The fourteenth round of negotiations of the Trans Pacific Partnership Agreement will be held from September 6-15 in Leesburg, Virginia.
Beneficial in theory, so-called free trade agreements far too often have been detrimental to the United States economy and the manufacturing sector that forms its central pillar. And while the proposed Trans-Pacific Partnership (TPP) does strive to include the high standards necessary for a "21st century" trade agreement, I believe that the potential inclusion of Japan in the negotiations is not in the best interest of the United States.
The establishment of free trade agreements can be a critical and progressive step towards greater economic integration, and continues to become more valuable in an increasingly global world. Unfortunately, the United States has entered into several free trade agreements that do not sufficiently protect and support our manufacturing industries, and the millions of American workers they employ.
The current debate centers on the TPP--a multi-lateral trade negotiation between many of the Pacific countries, the U.S., Australia, Canada, Mexico, and others. The agreement aims to establish a comprehensive and high-standard trade relationship between the leaders of a 21st century, global economy. In my opinion, the TPP has the potential to become a successful free trade agreement, and provide a solid economic anchor for the United States and its manufacturing industries. For these reasons, I have withheld any judgment on the TPP's enactment.
But what I have concluded is this: that inviting Japan into the trade negotiations will wipe out any possibility for the agreement to be considered a success for the United States, our economy, and the manufacturing industries that support it.
To be sure, Japan has and continues to be a close and steadfast ally to the United States. But at the same time, it has yet to demonstrate a commitment to opening up its economy to the international community. Our trade relationship remains complicated and unbalanced, none more so than in the auto industry. We have witnessed Japan regularly enact policy that closes its domestic markets from international competition while it simultaneously weakens the yen to boost its export power.
Particularly dubious policies that Japan has enacted to protect its automotive industry are its "non-tariff barriers," or NTBs--i.e. implementing a strict manufacturing regulation that impacts engine sizes but only applies to imported vehicles. Japan's web of NTBs was erected to protect its closed auto market even after the elimination of its anti-competitive trading barriers (such as a 40% automotive tariff). These NTBs rig Japan's automotive industry heavily towards its own favor, and continue to bar foreign automakers from making any significant headway into the market.
There is no doubt that inviting Japan into the TPP would be a costly detriment to the American auto industry, and in turn our entire economy. We cannot afford to offer Japan a seat at the table until it establishes a proven track record of cooperation with the global economy--steps that would include dismantling its non-tariff barriers and ending the practice of manipulating its currency as a means of unfairly tilting the balance of trade in its own direction.
According to an independent study from the Center for Automotive Research, allowing Japan to enter the TPP negotiations now would cost the United States upwards of 90,000 auto-related jobs. The bulk of these job losses would result from our elimination of the 2.5% tariff we currently employ on Japanese imports, coupled with Japan's significant currency manipulation.
But beside direct job losses, Japan's inclusion in the TPP would furthermore leave us battling for the least bad deal possible. Inviting them to negotiate the TPP would make it extremely difficult to set the trading standards at a high enough mark to ensure that each country involved is equally protected. But further, Japan has already made a habit of appearing to open up its economy through trade agreements and then immediately enacting manufacturing policies that maintain its protected status quo. Their inclusion in the TPP negotiations would be entirely counterproductive, especially after thirteen rounds of discussion have already taken place.
Any country will be able to join the TPP agreement after it has been enacted if it demonstrates that it can achieve and abide by the agreement's high standards. In fact, one of the ultimate goals of the TPP is to convince countries like China and India to reform their trading practices, and level the playing field across the globe. Likewise, if Japan establishes a legitimate record of open competition and abides by the standards set by the TPP after negotiations have been completed, we should certainly allow them to join.
There is much that our economies have in common, and can mutually benefit from one another. Manufacturing in general, and the automotive industry in particular, are both critical to my home state of Michigan and the U.S. as a whole. They are also critical to Japan. If our two economies can forge a fair and balanced trade relationship, I have no doubt that these and many of our other shared industries will experience long-term growth.
But as of now, the U.S. economy--and especially Michigan and our automotive industry--cannot trust Japan's trading policies. Japan has been a longtime friend and ally to the United States, and this will not change. But its economic and trading policies are uncooperative and disruptive to our economy. We cannot move forward until Japan opens its markets, eliminates its NTBs, and stops manipulating its currency. Offering them a seat at the table before this progress is made would place U.S. auto and our economy in far too vulnerable a position.
We should not leave ourselves negotiating the least bad deal possible, which is exactly what we'll be left with if Japan is invited into the Trans-Pacific Partnership.