Tokyo and Washington look to take the bilateral track but a slimmed-down TPP may still live on.


Japan and the United States have agreed to start new talks on trade and investment, adding to speculation over a bilateral trade deal between the two security allies. However, all is not lost for the Trans-Pacific Partnership (TPP), with Australia’s trade minister vowing to salvage the deal at March talks.

After holding their first official meeting Friday in Washington, U.S. President Donald Trump and visiting Japanese Prime Minister Shinzo Abe pledged in a joint statement to pursue stronger bilateral economic ties and regionally, “based on rules for free and fair trade.”

“This will include setting high trade and investment standards, reducing market barriers, and enhancing opportunities for economic and job growth in the Asia-Pacific,” they added, noting that their economies account for 30 percent of global gross domestic product (GDP).

Tokyo would have welcomed the joint statement’s support for Abenomics, “the three-pronged approach of mutually-reinforcing fiscal, monetary, and structural policies to strengthen domestic and global economic demand.”

Importantly, the joint statement also allowed for Japan to continue pursuing the TPP, even after Trump’s January 23 decision to withdraw the group’s biggest economy from the 12-nation pact.

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Despite the withdrawal, the statement said the two leaders would explore how best to pursue freer trade in the Asia-Pacific region, including both bilateral talks “as well as Japan continuing to advance regional progress on the basis of existing initiatives.”

The statement said Japan would welcome “an early visit” of U.S. Vice President Mike Pence, with Pence and Japanese Deputy Prime Minister and Finance Minister Taro Aso slated to “create a new framework for dialogue.” As well as bilateral trade, the dialogue is expected to include cooperation on fiscal and monetary policies as well as cooperation in fields such as cyberspace, energy and infrastructure.

A Japanese official told Japan’s Nikkei newspaper that “even as we continue to push the United States toward the TPP, we will not dismiss bilateral talks. We will discuss what framework will be best.”


During a press conference at the White House, Abe stressed Japan’s “more than $150 billion of new investment being made into the United States” over the past year, while promoting Japan’s “shinkansen” high-speed rail.

Trump said he would seek a trading relationship with Japan that is “free, fair and reciprocal, benefitting both of our countries.” The comment came after previous criticisms by Trump of Japan’s “unfair” trade practices hindering U.S. auto exports and criticism over alleged currency manipulation by Japan and China.

Asked about China, Trump continued his apparent rapprochement with Beijing, saying he had held “a very, very good conversation” with Chinese President Xi Jinping.

“It was a very, very warm conversation – I think we are on the process of getting along very well. And I think that will also be very much of a benefit to Japan,” he said.

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Nevertheless, Trump again took aim at currency devaluations, saying: “I’ve been complaining about that for a long time… I believe that we will all eventually…be all at a level playing field, because that’s the only way it’s fair.”

Trump said the United States would become “an even bigger player” in trade, helped by an “incentive-based” tax policy.

Japanese business leaders, including the head of Toyota Motor and the Keidanren business lobby, welcomed the comments by Trump, which followed previous attacks by the newly elected president on Toyota’s move to build cars in Mexico. Earlier, Abe stressed in a speech to U.S. business leaders that 70 percent of Japanese vehicles aimed at the U.S. market are produced in America.

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Australia: Don’t Waste TPP Gains

While Asia considers the implications of a potential U.S.-Japan trade deal, at least one member of the TPP group is determined not to let five years of tough negotiations go to waste.

On Wednesday, Australian Trade Minister Steven Ciobo told Bloomberg News that the TPP remained relevant despite Trump’s exit and previous comments from Abe that it was “meaningless” without U.S. involvement.


“What it comes down to is this, there were a lot of hard fought gains that were achieved through intense negotiations over many years, in relation to the TPP. I don’t want, and I know a number of other countries don’t want to let those gains slip through our fingers,” he said.

“That’s why I put a focus on whether or not we could have for example, a TPP 12 minus one… We’ll be having a meeting in Chile in March of this year to canvas all of the options.”

Asked about the TPP’s rule requiring 85 percent of member GDP for ratification, Ciobo said it could be overcome with some “minor tweaking.”

“We could make minor changes to the text to allow for the exclusion of the United States and still get the TPP into place. Alternatively, if there was going to be a more substantial redrafting around some of the agreed points, well that’s obviously a whole separate issue that we’d need to deal with,” he said.

“At this stage, I’m pursuing a minimalist approach, which would be to say let’s keep the gains that we achieved under the TPP, and let’s apply it to as many member states as possible that are willing to sign up on those terms, less the United States.”

Ciobo said a slimmed-down TPP involving such countries as Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru and Singapore “would be a great outcome.”

Singapore’s Trade Minister Lim Hng Kiang has said pursuing an 11-member TPP would be a possibility, depending on the “balance of benefits without U.S. participation,” while other members including Mexico and New Zealand have reportedly indicated support for reviving the pact.

Before the Mexico TPP talks however, in late February, Japan will host the 17th round of negotiations on the Regional Economic Comprehensive Partnership (RCEP). Unlike the TPP, RCEP includes China but excludes the United States, although both pacts are reportedly open to such new members willing to adhere to their rules.

Analysts such as the University of Indonesia’s Mari Pangestu have suggested that the TPP and RCEP “need not be in conflict” and could “co-exist in a constructive way.”

Depending on the March talks, Asia may yet get to benefit from both trade pacts, even without the involvement of the world’s biggest economy.