To break the deadlock in the Trans-Pacific Partnership (TPP) trade talks, the United States should consider excluding Japan, and conclude an agreement with only 11 instead of 12 nations, according to trade specialist Scott Miller of the Center for Strategic and International Studies (CSIS). “That would be extraordinarily popular in Washington,” Miller said in a wide-ranging interview about TPP. “It would be very attractive politically to simply make an announcement that, regrettably, Japan is not yet prepared to sign up for what we are trying to achieve via TPP. We hope to keep talking to Japan.” (See full text below.)
There are no public signs that the Obama administration is moving in this direction, but Miller’s suggestion is indicative of the frustration in Washington that the TPP talks are stuck. Earlier this year, in a joint statement, key US farm groups made a similar suggestion. But Miller is well-known as an ardent advocate of free trade agreements, and did not make his suggestion lightly.
Miller remains optimistic that a final TPP agreement – “with or without Japan” – will be concluded by this time next year, with Congress having granted the Obama administration “trade promotion authority (TPA) (formerly “fast track”) by mid-year. But he insists that this will require a thus-far politically timid White House to finally engage in a public effort to convince Congress to accept the deal.
Given the strategic stakes – the Administration has made TPP a cornerstone of its plan to “rebalance” US global focus toward East Asia – Miller argues that failure to conclude a TPP agreement “would amount to ‘foreign policy malpractice.’”
The TPP talks are deadlocked largely over Japan’s reluctance to sufficiently reduce tariffs (and not insist on replacing reduced tariffs with “safeguard clauses” that also block imports) on five agricultural products: dairy, wheat, sugar, rice, and meat (pork and beef).
It’s apparent that negotiators in both Washington and Tokyo have been misreading each other. In Washington, some US officials believe Tokyo is waiting until the Obama Administration has secured negotiating authority from Congress before making its best offer to reduce agricultural tariffs. Unless Congress agrees to forswear any amendments to a deal US negotiators reach with Tokyo, Japanese officials worry that Congress would continually demand additional concessions. But others worry that Prime Minister Shinzo Abe is not really committed to having a political battle with the agriculture lobby in his own Liberal Democratic Party. Prior to an important Upper House election in July 2013, Abe loudly committed to “firmly protect the agricultural industry.”
By contrast, some influential officials involved in setting Japan’s TPP negotiating strategy believe that, for strategic reasons, the US is so intent on achieving a final agreement that Washington will concede to a continued high degree of protection for Japan’s “sacred” agricultural products. To this, Miller says: “That would be a very serious misreading of US politics to think that agricultural market access is unimportant. US trade politics, particularly in the US Senate, are very dependent on agricultural market access.”
Miller: ‘US may pursue TPP without Japan’
Scott Miller is a senior adviser at the Center for Strategic and International Studies (CSIS), and widely considered one of Washington’s top specialists on international trade. From 1997 to 2012, Mr. Miller was director for global trade policy at consumer products giant Procter & Gamble, which is deeply involved in a wide range of trade and investment issues. Among his responsibilities was working through business associations to promote free trade agreements. He advised the U.S. government as liaison to the U.S. Trade Representative’s Advisory Committee on Trade Policy and Negotiations. Mr. Miller holds a B.A. from Ohio Northern University and an M.A. from the University of Cincinnati College of Design, Architecture, Art, and Planning.
DISPATCH JAPAN: What is the status of the Trans-Pacific Partnership (TPP) negotiations?
MILLER: It looks to me that we are still stuck. The readouts from the recent plenary meeting in Australia, and the meeting between USTR Michael Froman and Japan’s chief negotiator, Akira Amari, indicate there are still significant gaps, particularly between the US and Japan.
Japan has always been the outlier with respect to market access. Japan is the only one of the 12 parties to the TPP negotiations that does not have a lot of other free trade agreements (FTAs). Japan was the last to join the TPP negotiations, and had the furthest to go. Most of the TPP participants, especially the United States, have been unhappy with the market-opening commitments that Japan has thus far been willing to make.
Actually, this has been the state of affairs for at least the last six months.
