re going home”

 

 Looking back at the TPP negotiation process, a major turning point came during the Japan-U.S. talks in Washington in September last year.

 

 The U.S. side was making outrageous demands on beef, pork, auto parts, and so forth. These were irrational demands that were not even worth discussing. I was enraged, so I told the U.S. officials: “I came here to negotiate, not to play games”; “I am not going to waste more time playing games with you.” I told my staff: “Hey, we’re going home.” We walked out of the meeting.

 

 The Americans had never seen the Japanese talk to them like that before; they must have been startled.

 

 Later, I reported to Prime Minister Abe on the phone: “We need the Americans to get serious in order to have productive negotiations. That’s the reason I walked out.”

 

 Even though this was an action taken for the sake of Japan’s national interest, I was still a bit worried about how the U.S. side would react to this drastic step by a friendly country. I was ready to hand in my resignation if the Prime Minister had said: “That’s not good.”

 

 From the next day, the U.S. side started dealing with the negotiations not as a “game”; they started facing us squarely to “negotiate.”

 

 I quarreled with Froman many times until an agreement was reached.

 

 Of course, we did not fight for no reason. Froman and I both agreed that “if the talks collapse, the TPP will go down the drain.” Japan was also facing great difficulties, but it joined the TPP talks because it believed that something had to be done. Froman said to me: “I know, so let’s work hard.” Through such exchanges, we built a relationship of trust as partners, and that’s why it was possible to engage in fierce arguments.

 

 I also conveyed the message that Japan and the U.S. are equal partners, and that’s why Japan trusts the United States. So if the U.S. also trusts Japan, it should negotiate accordingly.

 

 My mission was to stand up for Japan’s position as well as work for an agreement. In Japan, there were many in the ruling parties who voiced bold opinions. But anybody can make destructive criticism. While it will not do to agree to all the demands of the other party, negotiation will not be possible if the other party’s proposals are rejected outright.

 

 The negotiating style of Froman, who is a lawyer, was to push as hard as he could. He made really tough demands, so sometimes people said he is a “very bad guy.”

 

 I personally think he is not a bad person. However, he adopts this super-businesslike thinking that “personal relations and negotiation are one hundred percent separate matters.” Politicians would try to sound each other out for a compromise because they know that “we both have our own positions, so we should find a meeting point somewhere.” Yet Froman would never say: “Why don’t we compromise here?” He would try to achieve the best possible result up to the very end – “some more, a little bit more.”

 

 Since that is how he is, I often had to yell at him to assert our position. We sometimes shouted at each other, banging on the table: “That’s totally out of the question!” “No way!” This happened not just once or twice. I think it must have been a nightmare for the interpreters.

 

 I was also bad-mouthed a lot.

 

 I heard from the bureaucrats that when the bilateral talks hit a snag, the U.S. officials would threaten: “Froman will come. He is even tougher.” In time, the Japanese officials also learned their lesson. They countered with: “If you just refuse to understand, Amari will come. Surely, you know how he is.” Apparently, in a situation like that, both sides would calm down and agree: “Let’s try not to get the ministers involved. Let’s make greater efforts at the working level.” (laughter) I had no idea I was being made into a “negotiating card.”

 

 SOS from the developing countries

 

 In a way, the other TPP participants expected Japan to tackle the U.S. head-on.

 

 I felt this expectation strongly as the negotiations went on. Japan was the only country among the 12 participating nations that could yell at and confront the U.S. in the negotiations.

 

 Before Japan joined the TPP talks, the negotiations had sometimes been ridiculed as an assembly of “the elephant and the ants.” The basis of negotiating power is national power in terms of economic and military power. The difference between the two sides was simply too overwhelming.

 

 When I was talking to the negotiator of another country, I could sense that he was feeling helpless because it was difficult to have his nation’s views reflected.

 

 The presiding country was supposed to be open-minded and accommodating of the views of other countries. But the U.S. was no good at doing that. The USTR, in particular, is an organization that holds a spear but not a shield. This aggressive organization was headed by someone like Froman. There was no denying the U.S. failed to heed the opinions of other countries sufficiently.

 

 I often told the U.S. officials: “A big country needs to show more generosity.” Froman was furious, claiming, “We are being generous enough.”

 

 Even if an agreement that benefits the U.S. alone could be signed, no one would want to join the TPP. While President Obama had declared that “we will make the rules” under the TPP, a framework that is good only for the U.S. cannot become the global standard. The TPP agreement would only be desirable and other countries would only be interested in joining if it was one in which “the U.S. both benefits and makes concessions.”

 

 The other countries were grateful to Japan in this respect. I believe that Japan dealt with requests for help from the developing countries quite flexibly.

 

 Vietnamese Trade Minister Vu Huy Hoang is an old friend of mine. He told me: “Japan spoke for the developing countries and talked to the U.S. for us. We owe this well-balanced agreement to you. We are grateful to Japan.”

