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The Strategic Meaning of the TPP and Japan’s Dilemma

Hidetaka Yoneyama
Senior Research Fellow

February 17, 2011 (Thursday)

The Strategic Meaning of the TPP

As Japan considers participating in the negotiations of the Trans-Pacific Strategic Economic Partnership (TPP), domestically, the greatest focus is on how to overcome agricultural problems. Internationally, this agreement will become a touchstone for whether Japan and the US can maintain an even closer collaborative partnership in terms of economy and security as they hold China in check in the Asia-Pacific region.

One likely reason for the US becoming so passionate about the TPP, which was originally centered on small countries, is that it has become wary of China, whose rapid growth has led to economic and military strength, which in turn allow China to take a more aggressive external stance. Further, for the US, strengthening economic ties in the East Asia region reinforces security there; the free trade agreement (FTA) negotiations between the US and South Korea, which led to an agreement in December of last year, also fall within the same strategic scope.

Until now, although the ASEAN+3 (Japan, China, South Korea) and ASEAN+6 (further adding Australia, New Zealand, and India) initiatives do exist in the East Asia region, they have not made many advancements in reality. If the TPP could get a head-start on these initiatives and strengthen cooperation over the entire Asia-Pacific region, which both includes East Asia and would allow the US to take part, it would give the US more room for committing to this region. Moreover, this would be useful for the purpose of strengthening security ties. While it goes without saying that countries like Malaysia and Vietnam, who have become wary of China’s growing influence on neighboring countries, can enjoy the merits of trading with the US, they also have the intention of strengthening security ties with the US by having the latter participate in the TPP.

Of course, the strategic aim of the TPP is not to needlessly stand in opposition with China. With China’s economic power looming in the background, countries in the region intend to strengthen economic relations by making shared rules, before pushing forcefully for the application of rules that are advantageous to themselves, and eventually pulling China into the fold. TPP negotiations include discussions on a wide range of fields (24 in total) such as tariffs, intellectual property, investment, finance, and e-commerce services.

China may feel a sense of discomfort in response to this rule-making movement. However, it is only a matter of time before China, which has passed Japan as the second largest economic power in the world, eventually draws nearer the US. One can regard this movement as an attempt to find a solution to the problem of how the US and Japan, the current economic powers, as well as the regions around China can oppose it before it gains overwhelming power.

For the US, Japan’s participation in the TPP would greatly increase its strategic meaning, while for Japan, recognizing the strategic importance of the TPP will show it the significance of its participation as well. While Japan’s agricultural problems are no small matter, what it should consider most regarding whether or not it should join the TPP is where the strategic meaning lies.

Is there Merit for Agriculture?

Conversely, from the standpoint of emphasizing ASEAN+3’s East Asian collective, Japan must also be cautious of joining the TPP, because China is unlikely to join for the time-being. If the TPP goes forward, it is likely that negotiations for the economic unification of Japan, South Korea, and China will stall and the short-term effects will be only negative.

Further, from the standpoint of opposing the TPP on agricultural grounds, there is a real danger that Japan will be utterly unable to oppose the agricultural giants, the US and Australia, if it joins the TPP together with them, since no matter how much Japan tries to increase its production scale, it is limited by its land conditions. Based on this standpoint, there are those of the opinion that Japan should go forward with ASEAN+3, which will increase opportunities to export high grade Japanese agricultural products such as rice, for which there is currently demand among the wealthy.

Accepting a high level of free trade and opening of markets, including those of agricultural products, is a prerequisite of taking part in TPP negotiations, and even though Japan is developing domestic agricultural countermeasures, this still represents a big hurdle. However, as mentioned above, if we stress the strategic importance of how the US will stand up to China’s sudden rise to power, there may be room to discuss interim measures in agriculture when negotiations actually get under way. We cannot know this, however, until after the decision to participate in TPP negotiations has been made.

In the Japan-Australia EPA whose negotiations are currently ongoing, there is a chance that rice will be given exceptional status and its tariffs abolished because Australia’s rice production is not very high and does not have much room for increase. If rice is treated as an exception in the Japan-Australia EPA, there is a slight chance that Japan can negotiate that that status be extended to the TPP as well.

Japan’s dilemma lies in the fact that, even though the TPP is significant to the country’s future direction, if we look at only agricultural exports to TPP-participating countries, far from there being any merit, the possibility that Japan will take a great blow is undeniable.

It is unsure whether or not Japan will be able to switch to a more aggressive, active exporting of agricultural products through the TPP alone. However, if participating in TPP negotiations provides Japan with an opportunity to bring about a substantial change in agricultural policy and revitalize the declining agricultural industry, then simply participating has great meaning in itself. If or when the blow does fall, however, the structure of the safety net that will soften it (i.e. the farming household income indemnity system) must be redesigned. Furthermore, in the case where Japan does decide to participate in the TPP, it must endeavor to strengthen economic relations with China through EPA discussions.

If a consensus that participating in the TPP is important for Japan can be reached based upon a deeper understanding of its strategic meaning, then Japan should be able to boldly form countermeasures to overcome its agricultural problems. Currently, however, the conversation begins and ends with dichotomous debate of whether or not to open Japan to the world and debate stunted by the feared blow to agriculture. It is most unfortunate for Japan that at that point all thought stops and the debate advances no farther.