Home > NHK WORLD News > Business Insight


Business Insight


Business Insight

TPP Breakthrough

Ministers from 12 Pacific-rim countries have come to a broad agreement on one of the world's largest regional trade deals. The announcement follows years of intensive talks.

Negotiators worked through the night on Sunday to resolve remaining differences before trade representatives fronted the press on Monday with an outcome.

"We, trade ministers of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, the US, Singapore and Vietnam are pleased to announce that we have successfully concluded the Trans-Pacific Partnership negotiations," US trade representative Michael Froman announced in Atlanta.

The pact aims to set new standards for global commerce. Ministers had to extend the final stages of the talks to find consensus on sensitive trade issues. They include the period of protection to the rights for data on biological drugs and tariffs on dairy products, and local content thresholds for automobile parts.

Froman said the TPP will support jobs and drive sustainable growth across the Asia-Pacific region. But it is not a done deal as the accord faces months of debate in each of the 12 countries.

One of the biggest sticking points was the period for protecting data on drug development. The United States has a large pharmaceutical industry, actively working to develop new kinds of medicine. It sought a protection period of 12 years, while Australia and emerging countries like Malaysia wanted five years or less. In the end, 8 years of effective protection was agreed upon.

The focus of talks in the automobile field was the so-called 'rule of origin' which sets a ratio of parts produced in the TPP countries to which automakers must adhere for vehicles to be tariff-free. Negotiators set the ratio at 55 percent. Japan had requested around 40 percent, but Mexico and Canada wanted a much higher figure.

In bilateral talks with Japan, the US decided to phase out its 2.5 percent tariff on Japanese automobiles over a 25-year period. The US will abolish tariffs on more than 80 percent of Japanese auto parts in terms of value once the TPP takes effect.

NHK WORLD presenter James Tengan was joined in the studio by business reporter Kyoko Fujita to discuss the key points.

Tengan: The most difficult issue was the patent protection period for drugs developed using biotechnology. The US wanted 12 years of protection, whereas countries such as Australia insisted on five years or less. American drug firms put pressure on the government because such drugs bring them huge earnings, but drugs require a tremendous amount of money to develop. Another key issue was dairy products. New Zealand wanted to export more, but countries including the US were opposed. Officials negotiated around-the clock for days to bridge their gaps and make concessions. What led the ministers to reach a broad agreement at this point?

Fujita: Experts say what changed is the political schedule of several member nations. Canada's federal election is coming up this month, and the US will have a presidential election next year. Those country's leaders will inevitably be spending more time on their election campaigns than on the TPP negotiations. Also, a possible change of government in either country could mean the agreement would have to be renegotiated. If the officials had missed this opportunity, the talks could have stalled. The US wields strong influence over the other members and has maintained a hardline stance in past talks. But President Barrack Obama is desperate for a legacy before leaving the White House. US negotiators may have felt the need to make some concessions.

Tengan: What will be the impact of the TPP on the world economy?

Fujita: The 12 nations account for about 36 percent of the world's Gross Domestic Product, so the trade pact will have a major impact on the global economy. Member countries expect that the TPP will boost trade and foreign investment. The TPP is also significant to the US and Japan in the sense that it's the first free trade pact that both countries have joined. The US and Japan want to retain a leading position in the world by establishing an economic bloc that can compete against China. So, this broad agreement is certainly a major step forward for the economic growth of the TPP members. Officials are now at a critical phase in the negotiations as they try to create a new economic block encompassing the Pacific region.

Japan's Prime Minister Shinzo Abe welcomed the deal that he says ushers in a new era for the Asia-Pacific region. "The TPP will create a huge economic zone with a population of 800 million and that accounts for nearly 40 percent of the global economy," he said. "Japan is joining a pact that will provide benefits for the next 100 years. The TPP will help make our lives better."

Abe called the agreement an ambitious attempt to create a sustainable economic zone where fair rules can properly evaluate the quality of services, intellectual property and items in many other fields. He said the government will set up a task force comprising all his Cabinet ministers to address concerns over the TPP's impact on Japan's farming industry.

Agricultural imports were a major concern for Japan during the talks. Japanese negotiators agreed with their US counterparts to set a new tariff-free import quota for up to 70,000 tons of American rice per year. Japan also made a deal with Australia to introduce a new quota for rice from that country.

As for beef, Japan will lower its tariff from the current 38.5 percent to 27.5 percent when the TPP goes into effect. The tariff will then be gradually lowered, until it hits nine percent from the 16th year. Japan has a so-called "safeguard option," allowing the country to temporarily raise tariffs if there is a spike in imports.

A key business leader also welcomed the deal. "I believe everything decided under the TPP will play a significant role in the development of Japan's economy," said Sadayuki Sakakibara, chairman of the Japan Business Federation.

*You will leave the NHK website. 


More on Business