US-Japanese relationship key to talks

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Completion of a massive Asia-Pacific trade deal may hinge on the efforts of top U.S. and Japanese leaders to narrow their differences on a variety of politically sensitive issues.

President Obama and Japanese Prime Minister Shinzo Abe will meet next month in Tokyo and trade analysts say that any sign of breakthrough on their bilateral deal would provide some much-needed momentum to wrap up the Trans-Pacific Partnership (TPP) negotiations. 

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The stalemate between Washington and Tokyo, especially over agriculture tariffs, is holding up progress on the trade pact. 

The meeting provides an opportunity for the two nation’s top trade ministers to accelerate work toward the meeting that could, at least, lead to a handshake, said Jeffrey Schott, a trade analyst with the Peterson Institute for International Economics.

“Essentially they are going to have to agree to changes in their current policies and have to commit to spending some political capital to ensure that those changes are sustainable,” he said.  

Schott said if the leaders can move forward on a political deal it makes it easier to move toward a final agreement.  

Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers (NAM), said it is critical that the “U.S. and other countries stay at the table and forge a strong market-opening agreement in an expeditious manner.”

A bilateral deal between the U.S. and Japan, which is being worked out on a parallel track with TPP, could go a long way toward bridging differences with the other 10 nations involved in the negotiations, especially those that have failed to ink deals with Tokyo in the past. 

Australian Trade Minister Andrew Robb said that while a lot of progress was made during four days of talks in Singapore “what happens between Japan and the U.S. is key, because they are the key players.”  

Abe said last week that there is no need to rush completion of the deal ahead of Obama’s four-nation trip to the Pacific Rim.

“Although an early deal would serve our country’s interests, setting a time limit in advance could tie our own hands and allow the negotiating partner to take advantage of us,” Abe said. 

U.S. trade officials and supporters have argued that they are aiming for high-standard contents not a random deadline. 

Meanwhile, Abe and Obama each have their own domestic battles to wage. 

Abe must deal with the politically powerful farming co-ops, which want to maintain tariffs on five “sacred” agricultural areas — rice, meat, wheat, dairy and sugar.

“We will aim for the best way to serve Japan’s national interests,” he said. 

The insistence on protecting those goods is just one of the sticking points in the discussions. 

With agriculture as the “bottleneck” in the talks, Schott said Abe could show Obama that he is willing to give some ground on agricultural issues while the president could offer some assurances to help him make those politically charged changes. 

He said that once that market access package is in place and meets expectations, it is likely that the other 10 nations will aim to speed final negotiations along. 

“Once that bottleneck is broken there is a lot more room to put a deal together among the other 10 nations,” Schott said. 

Meanwhile, the U.S. is seeking greater market access for U.S. autos and other products. 

Obama also may use the visit to quell any broader concerns about his ability to convince Congress to provide him with trade promotion authority (TPA), which is being slow-walked by congressional Democrats. 

Fast-track authority would smooth passage in Congress for any trade deal that reaches Capitol Hill. 

Last month, Obama sought to reassure his Mexican and Canadian counterparts that Congress would give him those trade powers if the TPP emerges as a strong agreement. 

Robb said he expects Washington will eventual sort out its "internal politics" on the issue and that TPP negotiations need to continue in the meantime.