U.S., Canadian Producers See Japans Potential TPP Entry Helping ...

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U.S., Canadian Producers See Japans Potential TPP Entry Helping Their Sensitivities
Posted: March 7, 2013

SINGAPORE U.S. textile and footwear manufacturers, as well as Canadian dairy producers hoping to protect their industries from full tariff liberalization in a final Trans-Pacific Partnership (TPP) deal, are viewing Japan's potential entry into the TPP talks as a positive development for achieving that goal, according to industry sources. If Japan were to join the ongoing negotiations, it could lead to a broader conversation among TPP partners about the need to protect their own domestic industries in a final agreement, these sources said. In addition, Japans entry would likely slow down the pace of negotiations, and the longer they go on, the less likely it is that they will conclude, one industry source argued. Japan has indicated it will seek to protect certain domestic agricultural products from full liberalization in a final TPP deal. That goal received a boost from a joint statement with the U.S. last month that holds open that possibility (Inside U.S. Trade, March 30). Such protections could jeopardize TPP partners' informal goal of eliminating tariffs on all goods, which is especially important to Australia and New Zealand. Sources pointed out that New Zealand has expressed worries about Japan joining the ongoing negotiations, and one source said this was based on the fear it could lower the ambition of a final TPP deal. Similarly, Australian officials have been reluctant to see Japan join the ongoing negotiations for fear it would delay their conclusion. The main sensitive domestic industries for the United States in the TPP talks are textiles and footwear, while Canada has sensitivities on dairy, poultry and eggs. Imports of these three agricultural products are tightly restricted under Canada's supply management system, which also restricts domestic production. Two industry sources pointed out that U.S. footwear producers may also have offensive interests in Japan because it currently imposes some barriers on footwear imports that they would want to see removed. One industry source here argued that the benefits of Japans participation in the TPP negotiations would outweigh the impact of excluding some products from tariff elimination. He said that Japan, as the worlds third largest economy, would add such economic weight to a TPP agreement that that any potential exclusions or protections would be comparatively insignificant in economic terms. Canadas efforts to protect its dairy, poultry and egg sectors were apparent when Ottawa tabled its first market access offer in the TPP negotiations ahead of the Singapore round. In an identical offer distributed to all 10 TPP partners, Canada placed its tariff lines on dairy, poultry and eggs in an undefined basket that does not specify the length of the proposed tariff phaseout, sources said. The U.S. has taken the same approach on footwear in its bilateral goods negotiations with Vietnam. The baskets of tariff phaseouts that have been defined so far are immediate elimination, a five-year phaseout and a 10-year phaseout. On goods market access, the U.S. is negotiating bilaterally with Vietnam, Malaysia, Brunei and New Zealand, but has also said it intends to do so with Canada. But sources said the U.S. has not yet made any offers on goods to Canada despite the fact that Canada has now provided the U.S. with its offer. At the same time, Canada has begun receiving offers on goods market access from other TPP partners. The TPP countries had set the goal of exchanging new market access offers in advance of the Singapore round. The addition of Japan could also change the negotiating dynamic when it comes to Vietnam's demand for preferential access of its apparel exports from the U.S., according to one industry source. Vietnam has been unwilling to budge on U.S. demands for greater market access on agricultural and industrial goods, calling for the U.S. to first show some movement on the Vietnamese priorities of apparel and footwear. But if Japan joins the TPP talks, U.S. exporters would see the potential benefits of a TPP deal greatly expanded, and therefore Vietnam

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U.S., Canadian Producers See Japans Potential TPP Entry Helping ...

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could lose its ability to dictate terms in the negotiation, this source speculated. U.S. textile manufacturers oppose Vietnams demands on the grounds that Vietnamese imports, which are made with low labor costs and what they charge are a host of subsidies, could displace apparel imports from Central America and other countries that are made with U.S. yarns and fabrics.

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