Trans-Pacific Partnership (TPP) free trade negotiations have reached a critical stage that will determine whether Japan can protect sensitive product categories -- its so-called five "sacred precincts," including rice -- from cross-the-board tariff elimination.

According to a senior Liberal Democratic Party (LDP) executive, the party plans to consider abolishing tariffs on at least some items covered by the five commodities, aiming to compromise on items that will have the least negative impact on domestic industries while at the same time satisfying the ambitious trade liberalization program that is the TPP's raison d'etre.

The government will have to move quickly, as the leaders of the 12 nations at the negotiating table indicated during recent meetings in Bali, Indonesia, that they intend to have an accord signed by the end of this year. As such, the ministerial level conference expected to be held in early December could very well be the last round of negotiations.

There is deeply-rooted skepticism within the government that an agreement can be signed before the close of 2013, but officials will "look hard for common ground on the tariffs question this November" just in case negotiations suddenly speed up, according to a government source.

Japanese tariffs cover 9,018 specific items, of which the "sacred" categories of rice, wheat, beef and pork, dairy products and sugar account for 586. If current tariffs on all those items were maintained, Japan would still eliminate tariffs on 93.5 percent of trade goods in the TPP zone. It is widely thought, however, that TPP negotiations are shooting for tariff elimination on more than 95 percent of items.

As such, there is a proposal within the government to narrow down precisely which items covered by the five "sacred" product categories have the greatest influence on the welfare of domestic industry. 

In concrete terms, Japan would seek to maintain tariffs on vital "national trade goods" including rice, wheat and barley, as well as government-set low-tariff quotas for items such as butter and powdered skim milk. This would allow tariffs on about 230 more items in the five categories -- primarily processed and manufactured items like rice crackers and beef tongue -- to be cut to zero in the TPP zone, making 96 percent of import items tariff-free.

The LDP, however, sees other items including chicken and plywood as "sacred" as well, even though they're not covered by the five sensitive categories, leading the LDP's TPP policy committee chief Koya Nishikawa to wonder "after all important products have been subtracted and added, where will trade liberalization end up?"

However, even if tariff protections are maintained for certain agricultural products and dropped for processed items, there is still a real possibility that domestic industries would take a hit under the TPP. For example, imports of azuki red beans exceeding a government-set quota are taxed at a rate of 400 percent. However, sweet red bean paste, made of red beans and sugar, is subject to a flat 23.8 percent tariff. China exports tens of thousands of tonnes of red bean paste to Japan every year, which of course impacts Japanese red bean and sugar producers.

According to a government source, "It's very important (for the LDP and the government) to be able to say, 'We protected the five important product categories.'" As such, the administration plans to closely examine the conditions of every item covered by the five important categories, paying close attention to those products' supply and demand and distribution to make sure tariff elimination doesn't come back to bite domestic producers in unexpected ways.

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This news was published on October 09, 2013.

Source: http://mainichi.jp/english/english/newsselect/news/20131009p2a00m0na013000c.html