Will Japan benefit from the TPPA?

By Raz Koroh

As with European countries’ strong reaction to the potential harm that their own trade deal (TTIP) with the United States will produce, it is the same story in Japan where a growing opposition focuses on the potential harm that products from the United States, under the Trans-Pacific Partnership Agreement (TPPA) trade deal, will have on Japan’s high standard.  Both Europe and Japan rightly view the trade deals as essentially a race to the bottom, as far as environmental, health, education standards (among many more!) are concerned.  On the other hand, the U.S. market is the biggest single developed consumer market in the world, and no one in the right mind should dismiss a trade deal with the United States.  In other words, Japan has more to gain from the TPPA, than the United States from the TPPA.  Alternatively, the United States has more to gain from the TPPA, and Japan should simply ride along.  Which view is correct?

Here are several factors to consider.

Emerging market.  The 12-member TPPA groups together the United States, Canada, Mexico, Peru, Chile, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand.  Thus four Southeast Asian economies are members of the TPPA.  As it is, Malaysia is arguably in a better position than the other three as it is strategically located for investors to establish their businesses; Malaysia is so much cheaper than Singapore and Brunei in terms of cost of doing business, and it is already so much better than Vietnam in terms of industrial infrastructure, with a multicultural and multilingual labor force, and its standard of English is at par with Singapore.  Furthermore, the trade deal will enable corporations to gain even more as reductions in tariff and non-tariff border barriers can trigger much larger cost savings and efficiency gains.  It is also increasingly the trend today for corporations to operate global supply networks where the final products are made in many stages, spanning many countries and corporations linked together by knowledge, trade and investment.  No longer should foreign corporations operate alone, and the gains for corporations and countries involved in these networks have been in terms of enhanced innovation, lower costs and faster growth of output and jobs.  Malaysian textile manufacturers, for instance, will want to benefit from Japanese technological and capital inputs, at the high-end product spectrum, as this will give Malaysia a sustainable growth pattern and move it into the ranks of a high-income status.  The same can be said for Vietnam and TPPA members outside of Southeast Asia like Peru, Chile and Mexico.  There is therefore a huge potential for Japanese corporate involvement in Southeast Asia’s and South America’s overall economic masterplans.

Security dividend.  It is plainly obvious that the United States has only one aim in pursuing the TPPA trade deal, and that is the simultaneous containment of China in the Pacific Rim and of leftist ideology in Central and South America.  Moving forward, the containment of both serves the basic goal of U.S. foreign policy in the post-Cold War era, in order to preserve the same thing that the Western World have always done since the Industrial Revolution in the nineteenth century, and that is ‘global capitalism’.  Thus, securing the friendly cooperation of key Pacific Rim economies like Japan in the north, Malaysia, Singapore, Brunei and Vietnam in Southeast Asia, and finally Australian and New Zealand in the south, will ensure that the U.S. Navy will have a ready string of naval bases at its disposal in case the more nationalistic and militant faction (aligned to the People’s Liberation Army or PLA) of the ruling Chinese Communist Party takes over control of China’s military assets.  Such eventuality is more than likely should China’s economy reverses deeper into trouble than it is presently experiencing, sparking internal unrest caused by higher unemployment for instance.  The result will likely be a tendency for the Chinese government to look at its own survival through military adventurism such as reclaiming Taiwan and the South China Sea as a way to appease domestic opposition.  For Japan, the medium to long term implication is not only a continuation of the U.S.-Japan security umbrella that liberates Japan to pursue its commercial ambition, but more critically for Japanese corporations worldwide to maintain the status quo of pursuing their own commercial ambition instead of being recalled home to re-arm the Japanese armed forces for possible confrontation with the PLA.

Comments welcomed.