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11 November 2014

The Trade Deal Tokyo and Washington Need to Seal

November 6, 2014


Japan and the United States have the best opportunity to elevate our bilateral relationship in many years - by concluding the Trans-Pacific Partnership (TPP) negotiations. The deal is about much more than expanding bilateral and regional trade, important as that is. The TPP stands to establish a new and enduring foundation for U.S.-Japan relations. The pact can guarantee Asia's future economic architecture and its trade rules, and it can cement our joint leadership at a time when regional economic competition is growing more intense and maintaining regional security is increasingly difficult.

There is much positive activity in the bilateral relationship. U.S. and Japanese companies from a wide variety of industries embark on new collaborative relationships on a daily basis. New defense guidelines are scheduled for completion this year; energy cooperation is moving forward, with the approval of new licenses to export U.S.-produced liquefied natural gas to Japan; and Washington has indicated its support for Japanese administration of the Senkaku Islands, as well as its willingness to help defend the isles under the U.S.-Japan security treaty.

But for the benefits of geopolitical cooperation to take full form, we need a new economic framework that strengthens Japan's economy and regional leadership while firmly establishing the long-term commitment of the United States to Asia. The TPP is the centerpiece of any such framework. 

While Washington and Tokyo agree on most of the rules being negotiated in the pact, Japanese and U.S. negotiators are hobbled by disagreements over market access to the agricultural and automotive sectors. The impasse has created a rough patch in the bilateral relationship and is holding up the overall negotiations - an outcome in neither party's interest.

The economic benefits of the TPP have been well documented. Eliminating tariffs on agricultural and manufactured goods and non-tariff measures that hinder services trade through TPP will give a major boost to the participating economies. According to widely reported work by Peter Petri of Brandeis University, Japan stands to gain more than almost any other TPP economy - a $105 billion boost to GDP by 2025, and $125 billion if South Korea ultimately joins, as is likely.

The TPP is essential to maximizing these gains, and to close the deal, Japan will have to take difficult steps - as will the United States. Japan must open its agricultural market. In return, its industrial exports will enjoy greater access to the TPP economies. Moreover, it will win stronger protections for its intellectual property and will benefit from new rules affecting investment, digital trade, competition with state-owned enterprises, customs and supply chains, government procurement, and other areas that will help Japanese companies compete in the TPP economies while fostering growth at home.

A big, bold TPP agreement will do more than simply boost Japanese trade and competitiveness. It will send a clear signal to the world that Japan indeed "is back," as Prime Minister Shinzo Abe likes to say, and is dedicated to vital reforms. By demonstrating that it is prepared to open its markets with ambition equal to the other TPP economies, Japan will bolster its credibility on economic reform while strengthening its economic ties with countries across the Asia-Pacific. Most of all, a strong TPP agreement will strengthen Japan's geopolitical and economic relationship with the United States. 

Reaching an ambitious, high-standard and comprehensive agreement that opens markets fully and establishes 21st Century rules for trade is all the more necessary because of the geopolitical importance of the TPP. Binding countries together under common and forward-leaning rules that emphasize the critical role of open markets, strong protections for IP, and the rule of law will not only create new commercial opportunities among the partners, but strengthen the bonds between - bonds based on shared values and a long-term vision for the region. 

Neighboring China is asserting its own regional strategic and economic visions with increasing vigor. China dominates trade in the region with its high demand for products and raw materials from other countries. Beijing is also increasingly exerting leadership through its investment, through regional trade negotiations such as the Regional Comprehensive Economic Partnership, and through initiatives such as the Asia Infrastructure Investment Bank. Given the extent to which the United States and Japan rely on trade with China, securing an agreement in which we work together to set the highest possible rules and standards for Asia will lead to better results for both countries, but also for the other economies involved - including that of China, if and when Beijing is able to meet the high standards of the TPP. Equally important, the pact will leave the United States and Japan in better position to secure high-standard commitments from China to open its markets.

Given the huge importance of maintaining the strongest possible U.S.-Japan strategic relationship and of establishing a vibrant trans-Pacific economy, the TPP is an opportunity too great to miss. Failure would complicate U.S.-Japan relations, worsen foreign perceptions of Japan's economic reform efforts, and impact our shared values and vision in fostering mutually beneficial regional and global trading systems. This is the moment when leaders and politicians need to think strategically and exercise the political will to do what is in our collective national best interests.

General James L. Jones (Ret) is former Supreme Allied Commander Europe and former U.S. National Security Adviser.

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