US companies attack Japan and Canada over tariffs

The Financial Times
By James Politi
February 21, 2014

US business groups attacked Japan and Canada for resisting tariff cuts in sensitive sectors, particularly agriculture, on the eve of a critical meeting of ministers negotiating a trade agreement among 12 Pacific Rim nations.

In a letter to Michael Froman, the US trade representative, more than 40 lobby groups supporting the Trans-Pacific Partnership said this week they were “very concerned” that the two countries seemed unwilling to offer “comprehensive market access liberalisation”.

“[Japan and Canada] seem intent on preserving the status quo for their most protected sector,” said the letter, organised by the Emergency Committee for American Trade.

The warning from corporate America comes as TPP trade ministers prepare to gather in Singapore amid a renewed push by the US and Japan to attempt to finalise the negotiations, which aim to forge much closer economic ties between Pacific economies in a challenge to China.

But the letter to Mr Froman highlights fears in business that the US and Japan might strike a deal that ends up being mostly symbolic, failing to tackle the high tariffs and regulatory barriers that hamper the flow of goods and services across the 12 countries.

“We in the private sector hope that is not the case. We would rather see a little bit more time taken to get to an outcome that will not only be strong on all the key issues, but open each others’ markets up, and address these rules,” said Cal Cohen, president of ECAT. “If we want to see economic growth, it’s in the interests of all 12 countries to bite the bullet,” he added.

The letter to Mr Froman took direct aim at Japan, which is resisting tariff cuts in five agricultural sectors – including rice, meat, wheat, dairy and sugar.

“Not only would the tariff barriers that Japan seeks to maintain be unprecedented, but they are in the very sectors that have the greatest potential for future trade growth between the US and Japan,” the letter said.

Mr Froman and Akira Amari, Japan’s minister for economic and fiscal policy, met in Washington a week ago but did not seem to solve the impasse.

The US too has sensitive industries – such as textiles and sugar – and it is far from clear how far the Obama administration is itself willing to slash its own tariffs.

The business groups’ warning to Canada relates to its resistance to striking down protections for its dairy and poultry sectors, Mr Cohen said.

“The significance of Japan not liberalising its agricultural sector is that it gives every other country at the table an ability to hide behind Japan and basically say: ‘If Japan has not liberalised, then why should we?’” Mr Cohen said.

The Canadian embassy in Washington said the country was working with its TPP partners to reach an agreement that “will enhance trade and investment”. The Japanese embassy in Washington did not immediately respond to a request for comment. Japanese officials have said they are bound by their parliament to not cut tariffs on these five “sacred” areas.

The backing of business is crucial if the TPP is to pass muster with Congress, where it is already facing a backlash from members of President Barack Obama’s own Democratic party.

Highlighting the pressures Mr Froman is facing, this week, a group of 120 members of the House of Representatives sent a letter to the top US trade official urging him to fight for strong environmental protections in the talks.

“In a region with a weak history of protecting its rich natural resources from exploitation, the US has an opportunity to secure a robust, fully enforceable environment chapter in TPP,” said the letter, led by Earl Blumenauer and Peter DeFazio, two Democratic lawmakers from Oregon.

“If done correctly, this will be about more than just conservation. It will enable the US to undercut the black market in illegally sourced plants and wildlife, while at the same time levelling the playing field for US companies consistently placed at a disadvantage because of poor or unevenly enforced environmental laws in other TPP countries,” they added.