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Asia

Japan, US fail to iron out trade pact differences

The nations involved in the Trans-Pacific Partnership trade agreement expected positive developments during President Obama's stay in Tokyo, but all sides have been disappointed and the deal has been delayed.

Despite all the smiles, handshakes and professions of bilateral goodwill during President Barack Obama's recent visit to Japan, not everything went according to plan.

Japanese Prime Minister Shinzo Abe welcomed the US leader reiterating his defense and security commitments to Japan and the broader Asia-Pacific region, and a minor deal was signed on university-level student exchanges, but the big prize was a breakthrough on the Trans-Pacific Partnership (TPP) free-trade agreement.

And the signs were clearly that both Tokyo and Washington anticipated that their trade negotiators were on the brink of overcoming their differences.

Speaking just days before Obama arrived in Tokyo, on April 23, Abe insisted that Japan "would focus our efforts going forward into concluding negotiations" on the TPP deal.

Overcoming differences

"We intend to overcome our mutual differences and together forge a sturdy economic order for Asia and the Pacific in the 21st century," he said. "We wish to create an unshakable foundation for growth."

Japanese Prime Minister Shinzo Abe speaks next to a map showing participating countries in rule-making negotiations for the Trans-Pacific Partnership (TPP) during a news conference at his official residence in Tokyo March 15, 2013 (Photo: REUTERS/Toru Hanai)

Abe was hopeful for a breakthrough

The Yomiuri newspaper even went as far as to run a front-page story that the two sides had reached a "basic agreement" after "marathon talks," but it soon became clear that the headlines had been premature.

"Personally, I had been very negative about the prospects for the TPP ahead of Obama's visit, but then in the immediate run-up to his arrival it did look as if both leaders had given their trade negotiators a hard time about coming up with a solution," Martin Schulz, a senior economist with the Fujitsu Research Institute, told DW.

"And then it didn't happen, and that is very disappointing," he said, adding that the outlook for an agreement in the next 12 months is now suddenly very bleak.

Explaining the failure to reach a compromise on a deal that is designed to create a 12-nation trade block that will promote growth, manage trade and more closely integrate the economies of the region, negotiators insisted that Japan and the US had found "common ground" and that the president's visit to Tokyo was a "key milestone" in the process, but the sticking points were once again Japan's agricultural sector and Washington's need to safeguard its domestic auto industry.

Agriculture sector lobby

For Japan, the US side's request that it lift all tariffs in the farm sector proved too much, in large part because many politicians from the ruling Liberal Democratic Party represent rural communities and draw a large proportion of their support from the farm lobby.

"Japan's domestic agricultural market is very complicated," admitted Go Ito, a professor of international relations at Tokyo's Meiji University. "Beef, in particular, is a very difficult area to negotiate on because of the pressure groups in that sector.

"My initial belief was that Abe would sign the TPP while Obama was here in Tokyo in return for providing subsidies via the agricultural associations, but I believe the size of the tariff cuts that the US was demanding was unexpectedly severe," he told DW. "And that made it difficult for Japan to accept."

Other nations with a stake in the TPP were also clearly anticipating progress in Tokyo, with the head of Chile's trade negotiations telling news agency Reuters that the stalemate means that the other participants are playing a "waiting game."

"From a practical point of view, the rounds of talks have been a kind of waiting game and there were no rounds in recent months because the fundamental attention in the process today is on the negotiations between Japan and the United States," Andres Rebolledo, the head of Chile's trade relations, said.

Europe trade deal

Abe's schedule for the week after Obama's visit was prepared long in advance, but it would not have helped that his first port of call would have Europe, with which negotiations on a separate free-trade deal appear to be making headway. The Japanese leader's first stop was Germany, while he will also be visiting Britain, Spain and France and discussing ways of moving the talks on an European Union-Japan trade pact ahead.

Immediately before Obama arrived in Japan, a similar deal on trade was struck with Australia.

US President Barack Obama (R) greets US Ambassador to Japan Caroline Kennedy (C), her husband Edwin Schlossberg (3rd R) and other officials upon his arrival at Haneda International Airport in Tokyo April 23, 2014 (Photo: REUTERS/Toru Hanai)

Smiles, handshakes, but no agreement

And future timing and political considerations mean that the US and Japan - and, hence, all the nations with an interest in seeing the TPP coming to fruition - have a very tight timeline for solving their differences, believes Martin Schulz.

"The window of opportunity that existed last winter was closed because Japan was not able to move fast enough and after the big push ahead of Obama's visit, I believe an agreement is now quite unlikely," he said.

"There may be a slight window of opportunity in the early summer months, but after that the US goes into mid-term elections and then there is the presidential campaign that will begin in the new year," he added. "Unless something can be achieved in those very brief periods, I fear the sides will not be able to reach agreement and sign the deal for another year or more."