Japan raises the TPP Stakes

Japan’s arrival at the negotiating table of the Trans Pacific Partnership (TPP) in Kota Kinabalu, Malaysia last week marks a remarkable sea-change in Japanese policy and is full of consequence for New Zealand.

Japan has been the only major economy in Asia with which New Zealand neither had an FTA or a negotiation underway. This changed back in April when Prime Minister Abe’s government announced that it wanted to join the twelve other economies in TPP.

New Zealand’s economic relationship with Japan is well established and encompasses not just two-way trade but also investment.

While New Zealand has for many years done profitable business in Japan, including in heavily protected sectors like dairy and beef, there has been a sense in recent years that there was a lack of momentum. This was certainly not helped in Japan’s case by an economy that continually failed to fire, and in New Zealand’s case by increasing attention focused on China, which is seeing Japan’s market share in New Zealand steadily decline.

TPP will address a number of key issues, which determine Japan’s economic competitiveness. Greater openness in the domestic economy will stimulate further growth in demand, as protected sectors including agriculture are subject to reform. Change will not happen overnight but the direction is clear. In the case of Japanese agriculture, which has enjoyed high levels of subsidy and protection in the past, this is unprecedented.

The point is that Japan’s association with TPP effectively changes the strategic calculation for New Zealand and raises the stakes of TPP’s success.