The Journal The Authority on Global Business in Japan

Event Report | TPP

November 2013
The time is right for trade agreement that could create jobs, help solve fiscal and social issues

By Megan Waters, ACCJ Journal editor-in-chief

The ongoing Trans-Pacific Partnership (TPP) negotiations hold promise of a deal that could set the standard for future agreements, and result in an Asia–Pacific trade zone.

The administrations of US President Barack Obama and Japanese Prime Minister Shinzo Abe appear to be moving closer to reaching an agreement that could help pave the way for expanded trade and investment in the Asia–Pacific region.

At the Conrad Tokyo hotel on October 1, Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, spoke about the role of the United States in the region, his country’s critical relationship with Japan, as well as the prospects for Asian integration and global trade.

With new leaders at the helm of many of the key Asia–Pacific economies, Donohue believes that the time is right for the region’s nations to increase the pace and boldness of their reforms, as well as their moves to openness and integration.

“Among US business leaders, there is more hope and interest in Japan than I’ve seen in some time,” he said.

Donohue believes that the Abe government has a very good chance of streamlining the economy, weeding out excessive rules and costs, introducing new flexibility in employment practices, as well as spurring on M&A activity and small business start-ups. Meanwhile, Japan stands to benefit from a robust US economy, he believes.

“If we act as leaders and help guide [the Asia–Pacific] region to more integrated, open, and efficient markets, we can drive a lot of growth and jobs in our own countries,” he said.

According to the International Monetary Fund, half the predicted $22 trillion in global growth over the next five years will be in Asia. For this reason, US trade and investment has a strong focus on the Asia–Pacific region.

In addition to the TPP, the Obama administration supports the Transatlantic Trade and Investment Partnership and the Trade in Services Agreement, while it also has a bilateral investment treaty with China.

However, according to Donohue, the TPP is “the biggest and best opportunity [the United States has] to secure a strong and lasting foothold in the Asia trading system.”

The number of trade agreements among Asian countries rose from three in 2000 to more than 50 in 2011, with about 80 more being negotiated. Meanwhile, the United States has only three trade agreements in Asia.

One study has estimated that the TPP could boost US exports to an annual figure of $124 billion by 2025, thereby generating hundreds of thousands of jobs in the United States.

“The TPP could play a major role in helping Japan and the United States—as well as the other participants—reform [their] economies and government policies,” he said.

“If TPP fulfills its ambitions, it would protect intellectual property, unwind regulatory barriers to trade, and safeguard international investments.”

Donohue stressed that although it is necessary to conclude the TPP quickly, it needs to be done with the right content and to cover the full scope of goods, services, and investment. Further, reaching an agreement is only the beginning.

“We’ve got to win ratification and then implement it—fully, fairly, and transparently. And we must move aggressively to welcome new participants to the fold,” he said.

According to Donohue, since the General Agreement on Tariffs and Trade was signed in 1947, eight successful multilateral negotiating rounds have helped increase world trade from $58 billion in 1948 to $22 trillion today—a 40-fold increase in real terms—helping to boost incomes in many developed countries.

However, the agreement’s most dramatic benefits can be seen in developing nations.

“This is why we need to seize the many opportunities before us—to reduce poverty, raise living standards, create jobs and opportunities for our citizens, and help solve our fiscal and social problems.”