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Trans-Pacific Free Trade Deal Stalled for Now

Posted May 01, 2014

Returning from his recent tour of Asia, President Obama proved unable to resolve significant differences with Japan over tariff barriers in the agriculture and autUS-Japan Quotesomotive industries. The disagreement between the two largest economic players involved in the Trans Pacific-Partnership (TPP) is one of the critical factors that have delayed negotiations on the ambitious free trade agreement.

The TPP is seen as the centrepiece of Obama’s efforts to re-orient the American economy to the fastest-growing markets of the 21st century and boost U.S. influence in Asia in the face of China’s rising clout. The pact does not include China and is regarded by some analysts as an effort to economically contain Beijing.

U.S. and Japanese officials have said that while the differences in their positions are being narrowed they remain “considerable” – a sentiment reinforced by Japanese Economy Minister Akira Amari who said, “the old issues still remain ... we can’t say there’s a basic agreement.”

Many press reports since the talks ended have speculated that neither the U.S. nor Japan is likely to make any major concessions that could move negotiations forward in the near future. Although Obama called for both sides to take “bold steps” to “move out of our comfort zones … because ultimately it’s going to deliver a greater good for all people,” he also acknowledged that they both face “political sensitivities” that limit their flexibility.

Back in Washington, Obama faces increasing domestic opposition to the TPP from within his own party. In the House of Representatives, 151 Democrats oppose renewing the trade promotion authority (TPA). Under the so-called fast-track rules, Congress can vote up or down on a final draft deal submitted by the president, but cannot add amendments. The idea is to expedite the passage of complex trade agreements.

Lack of TPA is considered a key stumbling block to negotiations because Japan is not inclined to put its best offer on the table without the assurance that fast-track rules would prevent the deal from being picked apart by Congress. However, with considerable opposition to free trade from many Democrats and recent polls showing opinion divided even among traditionally more pro-trade Republicans, any congressional action on TPA is unlikely until after the mid-term elections at the earliest.

With that in mind, Japanese Finance Minister Taro Aso has suggested there is now likely to be “no resolution on TPP” until the November elections are over. In the meantime, the next full round of TPP negotiations is slated for mid-May in Vietnam.