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TPP can kick Asia's economies into shape

By SHIHOKO GOTO, UPI Outside View Commentator   |   March 22, 2013 at 12:15 AM   |   Comments

WASHINGTON, March 22 (UPI) -- Joining what is likely to be the world's biggest trade deal can be a mixed blessing.

Advocates insist that joining the Trans Pacific Partnership could boost exports, create jobs and jump-start economic growth. Naysayers argue that the less competitive industrial sectors may flail and even go bust as they face foreign competition.

But for Japan -- and for its northeast Asian neighbors, too -- joining TPP may be the one last chance to regain lost ground and move forward as an economic powerhouse. In fact, joining the global trade deal may provide the outside pressure to force Japan, and potentially South Korea, to push through much-needed structural and social reform.

Japan's decision last week to be a founding member country of the Trans Pacific Partnership agreement was heralded by Japan's powerful manufacturers as a step in the right direction.

While farmers have been quick to howl about opening the hitherto heavily protected rice sector in particular, many are quick to point out the advantages of joining the framework.

Increased overseas market access and increased exports are expected to boost the bottom line for corporate earnings and government coffers alike.

What's more, joining TPP from its inception will allow Japan and other original signatories to set the rule, instead of merely following them.

"This is our last chance to join the TPP and take part in the rule-making," said Japanese Prime Minister Shinzo Abe in announcing the decision to push Japan to become the 12th country to join the trade pact.

The prospect of being a founding member of the trade pact, rather than simply signing on to what has already been agreed by others, is certainly attractive for South Korea and Taiwan.

Certainly, Tokyo's latest decision should further encourage South Korea as well as the Philippines, Thailand and Indonesia to join the pact that includes the United States, Australia, and Canada.

Assuming that Japan will be accepted into the TPP framework, the 12 countries that make up the pact will account for nearly 40 percent of world gross domestic product. That alone would make it more difficult for neighboring countries to argue against joining the agreement.

Granted, many analysts view TPP as the economic half of the U.S. pivot toward Asia, with the United States taking the lead in defining the Asia-Pacific's future trade framework, which also happens to exclude China. Asian nations that sign onto the deal can rest assured that their political as well as economic ties to the United States will solidify still further. It could, however, put a dent in their relations with China.

Yet increased exports and stronger geopolitical ties with the United States are far from the only benefits for Japan to join the TPP. Instead, the fact that TPP requires member countries to lift tariff barriers and level the playing field to foreign competition will push Japan to move forward with structural reform that faces domestic opposition. The fact that Japan remains largely closed to immigrant labor will be challenged by the TPP and membership could push Japan to confront the fact that Japanese women are among the most woefully underemployed in the world. In short, TPP could prove to give Japan the much-needed it needs to address politically sensitive social issues that are keeping the country from moving forward.

South Korea, meanwhile, continues to mull the possibility of joining the trade pact. TPP may well provide the impetus President Park Geun-hye needs to push through painful structural reforms, not least tackling the overbearing presence of powerful conglomerates.

The newly elected leader faces an uphill struggle to give greater leverage to small and medium enterprises on the one hand, and chipping away at some of the powers held by the chaebols on the other. It may, however, be easier for South Korea to accept such overhauls if they are perceived to be a price to be paid for TPP membership.

What is clear is that both Japan and South Korea need to redefine their economic futures, as their formula for exporting higher-end manufactured goods is unlikely to be sustainable in the longer term.

Yet in order to grow as innovation leaders, both will have to be willing to undergo social as well as economic reforms which will not be easy to accept without outside pressure. And TPP may provide just that.

Of course, TPP is not a done deal. In Japan, Abe will need to confront the fear-mongers who will focus on what Japan will lose as a result of greater market openness. Opposition will only intensify as he gears up for an Upper House election in July. In the United States, meanwhile, more lawmakers may oppose joining Japan's entry into TPP as it is perceived to harm U.S. competitiveness, especially in the automobile industry.

Signing on to the world's biggest free trade pact will invariably lead some industries to lose in all member countries. TPP should nonetheless provide the impetus for all member nations to embrace much-needed change, and make them stronger in the longer term.

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(Shihoko Goto is the Northeast Asia associate of the Woodrow Wilson International Center for Scholars in Washington. She is also a former business writer for United Press International.)

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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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