Sean Connell: Lessons from KORUS for Japan and TPP

The agreement by the eleven Trans-Pacific Partnership (TPP) member nations on April 22 to include Japan in their ongoing negotiations was a significant breakthrough, both for advancing the high-standard “21st century” regional trade agreement envisioned in TPP and for Japan’s quest to revitalize its economy. With Japan now formally participating in the negotiating rounds, TPP covers 40 percent of global GDP, increasing its potential to shape the Asia-Pacific regional economic environment and global trade rules.

Prime Minister Shinzo Abe has made TPP a core element in his economic growth strategy, ensuring that structural reform issues that Japanese policymakers have long struggled to address will be front and center on his agenda. In announcing his intention to seek Japan’s inclusion in TPP, Abe contrasted the potential risks of Japan’s inward-looking tendencies with other countries that are rapidly opening themselves to economic growth, singling out Korea and its free trade agreements with the European Union and the United States. It is impossible to discuss Japan’s participation in TPP without considering the role of Korea and the impact of the U.S.-Korea Free Trade Agreement (also known as KORUS).

There are more than a few parallels between Japan’s participation in TPP and the experience of KORUS. It is worthwhile to consider the lessons learned from KORUS in looking at ways TPP could not only promote new economic growth, but also bring new momentum to the Japan-U.S. partnership as KORUS did in Korea-U.S. relations.

First, the goals of TPP build upon strong provisions and protections included in KORUS. Indeed, TPP is often described as a “KORUS-plus” agreement in its intended scope and provisions. Several of KORUS’ twenty-four chapters—ranging from services and intellectual property rights (IPR) to investment and technical barriers to trade, among others—are likely to serve as a basis for the twenty-nine chapters under discussion within TPP. Beyond the traditional challenge of eliminating high tariffs, these agreements target removing non-tariff barriers in order to facilitate new trade and investment. Examples include bringing regulations and standards into greater alignment with international best practices, establishing a level playing field, and strengthening protections in areas such as investment, IPR, and competition policy.

KORUS successfully demonstrated ways to address these often complex issues, setting important benchmarks for future trade agreements. As a result, it has reshaped trade negotiations in Asia, providing the template for Korea’s trade agreement with the European Union and offering models for other global trade discussions. KORUS is instructive in the level of commitments Japan will be expected to make in TPP, both in regards to non-tariff barriers and to opening its agriculture and other protected sectors. On several key issues, such as IPR, anti-corruption, and environment and labor protections, it is worth noting that Japan has strong rules and shares many goals with the United States, presenting important areas for cooperation within TPP.

A second parallel is the momentum that bold measures can build. Many in the United States were initially skeptical of Korea’s readiness to enter into comprehensive FTA talks, due to long-standing challenges—such as the screen quota protecting Korea’s domestic movie industry—that Korean governments had pledged to address yet deemed too politically sensitive to tackle. With a narrowing window of opportunity to launch negotiations, however, the Korean government acted decisively to reduce the screen quota and settle other trade disputes up front, demonstrating its commitment. Throughout the negotiations, Korea continually took bold steps, including on agricultural and other highly sensitive issues, to ensure the successful conclusion of KORUS.

Bold actions that build confidence of Japan’s readiness to meet TPP’s ambitious goals stand to generate strong momentum for the negotiations. There is similar skepticism of Japan’s readiness to commit to the agreement’s market opening goals. The actions on autos, insurance, and other issues that Japan committed to in its April 12 bilateral agreement with the United States are an important start. These represent the kinds of compromises that Japan and other TPP partners will need to make for negotiations to succeed. Actions like these could also send positive signals to U.S. and other foreign investors that Japan’s market is open for business in ways it sometimes is seen as not.

A third parallel to consider is the opportunity to build new awareness in both countries of the importance of the bilateral relationship. The KORUS experience infused new energy into a bilateral partnership historically defined by, and sometimes divided over, security and geopolitical issues. When KORUS negotiations began in 2006, the U.S. public had relatively limited awareness of the considerable economic linkages with Korea supporting domestic jobs and growth. Perceptions of Korea as a closed market did not reflect significant reforms Korea made following the 1997-1998 financial crisis, which supported its remarkable economic recovery by opening its doors wider to foreign trade and investment. KORUS put the economic relationship front and center on the bilateral agenda—and there were many positive stories to share. These ranged from small U.S. businesses already successfully exporting to Korea and looking to grow their sales, to communities across the country experiencing new job growth and economic revitalization through Korean investment.

Japan’s participation in TPP could, similarly, increase awareness of the profound economic interconnections with the United States. Not unlike Korea, public perceptions of Japan’s economy among Americans can reflect past experiences rather than current conditions. Often unrecognized is the deep integration of the U.S. and Japanese economies and supply chains, and the hundreds of thousands of jobs in both countries this supports. The unanticipated disruptions to U.S. supply chains resulting from Japan’s devastating March 2011 earthquake and tsunami surprised many Americans by revealing just how tightly interwoven they are. TPP offers a chance for people in both countries to update perspectives and more fully appreciate the ways they benefit from these linkages every day.

It is easy to forget today that, just a few years ago, some voices in Washington and Seoul raised doubts about the future of the Korea-U.S. alliance amid sometimes-thorny differences over North Korea policy and the U.S. military footprint. KORUS showed what can be accomplished when national visions are refocused around ties that connect, rather than issues that divide. Strong leadership, a willingness to make tough decisions, creative solutions by trade negotiators, and active efforts by a broad range of interests to build support in both countries all factored into the success of KORUS. It is an outcome that Japanese and U.S. policymakers should be mindful of as they explore the full potential through TPP to strengthen their partnership and forge new areas for growth.

Sean Connell is a Japan Studies Fellow at the East-West Center in Washington, DC, and a former CFR International Affairs Fellow in Japan. He was executive director of the U.S.-Korea Business Council during the KORUS negotiations and congressional approval process.