Negotiators have identified what they call “landing zones.” They know the key outstanding issues, and the points of controversy within those issues. But there has not been much movement since at least April.
At this point, unless there is a major breakthrough, particularly in agricultural market access, we will remain stuck, and we will not have a successful conclusion to the TPP negotiations anytime soon.
DISPATCH JAPAN: Has everything boiled down to reconciling differences between the US and Japan?
MILLER: That is the key point. However, there are a lot of market access concerns. New Zealand’s trade minister, Tim Groser, said in Australia recently that the Japan-US talks are not designed to reach a sweetheart bilateral deal. TPP involves 12 nations, and all of the parties are supposed to meet the same dress code. It is natural that a big, globally competitive agricultural exporter, such as New Zealand, also wants better market access to Japan. The remaining major issue – access to Japan’s agricultural market – is often framed as a Japan-US dispute. But there are other parties who have the same concerns. And there are some nations who are hiding in the shadows of the US-Japan dispute in hopes of protecting their so-called ‘sensitive sectors.’ That is certainly true of some agricultural products in Mexico and Canada; they each have political troubles with certain sectors, as does the United States with sugar.
A US-Japan bilateral agreement would be unsatisfactory to the other parties, so would not fully resolve the problem.
DISPATCH JAPAN: Is there any basis to the argument often heard from Tokyo that Japan can’t be expected to make major concerns until the US Congress signals its bottom line in the form of Trade Promotion Authority (TPA)?
MILLER: That is a fair argument, which underscores the point that the Obama Administration has a lot of work to do in Washington. The Administration has not made the US Congress a partner in the TPP process. The Constitution, and the history of our trade policy, dictates that there is a division of labor that has to be bridged. We have found ways to do that since 1934, and the procedures are fairly well-rehearsed. But the Obama administration needs to do a better job. This is critical if the administration is to have credibility with its negotiating partners that a deal Ambassador Froman cuts is going to stick in Congress.
There is some reason for reluctance in Tokyo to move forward. I have often said this year that the Obama administration’s ‘landing zones’ with Congress are just as important as the landing zones with, for example, Japanese beef.
DISPATCH JAPAN: Looking back to last April, when President Obama visited Tokyo and put high-profile pressure on Prime Minister Abe to deliver a “bold” compromise, how could the administration have expected Abe to act without Obama having a TPA in hand?
MILLER: In hindsight, it should not have approached the Tokyo visit that way. My sense is that the Administration believed Japan was eager for a deal, and eager to be part of the TPP process. Abe has spearheaded a lot of market reforms. He has a reform agenda, and he is a strong leader. The White House may have been testing the degree of that strength, particularly with regard to making trade policy concessions. But it did not work. That coincided with the TPP talks really getting bogged-down.
DISPATCH JAPAN: How do you read Abe’s commitment to making bold trade concessions, particularly on agriculture? There is a school of thought in Japanese policy circles that Obama so much wants the TPP talks to move forward that the US will eventually back down on the disputed farm issues with Japan.
MILLER: I think that would be a very serious misreading of US politics to think that agricultural market access is unimportant. US trade politics, particularly in the US Senate, are very dependent on agricultural market access.
DISPATCH JAPAN: How will the US get this point across in Tokyo?
MILLER: If I were a trade negotiator in the Obama administration, trying to crack this policy egg, I would be contemplating a path forward with 11 parties to the TPP. In other words, exclude Japan. I would call that the “breakthrough,” and invite Japan to join TPP at some future time. That would be extraordinarily popular in Washington. It would simplify the agreement quite considerably. It would take a few irritants out of the equation, most importantly the yammering in Congress for provisions against alleged currency manipulation, and the neuralgia of the auto industry.
It would be very attractive politically to simply make an announcement that, regrettably, Japan is not yet prepared to sign up for what we are trying to achieve via TPP, and we are therefore going to conclude the agreement with 11 instead of 12 signatories, and we hope to keep talking to Japan.
I don’t know that this is going to happen. But I would not underestimate the political attractiveness of that approach, should the deadlock persist.
DISPATCH JAPAN: Would the US really play that kind of hardball?
