Is Japan’s entry into the Trans-Pacific Partnership good for the Americas?

The 17th round of Trans-Pacific Partnership (TPP) negotiations are currently under way in Lima, Peru, having begun on May 15 and expected to conclude May 24.

The United States is currently negotiating the TPP with 10 other like-minded countries (Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) that share a commitment to concluding a high-standard, ambitious trade agreement and to expanding the initial group to include additional countries throughout the Asia-Pacific region.

Since the last round of negotiations in March of this year the major development has been the announcement that Japan will seek entry into the agreement, bringing to the table the world’s third largest economy. But what does Japan’s involvement mean for the United States and for the rest of the Americas?

Q1: What is the importance of the TPP to the Obama administration?

A1: The TPP is the cornerstone of the Obama administration’s economic policy in the Asia Pacific. The large and growing markets of the Asia-Pacific are already key destinations for U.S. manufactured goods, agricultural products, and services suppliers and the TPP will further deepen this trade and investment.

As a group, TPP countries are the largest goods & services export market of the United States. U.S. goods exports to the broader Asia-Pacific totaled $942 billion in 2012, representing 61 percent of total U.S. goods exports.

Q2: How does Japan’s inclusion affect the U.S. economy?

A2: An expanded TPP could serve to reinvigorate the U.S. economy, stimulating job growth. Ensuring that Japan has a seat at the table when talks resume for the 18th round later this year will augment the power of the TPP, offer compelling incentive for other economies to join, and accelerate the rate at which all signatories reap its benefits.

Japan’s investment in the U.S. economy—quantified at $289.5 billion for 2011, the most recent year for which data is available—is second only to the United Kingdom’s. This is an investment that includes $82.7 billion in manufacturing and $103.2 billion in wholesale trade.

Japan can claim a number of economic selling points, one of which is its consistent ability to create and sustain U.S. jobs. Japanese automakers alone employed over 388,000 Americans as of 2011. Encouraging Japan’s participation in the TPP would naturally result in even steadier investment in the U.S. economy and would be a direct infusion for the United States’s anemic job market.

U.S. food and agricultural exports to Japan—which totaled $13.5 billion in 2012—would enjoy appreciable increase with Japan’s inclusion in the TPP. That’s why more than 70 individual commercial entities within the sector were unified in their advocacy of Japan’s entry, and joined as signatories to a letter to President Obama with that singular appeal.

Q3: What are the economic impacts of Japan’s inclusion throughout the Americas?

A3: Japan’s inclusion in the TPP will not only boost trade relations with the United States; it will also help accelerate job creation throughout the Americas. This is particularly true of key emerging Latin American partners. Not just for Mexico—the second largest market for U.S. exports, with whom we engage in more than half a trillion dollars of annual trade, and to whom we are valued as the largest customer—but also for Chile and Peru.

Although smaller partners in proportion to Mexico, and larger than only TPP partners New Zealand and Brunei—Peru and Chile depend on U.S. exports for 17 and 20 percent of their total annual imports, respectively.

The TPP is an unrivaled economic force; with Japan’s inclusion, these member countries (the United States, Canada, Mexico, Chile, Peru, Australia, New Zealand, Vietnam, Singapore, Malaysia and Brunei) produce a collective 40 percent of the world’s Gross Domestic Product (GDP), fully $27 trillion in economic output. That’s nearly twice as much as produced by the entire European Union.

Conclusion: The U.S. economy has always thrived atop a few basic foundational principles, not least of which have been commitments to free and fair trade. Expose American products to as many consumer markets as possible and greater volume, efficiency, and quality result. That’s the nature—and the attraction—of increased competition. It’s a calculus with which Americans are familiar and adept; we should seek—and embrace—and promote this for the United States, for the TPP, and for the Americas.

Carl Meacham is the director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Carl Meacham