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Part II of the US-Japan sage: Follow up on TPP talks in Vietnam

Starting today, the dozen countries involved in the Trans-Pacific Partnership (TPP) will begin a new round of talks in Ho Chi Minh City. The four day meeting will be followed up with a ministerial gathering from 19th to 20th May in Singapore.

The centre of attention will be the US-Japan deadlock, while the other 10 countries, including Australia and Canada take up a “wait and see” attitude. Even though the negotiations held between two of the biggest economies in the TPP suffered an initial setback in April, the heads of both nations said that they have “identified a path forward” on important bilateral issues and that it marked a “key milestone” in the TPP.
It was indeed heartening to see an absence of discouraging quotes “considerable differences remain over thorny issues”, something that has unfortunately become a common element in negotiations. Instead, Mr. Obama and Mr. Shinzo Abe called upon all TPP partners to move as soon as possible to take the necessary steps” to conclude the agreement.
It will be a historic set of trade-talks as we will now see two incredibly experienced negotiators face off: Mr. Akira Amari for Japan and U.S Trade Representative, Micheal Froman. 

Some musings:

* The Labor Standards issue:
Not everyone is completely convinced that the TPP is a good idea. While some worry that the agreement is nothing but trade-centred imperialism on part of the West, there are others who claim that the TPP is a bad deal for America too.

Rachel Marsden recently wrote a strongly worded piece for the Opinion section of the Chicago Tribune in which she claims that the US might as well “effectively erase all the borders in Asia and turn it into one giant pool of exploitable labor, because that’s exactly what this agreement would achieve.” The central theme of the article is that the system of temporary foreign worker programs (which the TPP encourages) would establish a mechanism for importing and subsequently exploiting foreigners in domestic labor markets. 

* The compatibility issue:

The second point that Ms. Rachel stresses on is that free trade and duty-free access should only be established between countries that are “relatively equal in all respects“. This seems fair especially when you consider that a developed nation would make huge gains by establishing operations in a developing nation with cheaper labor and tax standards. Though empirical data is absent on this point, she claims that the cost of doing business for these developed nations, should include some customs and excise levies. 

Granted, foreign direct investments by American companies in Asia are important to offset the ever-increasing influence of China, but that cannot consist entirely of outsourcing American operations abroad. Such operations should complement the domestic workforce, not replace it — but history suggests that this rarely ends up being the case

* What about everybody else?

The rest of the nations have displayed considerable reluctance to make concessions of “sensitive” issues of their own (agriculture etc). Most commentators take the view that once satisfactory progress is made by the pact’s two biggest members, the rest will follow.
It is questionable whether such a strategy is going to pay-off. Developing nations constantly complain that they are not given enough space in the international trading sphere to establish their presence but when such opportunities do materialize, they abstain from making any positive steps unless the West does it first. This policy of “follow the leader” needs to stop.

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