MILLER: We’ll have to see how it plays out. I am still waiting for the president to engage Congress and the American people, and make this an important part of the president’s agenda. TPP has not been an important part of his agenda for at least the past year. Trade policy in general, and specifically TPP, have not been on the agenda since Max Baucus left the Senate and became US ambassador to China. Baucus was a big bipartisan advocate of efforts to expand market-opening efforts.
For our trade policy politics to effectively work, trade policy will have to be front-and-center.
This will be difficult. President Obama will have to challenge his own party, which no president does often, or with great relish. The White House will have to partner with the Congress, which everyone knows President Obama has not done often, or effectively, even when he had Democratic majorities in both houses during his first two years in office. The president is reticent to engage in much retail politics.
After the November 4 midterm elections, Congress will be set for the next two years. Where will trade, particularly TPP, rank on the president’s priority list. Is the administration prepared to do the hard work on trade policy that it has not done during the past six years?
The answer to that question will presumably be yes, and we’ll see a new level of seriousness about trade policy in Washington. At that point, the decision will have to be made about whether TPP will have 11 partners, without Japan. Matters would proceed from there.
DISPATCH JAPAN: How do you assess the Obama Administration’s commitment to TPP?
MILLER: The administration has said all of the right things. In my view, USTR Michael Froman is the strongest member of the president’s Cabinet. At this point, he is clearly the president’s best second-term appointee. He is an incredibly effective representative of the US, and of trade policy in general. At some point, personnel is policy, and if anyone can deliver a TPP agreement it is Froman. You don’t put a guy like Froman in a role like that unless you intend for him to conclude an agreement.
But this will require a noticeable change in the president’s initial profile on this issue. We can’t have any more incidents such as that earlier this year when the president went to the port of New Orleans, gives a speech, and does not mention trade.
Obama will have to make the public case for TPP, much as George W. Bush did for his trade agenda. He will have to take on some segments of his own party, as Bush did, and certainly as Bill Clinton did.
You’ll recall that Bill Clinton got normalized trade with China in 2000. He was at the end of his 8 years in office. He had been impeached by a Republican Congress in 1998. It is not as if the GOP-controlled Congress was fond of Clinton.
Ronald Reagan did with same thing with the trade acts of 1988, in the wake of the Iran-Contra scandal and with Democrats controlling both chambers of Congress.
In each case, the presidents in question were willing to make trade an issue, on their respective priority lists, and demonstrated the required personal interest and determination to bring politically controversial trade deals across the finish line.
We’ll see if Obama will adopt a similar approach.
DISPATCH JAPAN: Has the White House even begun quietly cultivating support on Capitol Hill?
MILLER: Froman has done a good job of keeping Congress informed, and has engaged in extensive consultation. Unfortunately, he and his team have not made a lot of progress on the Hill. USTR has only had consultations, not discussions designed to drive toward passage of a piece of legislation.
The conditions were right in Congress starting in early 2014. Then-Senator Baucus, together with his GOP counterpart Senator Orin Hatch, and with House Ways and Means Committee Chairman Dave Camp, put forward a bill that essentially would have granted the Administration trade promotion authority. Many analysts believe the bill would have passed out of the Senate Finance Committee without much difficulty. Camp could have passed the House version through the Ways and Means Committee without much difficulty.
Congress was ready to act, but the Obama administration wasn’t.
Baucus subsequently left the Senate to go to Beijing, and the new Finance Committee chairman, Rob Wyden, was not part of the Baucus-Hatch process, and he subsequently has not produced even a discussion draft of a new bill. He has only talked about it. So there is no trade promotion bill at this point.
A bill is important because it would create negotiating objectives, and establish special rules for an implementing bill.
Ambassador Froman and his people spend a lot of time on Capitol Hill. But the discussions have only amounted to consultations.
In my experience in working with the Congress, it is important to get the members on record as backing particular stances. It is important that members actually vote on a trade promotion bill. Consultations between USTR and Congress are not sufficient.
The process of moving a trade promotion bill – getting the votes to pass the bill – essentially amounts to building the political coalitions needed to pass a final TPP bill.
