HONOLULU – Japan entered talks Friday on a game-changing trade pact, boosting US President Barack Obama’s ambitions in Asia as he prepared to host a Pacific Rim summit in his native Hawaii.
Japanese Prime Minister Yoshihiko Noda made the highly anticipated announcement hours before leaving to join Obama, Chinese President Hu Jintao and other leaders of the Asia-Pacific Economic Cooperation (APEC) forum.
Mexican President Felipe Calderon canceled plans to attend after his interior minister, Francisco Blake Mora, a key figure in the country’s bitter war on drug cartels, died in a helicopter crash near Mexico City.
Traffic ground to a standstill at checkpoints in Honolulu as police erected fences on famed Waikiki Beach and sniffer dogs scoped the palm tree-lined harbor ahead of Obama’s arrival late Friday in the city of his birth.
Obama, who will head on after the weekend summit to Australia and Bali, is using his APEC chairmanship to sketch the outlines of a pact that could shape the commercial rules for a region vital to America’s economic future.
The entrance of Japan, the world’s third largest economy, into talks was seen as imperative if the once-obscure Trans-Pacific Partnership (TPP) is to be transformed into an Asia-wide free trade zone spanning the Pacific.
“This is a good sign,” Australian Prime Minister Julia Gillard told reporters in Hawaii. “Clearly we’ve said over time that we would welcome Japan joining the TPP discussions. We would like all of that to be done in the framework of striving for a comprehensive and ambitious agreement.”
US Trade Representative Ron Kirk cautioned that Japan would have to commit to ending protections for its agriculture industry and experts warned that negotiations could drag on for years.
“To join the negotiations, Japan must be prepared to meet the TPP’s high standards for liberalizing trade and to address specific issues of concern to the United States regarding barriers to agriculture, services and manufacturing trade, including non-tariff measures,” Kirk said.
Persuading Asian governments to accept new rules for state-owned companies and commit to reducing tariffs in agriculture will require hard bargaining and concessions from the United States on its own protectionist barriers.
The elephant in the room is China, the world’s second largest economy, which risks being left out in the cold if the trade zone takes off. It has criticized the US ambitions as beyond the reach of developing economies in the fast-growing region.
The decision to join the talks was a thorny one for Noda as Japan’s exporters are keen to expand their markets but farmers fear that a massive flow of cheap food imports would destroy an already weak agricultural sector.
Signed in 2005, the TPP was originally an obscure arrangement between just four members — Brunei, Chile, New Zealand and Singapore.
But it got a shot in the arm in 2008 after the United States announced it wanted to join the grouping and invited a few economies to follow suit.
With Japan’s entry, 10 nations are now in talks for an expanded TPP. The others are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.
The vision is for an initial group of economies to form the core of the grouping. Membership will remain open, with more economies added progressively after they agree to the same commitments as existing members.
The implications for such a trans-Pacific FTA are enormous, especially with the Doha Round of global trade talks still in limbo.
The Pacific Economic Cooperation Council, a Singapore-based think tank, said the combined economic output of the Asia-Pacific region was $35 trillion in 2010, or a little over half of the world’s total.
The 21 members of APEC account for about 40 percent of the world’s population and 44 percent of global trade.
Secretary of State Hillary Clinton, speaking after ministerial-level meetings, hailed “extraordinary efforts” at the APEC summit towards a “rules-based economic agenda for the region.”
“We obviously believe that the world’s strategic and economic center of gravity will be the Asia-Pacific for the 21st century and it will be up to American statecraft over the next decade to lock in a substantially increased investment: diplomatic, economic, strategic and otherwise.”