 

 The developing countries were groping with difficult issues regarding investment rules and domestic legislation during the negotiation process. It was impossible for countries with developing economies and industries to fully meet the standards in government procurement and other areas required by the TPP. It was necessary to give consideration to issues that they could not possibly compromise on or that could threaten their very survival. Otherwise, some countries may not be able to ratify the agreement. It was necessary to strike a balance between the major economic powers and the developing countries.

 

 When I mentioned this at a ministerial meeting, ministers from four countries indicated their agreement immediately. Many others echoed this opinion.

 

 Encouraged by the Prime Minister’s words

 

 The TPP negotiation process also involved my personal battle with my health problems.

 

 In December 2013, I felt a stinging sensation in my mouth. A detailed examination by specialists showed that I was suffering from early stages of tongue cancer. Tariff abolition, intellectual property, and other tricky issues were going to be tackled at the upcoming ministerial talks in Singapore at that time.

 

 I thought I could not afford to compromise the negotiations, so I reported my illness to the Prime Minister immediately and told him: “I will cause trouble, so even though I truly regret having to give up before achieving the goal, I would like to tender my resignation.” The Prime Minister said right then and there: “There is absolutely no need to resign.” He dissuaded me by telling me:

 

 “There is still time before the regular Diet session convenes. Take it easy and rest. Above all, I want you to encourage people suffering from the same condition by your example. Your job is to come back to work in good health.”

 

 I will never forget those words. They made me renew my determination to stake my life on the TPP negotiations. Fortunately, the surgery went well and I was able to return to work after two weeks, sooner than the originally expected three to four weeks.

 

 Actually, the day before I checked into the hospital, critical Japan-U.S. negotiations on the TPP took place at Hotel Okura.

 

 This was the first session Ambassador Caroline Kennedy participated in. Yet the session over lunch ended with both sides shouting at each other without even eating. Tensions were really high. Ambassador Kennedy, who had so far been welcomed warmly everywhere, was probably shocked. She turned really pale.

 

 Although I had been informed by the doctor of the diagnosis, it was not yet the time to make a public announcement. The examination had not been completed and I was convinced that the TPP talks would be my last negotiations as a politician. I wanted to show State Minister of the Cabinet Office Yasutoshi Nishimura, who was going to Singapore on my behalf, my negotiating style and how the TPP negotiations were done at this meeting. I showed him that I was not going to budge an inch.

 

 Perhaps because the interpreter was shaken by my vehemence, she mistranslated “this is our final answer” as “this is our ultimatum.” Can you imagine, an “ultimatum” from a friendly nation? This became something to laugh about in hindsight. However, this might have been effective in conveying Japan’s determination to the U.S. side. (laughter)

 

 Agricultural products protected sufficiently

 

 I am fully aware of the many criticisms against the basic TPP agreement.

 

 For example, the U.S. will abolish in stages the 2.5% tariff on passenger car imports over 25 years. Some people seem to look at this as Japan’s defeat. However, it must be remembered that when Japan entered the TPP talks, the U.S. had set the condition that the period for elimination of auto tariff must be the longest compared with all other products.

 

 In reality, reduction of tariff will start from the 15th year, and by the 22nd year, it will be down to 0.5%. Furthermore, tariff for over 80% of auto parts will be abolished immediately. It is said that the ROK sacrificed other product sectors considerably in exchange for auto tariff reduction under the U.S.-ROK free trade agreement (FTA). The ratio of immediate tariff elimination for Japanese auto parts is actually higher under the Japan-U.S. agreement. The Japan Automobile Manufacturers Association has issued a statement welcoming the deal, so I absolutely do not think that Japan lost in the negotiations.

 

 Another focus of the TPP talks was agriculture. New rice import quotas will be introduced and tariffs for most fruits and vegetables that have so far been protected will be abolished.

 

 Before Japan joined the TPP talks, it had been agreed at the Honolulu meeting that the goal was to eliminate tariffs 100%. Even under such circumstances, Japan succeeded in protecting the core items and basic systems with regard to the five sensitive product sectors cited in the resolution passed by the Committee on Agriculture, Forestry, and Fisheries of both houses of the Diet. Japan won exemption from tariff abolition for exceptionally numerous items, compared with other countries. I believe this is a major achievement. Tariffs for vegetables and other products will be eliminated but they are only a few percent in the first place, and these products are rather more affected by exchange rate fluctuations. Compared with other countries, Japan’s agricultural products will be well protected.

 

 I would like the agricultural sector to have a positive view of the TPP. The ultimate goal of the Abe administration is to transform agriculture into a growth industry. Our past experience shows that agriculture will not thrive with protection. No young people want to work in an industry sustained by subsidies with no future.

 

 Internationally, the trend is for agriculture to become an advanced industry using IT. For example, the Netherlands, whose land area is about the size of Kyushu, is the no. 2 exporter of agricultural products in the world. The area near the Schiphol International Airport outside Amsterdam is a major agricultural belt that monitors the demand in the global market in real time and exports agricultural products at high prices.