We’ve learned in the past that members of Congress who vote in favor of trade promotion authority tend to vote in favor of a final trade agreement bill.
DISPATCH JAPAN: But technically, trade promotion authority is not a necessary prerequisite to pass TPP, right?
MILLER: That’s right. Bill Clinton did not have what we then called “fast track” to win passage of permanent normal trade with China. The House passed a bill, and the Senate passed the same bill without a single amendment. It took work; it took leadership. We were fortunate to have had two very strong leaders at the Senate Finance Committee: Chairman Bill Roth, and ranking minority member Pat Moynihan. The Clinton administration invested a lot of political time and effort.
But it is unusual to proceed without first having won negotiating authority from Congress, and would be very difficult to do with an agreement as complex as TPP.
Without Congress having provided trade promotion authority, any member of Congress could propose amendments to any agreement put forward by the Administration. Any member could argue that he or she supports expanded trade with the Pacific, but not this specific agreement. Any member could maneuver to try to win favorable treatment for his or her constituency. Imagine Mitch McConnell, as Senate majority leader, being able to evaluate TPP provisions on tobacco (which is heavily grown in his home state of Kentucky).
DISPATCH JAPAN: How will the midterm elections affect the process?
MILLER: It will be easier for the Obama administration to talk about trade after the election. That is good. The White House does not have to worry about elections any more. Of course, the White House still has to worry about convincing skeptical members of Congress to vote for TPP. But that is a separate problem.
A Republican Senate would be easier territory in which to negotiate trade bills. Leader McConnell has already signaled this. He has been on record since at least early 2014 that trade policy is one area in which Republicans can and would work with Obama.
Orin Hatch, as a Republican chairman of the Finance Committee, would have an easier time moving a TPP bill than would Democrat Wyden. As of now, Wyden has some members of the Committee from his own party who are skeptical: Jay Rockefeller (who is retiring), Sherrod Brown of Ohio, Bob Casey of Pennsylvania, and Debbie Stabenow of Michigan. These are key members of the Finance Committee, and they are long time skeptics.
As chairman, Senator Hatch would have a lot of Republicans who are supportive of trade, including former USTR Rob Portman of Ohio.
The Committee dynamics would change in a positive way.
In addition, coordination on this issue between a Republican House and a Republican Senate would improve, making it easier for the two chambers to arrive at a satisfactory product.
DISPATCH JAPAN: You don’t see a scenario in which the whole thing falls apart?
MILLER: It is always possible. Trade negotiations do break down. But in the case of TPP, I think it is very unlikely. The parties know what they are doing. The 12 negotiating parties have already negotiated 30-40 free trade agreements with each other. The space between completion and where we are now is really not that big.
With the exception of Japan agriculture, TPP would not entail any big shocks to the trading system.
All of the parties have made big political investments in TPP.
The real question is whether it will truly be the high-standard, 21st century agreement we are all hoping for, or will it be less ambitious?
A less-ambitious outcome would not necessarily be bad. It would not live up to the initial billing, but it would still be good for the region.
And in the context of the Obama Administration’s stated strategic goal of “rebalancing” toward Asia, a breakdown of the TPP negotiations would amount to “foreign policy malpractice.”
So, I think there will be a final agreement.
DISPATCH JAPAN: How do you envision passage of TPP legislation will unfold in the Congress? What will the schedule look like?
MILLER: I don’t expect anything to happen in the ‘lame duck’ session, before the new Congress takes office in January. Keep in mind that we might not know which party control the Senate until January, since a few of the races may require runoffs a few months from now.
The Administration also has other priorities for the lame duck, including a long list of presidential appointments that are now stalled in Congress.
Even if Congress tried to proceed in the lame duck session, there is no Senate bill, and it would be hard to cobble together such a complicated piece of legislation in the midst of the uncertainties that characterize lame duck sessions.
So, the process of moving TPP forward will really begin in January. The Congress could pass TPA legislation by mid-2015, at which point USTR would have the credibility with its negotiating partners to finalize a TPP agreement – with or without Japan.
By October 2015 there could be a nice signing ceremony at the White House.