Inside U.S. Trade
August 17, 2012

Baucus Travels to Japan, New Zealand to Discuss TPP with Top Leader

Senate Finance Committee Chairman Max Baucus (D-MT) will depart today (Aug. 17) for New Zealand and Japan, where he will meet with the countries' leaders and top trade officials to discuss issues surrounding the Trans-Pacific Partnership (TPP) negotiations, the senator's office announced in a press release.

In New Zealand, which is currently a party to the TPP talks, Baucus will travel to Auckland and Wellington to meet with Prime Minister John Key and Trade Minister Tim Groser, among other political leaders. The meetings will "discuss the progress of TPP negotiations and pursue trade opportunities for American businesses that would create additional U.S. jobs," according to the press release.

Baucus will also tour the Mokai geothermal power plant, which is New Zealand's largest privately developed geothermal project.

In Japan, which is not a member of the TPP talks but has expressed an interest in joining, Baucus will meet with Prime Minister Yoshihiko Noda, Foreign Minister Koichiro Gemba and Economic and Trade Minister Yukido Edano. In these meetings, Baucus is expected "to seek expanded access for U.S. exports."

As a condition for Japan's membership in TPP, the U.S. is pushing for confidence-building measures in areas like market access for U.S. beef exports, market access for U.S. auto exports, and a voluntary standstill commitment from Japan Post entities on offering new or modified products (Inside U.S. Trade, June 15).

Japan is still considering whether it will join the TPP talks, but is facing mounting political hurdles that will make it difficult for the government to make a decision in the near term. These hurdles include the possibility that Noda and his ruling Democratic Party of Japan coalition will lose power (Inside U.S. Trade, Aug. 10).

Baucus is also expected to tour a Tesla Motors Facility in Japan that sells electric automobiles made in the U.S., according to the press release.

Baucus last traveled to Japan in 2004 as ranking member of the Finance Committee. On that trip, he pushed for Japan to lift an overall ban the government had placed on U.S. beef after it was discovered that a dairy cow in Washington had contracted bovine spongiform encephalopathy, also known as mad cow disease. Japan currently limits its imports of U.S. beef to that from cattle under 20 months, but is considering raising that ceiling to 30 months.

Also on that 2004 trip, Baucus discussed with Japanese officials the possibility of pursuing a bilateral U.S.-Japan free trade agreement.

In a related development, the Economic Strategy Institute (ESI) last week firmly rejected the notion that Japan should be allowed to join the ongoing TPP negotiations without significant changes to the negotiating agenda to address issues such as currency manipulation. The institute also argued that, unless negotiators radically alter course to handle trade policy in new ways, the TPP talks "should probably not proceed at all."

The report, released Aug. 8, alleged that a variety of non-tariff barriers (NTBs) make it difficult for U.S. automakers to sell their products in Japan. It concludes that Japan should only be allowed to join the TPP after it has "undertaken to cease currency intervention and to adopt measures to offset the impact of its anti-import market structures."

The ESI report was met with criticism from Japanese automaker Mazda, whose government affairs director, Barbara Nocera, said the ESI study "attempts to turn back the clock to the protectionist era of the 1980s and 1990s, rather than looking forward to a future of more open automotive trade between the U.S. and Japan."

ESI charged that U.S. auto sales in Japan remain at low levels in part because Japanese dealerships "are all controlled by the producers," which have no incentive to also allow foreign cars to enter the showroom. For this reason, it has become basically impossible for U.S. automakers to sell their products in Japan, the report alleged.

U.S. automakers have long complained that Japanese dealerships discriminate against foreign models, although critics of U.S. automakers point out that dealerships are carrying more foreign cars in recent years than they were before, and that only the number of dealerships carrying U.S. models has gone down (Inside U.S. Trade, June 15).

Regarding currency manipulation, the report argued that "the expectation today has to be that if a vital industry like the auto industry is threatened, the Japanese government will be likely to intervene to drive the yen down." A weaker yen would make Japanese exports more attractive, and imports less attractive for Japanese consumers.

U.S. automakers have also blasted Japan's intervention in currency markets, although some experts question how much of an impact those interventions have really had on trade flows (Inside U.S. Trade, Jan. 20). The U.S. is not pushing for currency provisions in a final TPP deal (Inside U.S. Trade, Aug. 10).