Yes, it should
Japan agonises over joining a possibly radical free-trade area
Oct 29th 2011 | NAGANO | from the print edition
IT TAKES a minute or two to work out what is refreshingly odd about Hideki Shimazaki’s lettuce farm in Nagano on Japan’s main island. Then it dawns: all the workers are 20- or 30-somethings, with the same lop-sided grins and earthy jokes common to young farmers elsewhere in the world.
In Japan, this is incongruous. Most farmers are over 60, and their task is solitary: growing rice in small paddies, mostly on a part-time basis. In contrast, Mr Shimazaki’s lettuces spread across hillsides, and his business, Top River, could grow far more if only other landowners would let out unproductive land.
On the face of it, Mr Shimazaki should have good reason to support Japan’s involvement in talks to forge the Trans-Pacific Partnership (TPP) that America’s president, Barack Obama, and the leaders of eight other countries are keen to promote at an Asia-Pacific trade bash, APEC, in Honolulu on November 12th-13th. After all, a powerful incentive for Japan to take part is to make its farm sector, which contributes just 1% to GDP, more competitive. A tariff on rice imports of nearly 800% and subsidies underpinning the rice price keep old farmers in the game and hold back on land consolidation.
Yet Mr Shimazaki is hesitant about free trade. His position highlights the delicate task that the new prime minister, Yoshihiko Noda of the Democratic Party of Japan (DPJ), has in convincing the public that Japan should be the tenth country to join the TPP talks. Mr Shimazaki thinks farm liberalisation is inevitable as old farmers retire, but like many is worried about the costs of open borders on other uncompetitive parts of the economy, such as the finance and construction industries.
A farm lobby group said on October 24th that 350 members of the 722-member Diet, or parliament, had signalled to it their opposition to the TPP. Opponents also include doctors worried about private firms muscling into hospital care, and unions who are against labour-market reforms. Mr Noda’s cabinet is divided.
Yet the prime minister, the third in two years of DPJ-led government, has few alternatives other than to put his fragile popularity on the line in support of free trade. The issue has shot up the political agenda thanks to sluggish world commerce, a strong yen and renewed fears of economic slowdown and energy shortages since the March 11th earthquake, tsunami and nuclear disaster. There is also a sense that Japan would let down its closest ally if it did not endorse Mr Obama’s Honolulu push.
Mr Noda’s supporters believe he has a strong case to make. Vulnerable farmers could be protected by direct income support, as they are in America and Europe, rather than with price supports that punish consumers. Though the TPP plans to scrap tariffs, that would be over ten years. Further, a drop in food prices would immediately benefit households. And if more competitive farming pushed up land prices, it would boost the collateral held by overextended banks.
The pressure on Mr Noda to embrace the TPP has largely come from the big-business lobby, Keidanren, whose members have less to lose than their smaller, less globally competitive counterparts. Their lobbying has been sharpened by America’s looming free-trade agreement with South Korea, recently ratified by Congress and now awaiting approval in the National Assembly in Seoul. Japan’s biggest manufacturers each sell more than Japan’s entire farm sector combined. Yet without free access to American markets, such firms will struggle to remain competitive against South Korean rivals, especially with the yen climbing against the dollar.
Japan’s desire for international heft also has something to do with it. Mr Noda, like many Japanese, worries about his country’s fading relevance in world affairs. This makes it harder for it to influence technology or intellectual-property standards, for instance, in a region increasingly dominated by China.
Participation in the TPP would join the world’s largest economy, America, with the third-largest. That might be the cornerstone for an even bigger free-trade area eventually including China, the world’s second-biggest economy. That is why John Roos, America’s ambassador in Tokyo, says Japan’s involvement would be a “game-changer”. But it would also change Japan, and far beyond its patchwork quilt of paddies—something all prime ministers, let alone one who has been in office for just a few tenuous weeks, have found hard to do.