 

 In Japan, grandmothers in the town of Kamikatsu in Tokushima Prefecture, where 90% of the area is forest, use tablet PCs to get orders from luxury Japanese restaurants in Kyoto for ornamental leaves called “tsumamono.” Some of them earn an income of 10 million yen each year.

 

 There are quite a few motivated young people who are interested in new agriculture and innovative business. A friend from Niigata Prefecture told me that the younger generations are much less interested in subsisting with government aid. They want to take this opportunity to work with the government to make a decisive push to go on the offensive.

 

 Since the start of the Abe administration, exports of agriculture, forestry, and fisheries products have increased by 40%. However, there are still issues that need to be tackled — specifically, customs and quarantine procedures. I heard that there have been cases where fruits and vegetables, which need to be fresh, were held at ports and rotted while waiting for clearance. Sometimes they are held in quarantine for no particular reason. Under the TPP, rules and procedures will be established in advance to enable agricultural products to reach consumers smoothly.

 

 TPP is growth strategy

 

 Unlike previous FTAs or economic partnership agreements (EPA), the TPP is of unprecedented quality and scale for Japan.

 

 Previous bilateral economic agreements signed by Japan all have a ratio of tariff abolition for industrial and agricultural products at the 80% level. This ratio will be 95% under the broad TPP agreement.

 

 The TPP will set common rules not only for tariffs, but also for trade and investment. It is highly possible that this will become the international standard in the future. For example, with regard to branding, marketing, and intellectual property, there will be a thorough crackdown on counterfeit goods. The TPP nations will be required to put in place laws and regulations because their existing measures to deal with imitations and pirated copies have been inadequate. This will serve as very important protection for Japan’s high quality industrial and agricultural products.

 

 When companies do business overseas, there is the “performance requirement” risk. At the time of investment, the host country government welcomes these companies with promises to reduce corporate taxes or deregulate. However, after investing, they are slapped with demands to increase the ratio of locally produced parts or transfer technology. They are told that unless these demands are met, preferential treatment will be terminated. This represents a major unpredictable risk for investors. Such performance requirements will be banned under the TPP.

 

 In case of rule violations, investors will be able to file litigation against the host country government based on the “ISDS (investor-state dispute settlement) provisions” to seek arbitration by a third-party body. Procedures for this have been instituted. This will mean a major improvement in the environment for the globalization of business operations.

 

 After the TPP takes effect, Pacific nations in Asia, the Americas, and Oceania will build a single economic sphere led by the U.S. and Japan, the no. 1 and no. 3 economies in the world. Further expansion in the future is envisioned. The ROK has already expressed an interest in joining the TPP, and a government official of an ASEAN state has also come to see me. Other countries have made unofficial inquiries. It looks like there is a long waiting list.

 

 Japan was relatively late in joining the TPP talks. It is of great significance that it was still able to be involved with shaping the TPP agreement. It is a charter member of this new framework. In the future, an application for new membership will need the consent of all 12 incumbent members. Needless to say, there is an advantage in being the one reviewing the applications rather than being the applicant. For sure, Japan has no intention to be mean. However, if a country has rules that make sense only to itself, it will have to adjust its rules to conform to the common TPP rules.

 

 China, which is distancing itself from the TPP at present, will no longer be able to ignore the TPP standards when privatizing its state-owned enterprises or setting market rules. If China wants to continue economic growth, it will have to join the TPP someday.

 

 A debate is heating up in the United States, in anticipation of the presidential election next year. Democratic candidate former Secretary of State Hillary Clinton has indicated that she cannot support the TPP based on information available to her at this point. Labor unions in the U.S. seem to be opposing the TPP, thinking workers will lose their jobs. That is not possible. On the contrary, foreign investment will create jobs.

 

 I suppose Clinton’s statement was most probably meant for the campaign. It is unlikely that the U.S. will withdraw from the TPP if it weighs things level-headedly because this will mean losing its foothold in Asia and giving up its position as the rule maker. This would be an option that would be clearly detrimental to the U.S. national interest.

 

 It is not possible to renegotiate the TPP agreement. For sure, the accord is not 100% satisfactory for the U.S. But as I stated earlier, a win-win relationship with the other countries will not be possible with an agreement that fully satisfies only the U.S.

 

 The TPP is not only about the reduction of tariffs. It is a national strategy for the future.

 

 A truly unforgettable statement was made when I first participated in the TPP talks. This was when Vietnam made a commitment to abolish all its tariffs at a very early stage. I told Minister Hoang: “You have made a momentous decision.” He answered emphatically: “We had a big debate, but we are staking the nation’s fate on this decision.”

 

 I was impressed by this spirit. It was a powerful reminder of the strategic importance of the TPP for a country’s economy. The growing Asia-Pacific market needs to be tapped for the vitality of Japan’s economy. The TPP is the way to realize the growth strategy advocated by the Abe administration.

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