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The Implications of the TPP for Japan

Perhaps unsurprisingly then, a scholarly consensus is developing around the need for the restructuring of Japanese agriculture, ideally through liberalization, with the TPP seen by some as a potential saviour. This burgeoning literature concentrates on the benefits to agricultural efficiency and the economy more broadly, but pays less attention to the potential negative consequences of liberalization. FTAs such as the TPP always produce winners and losers. Even the pro-TPP Nikkei newspaper acknowledged that Japanese agriculture ‘is largely acknowledged as a major loser of the deal’.[1]

Economists broadly agree that agricultural subsidies distort markets, put exporters from developing countries at a disadvantage, and cost taxpayers in developed rich countries huge amounts of money.[2] As we have seen, Japan does indeed spend almost as much on subsidizing agriculture as agriculture itself contributes to the economy, and these policies have so far failed to prevent the continuing decline of the agricultural sector. Japan’s accession to the TPP received strong support from politicians in both the LDP and DPJ, the Ministry of Economy, Trade, and Industry (METI), big business federations such as Keidanren, all arguing that the benefits of the TPP far outweigh the costs. Assuming ratification, the primary economic beneficiaries will be large manufacturing industries through easier access to foreign markets.[3] Indeed, a METI study stated that staying outside the TPP would cost Japan approximately 10.5 trillion yen and almost 1 million jobs.[4] The final deal does remove tariffs on almost all Japanese industrial exports, although the 2.5% US duty on auto imports will be phased out over 25 years, and Japanese carmakers have already shifted much production abroad in order to avoid tariffs, making use of the North American Free Trade Agreement. Consumers would gain through reductions in prices, especially food prices, as well as access to a wider range of good and services.

The scholarly economic arguments for joining the TPP from an agricultural perspective focus on the inefficiency of the current system and the possibilities for consolidation of farms as small farmers go out of business due to increased competition. The basic argument is that high tariffs together with high subsidies, combined with land-use legislation, has produced an agricultural sector dominated by small farmers (many of whom are part time), in which innovation and efficiency are discouraged. This, in turn, results in high food prices and the ongoing decline in actual agricultural output. Aurelia George Mulgan has published proli- fically on Japanese agriculture and is highly critical of both JA and MAFF for their protection of inefficient small farmers. She advocates not only for entry into the TPP but also for increases in land taxes to force out small farmers and encourage farm consolidation and corporate farming (i.e. farms run by corporations rather than households).[5]

Similar arguments are made by Harada Yutaka and Michael Auslin, who also advocate trade liberalization through the TPP as well as increased land tax and farm consolidation.[6] Others, such as Godo Yoshihisa, call for the fundamental overhaul of land-use regulations to prevent land hoarding.[7] Almost all emphasize the trade barrier issue. For example, Tanaka Tetsuji and Hosoe Nobuhiro argue that MAFF’s protectionist policies to preserve self-sufficiency are ‘nonsensical’ as they prevent major trade gains in other areas when, according to their simulations, even the abolition of all tariff and non-tariff barriers to rice imports would not significantly affect Japan’s food security.[8] Thus, they suggest full liberalization accompanied by some side-payments to compensate farmers. Even those who do not specifically critique the protection of small farmers advocate agricultural liberalization through the TPP.[9]

Beyond the numbers, Japan has lagged behind regional states such as China and South Korea in signing FTAs with other Asia-Pacific states, and opting out of the TPP could have left it even further behind. Also, since the TPP is not merely about reducing trade barriers but the harmonization of social, political, and economic regulations, being the second largest economy in the negotiations enables Japan to shape the future of Asia-Pacific economic activity. Indeed, the sheer size of the TPP zone means that its regulations will have global effects. This is the other side of Prime Minister Abe’s previously quoted statement on Japan’s participation: ‘Japan must remain at the centre of the Asian-Pacific century [... ] This is our last chance [... ] If we don’t seize it, Japan will be left out.’[10]

Undoubtedly the arguments in favour of liberalization through the TPP — which at this point in time is by far the most likely catalyst — are strong. Under MAFF’s policies, food self-sufficiency has declined dramatically; production is declining, leading even to shortages in key areas such as dairy. However, the situation is far from being as clear-cut as some scholars and politicians suggest. It is certainly true that farming has remained small scale, but as we will see in the next section, this is not necessarily as negative as it is made out to be. Furthermore, the TPP is both broad and deep, trade being only one facet. As Abe’s remarks above highlight, the TPP is about far more than agriculture, automobiles, or intellectual property. It is about the future of US leadership in the Asia- Pacific region, and is a fundamental pillar of the US ‘Asia Pivot’ and the containment of China.[11] Rural Japan may yet be transformed thanks to the developing rivalry between two great external powers.

The chapter turns now to the negative potential implications of liberalization: the agriculture-dependent regions, which are currently protected by the government, such as Tohoku and Kyushu, are already in nearterminal demographic decline. In terms of securing food imports, highly import-dependent states such as Japan find themselves in a potentially precarious position: spikes in grain prices in 2008 and 2009 led to key Asian grain exporters implementing export restrictions[12]; increasing quantities of grain are being diverted for biofuel production[13]; and climate change threatens to further increase the unpredictability of harvests. Conversely, as outlined below, those in favour of the TPP argue that its implementation will help strengthen Japan’s relations with the USA and friendly Asia-Pacific states, thus opening up new sources of food imports, thereby simultaneously double-hedging against both geopolitical and food security risks.

  • [1] Yoshida, ‘Japan Farmers’.
  • [2] Brooks and Cahill, ‘Why Agricultural Trade Liberalisation Matters’; Tokarick, ‘DispellingSome Misconceptions’.
  • [3] Naoi and Urata, ‘Free Trade Agreements and Domestic Politics’.
  • [4] Ibid.
  • [5] George Mulgan, ‘Abe’s “Growth” Strategy’.
  • [6] Harada, ‘Japan’s Agriculture and the TPP’; Auslin, ‘Getting it Right’.
  • [7] Godo, ‘The Puzzle of Small Farming in Japan’. Godo and Takahashi, ‘Evaluation of JapaneseAgricultural Policy’.
  • [8] Tanaka and Hosoe, ‘Does Agricultural Trade Liberalization Increase Risks’.
  • [9] Solis and Katada, ‘Unlikely Pivotal States’; Naoi and Urata, ‘Free Trade Agreements andDomestic Politics’.
  • [10] Tabuchi, ‘Japan Moves to Enter Talks’.
  • [11] Asia pivot renamed rebalance, see endnote 2.
  • [12] Headey, ‘Rethinking the Global Food Crisis’.
  • [13] Koizumi, ‘Biofuel and Food Security’.
 
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