Assistant USTR Cutler Discusses TPP at APCAC 2012

Assistant U.S. Trade Representative Wendy Cutler
Remarks at APCAC 2012 panel on the Trans-Pacific Partnership
and the future for Asia-Pacific trade

March 1, 2012, Tokyo

As delivered

(Following introduction by Moderator Melanie Brock.)

Thank you Melanie. It is a real honor and pleasure to be here. I met Melanie for the first time a few minutes ago. She was telling me of the virtues of Australian beef. And knowing me I could only talk about U.S. beef and how safe and delicious it is. Thanks so much to the American Chambers of Commerce and APCAC for inviting me here today to speak. During my 20 or so years at USTR I have worked extensively with the American Chambers of Commerce in Asia, and I have always valued your insights, your advice and bringing to us the issues that needed attention. I am just honored to be here today. One of the areas where the Amchams in this region have offered us tremendous support from day one was for the U.S.-Korea Free Trade Agreement, and this wasn't just from the Korea American Chamber of Commerce but it was from the Amchams all over the region. You recognized the importance of this deal early on and the importance of it for the region and the implications for U.S. credibility as a trading partner by finalizing and implementing this deal.

I am glad to report - and I have waited for about six years to say this - that two weeks from today the U.S.-Korea FTA will come into effect. (Applause.)

It's been a long journey to get here, but well worth it, in light of the significant benefits that both sides will gain from this deal.

Now let me just turn to the topic of interest today, and the topic of interest of almost everyone in Japan it seems or at least the people who pull me aside ... and that is the TPP.

There is no doubt that the TPP, the Trans Pacific Partnership is sparking a lot of interest and is already having a major impact in the region. And this impact can be felt especially here in Japan, and I think the huge turnout today underscores this tremendous interest.

Here in Japan, it is fair to say that there is a lively debate going on about whether Japan should join the TPP. This started during Japan's APEC year and it intensified after the November 11 announcement by Prime Minister Noda about Japan's interest to enter into consultations, I want to make sure I get this right, "toward participating in the TPP negotiations."

Just by reading the newspapers from Japan over the past few weeks, I am struck by the number of articles and editorials - as many of you coming from outside of Japan for this conference are also probably noticing. And many of the questions the Japanese are asking themselves and debating are familiar to a lot of us and to any country that has had to make a decision as to whether to join a bilateral FTA or a regional FTA such as the TPP.

The questions are, for example:

• What it would mean to our country to join.
• Also, what it would mean for our country not to join.
• How participation may affect our economy, our people and our living standard.
• And how joining may affect our position and relations in the Asia-Pacific region and globally.

Many of you are quite familiar with the general TPP narrative, and we greatly appreciate the support, advice and input by the Amchams as we have entered into these negotiations and as they proceed.

As I speak today, the 11th round of TPP is getting off in Melbourne, Australia, where negotiators are assembling to continue their talks in over 20 areas of negotiation.

Today what I would like to do is to focus my remarks through the lens of our engagement with Japan on TPP. And so I hope I can contribute to this lively discussion by offering the U.S. perspective on some of the questions that Japan is debating, clarifying what TPP is about and what it's not about, and explain why and how the United States is taking Japan's interest in TPP so seriously, by embarking on our own domestic consultation process.

The TPP

Let me just begin quickly by just saying a few things about the TPP itself. If you know nothing else about the TPP what you want to know is that it is a high-standard agreement. It not only includes comprehensive tariff elimination, but it addresses non-tariff measures, it addresses IPR protection and enforcement, services and investment, disciplines on labor and environment and other areas.

But furthermore it addresses pressing and new issues facing our respective economies that have not been addressed to date in a binding trade agreement. We call these issues the 21st century issues. In fact, many of these issues have been brought to our attention by many of you in the audience because you are the ones doing business in the region. So whether it is regulatory convergence. Whether it is supply chains. Or whether it is how to make FTA's more attractive to small and medium-size enterprises, these are the issues that we have added on to our TPP agenda. And we are also making the TPP what we call an "open platform" agreement - that is, we are opening the negotiation to the participation of other Asia-Pacific economies also committed to a high standard agreement - as an important feature of the TPP.

It is a clear break from what we used to call the "spaghetti" or "noodle" bowl web of agreements toward a more integrated approach and a more business friendly approach as you all do your businesses among different countries in the region.

To be clear, this is not a U.S.-crafted agreement. In fact, it originated with four Asia-Pacific countries a number of years ago, the so-called P4 countries. I don't how many of you in the audience know who the original P4 countries are, but I will remind you in case you don't know, that's Singapore, Chile, New Zealand and Brunei.

The U.S. joined TPP a little over two years ago. In the lead up to that decision, we had an extensive debate in the United States on the merits of making this move, and like Japan now, we faced opponents and skeptics.

We took all these concerns into account, and the Obama Administration decided that it was in our national interest to join and help shape a regional deal with other countries that also seeking a high standards agreement.

Once we joined there was no doubt that our participation elevated the interest and importance of this regional trade negotiation. And, likewise, possible Japanese participation, would further elevate this negotiation and bring it closer to becoming the most promising vehicle for achieving a Free Trade Area of the Asia Pacific (FTAAP).

The sheer size of Japan's economy would bolster the TPP. Japan's GDP is greater than the other eight TPP partners, excluding the United States, by about two-and-a-half times. In addition, Japan already has extensive trade ties with the other TPP partners. Two way trade between the United States and Japan is over $250 billion greater than the other eight TPP partners combined.

Given all this, it is important for TPP membership to work, that both countries do their due diligence, that they are fully aware of each other's expectations, priorities and concerns, and have consulted widely at home to build domestic support for this endeavor. That is what we are doing now.

Immediately following Prime Minister Noda's announcement on November 11 of Japan's interest to join the TPP negotiations, President Obama instructed my boss Ambassador Kirk to undertake a domestic consultation process. Upon our return home from Honolulu that's exactly what we did. The purpose of our work in our domestic consultation process is to assess Japan's readiness to join TPP.

In our view there are two aspects to this readiness. First, we are assessing Japan's readiness to live up to and adhere to the high standards of the TPP agreement. We are not only doing this with Japan, we have done this with other FTA partners and TPP partners. We do this by walking through the issues in the negotiation and sharing our expectations of the types of commitments that any new member would need to share.

At the same time we are also looking at Japan's readiness to address specific issues and areas of concerns. This is important because we think that by clearing and resolving or agreeing on a path to resolution for long-standing bilateral irritants we can free up the negotiating agenda to focus on the other issues. It also demonstrates a country's determination, political will and commitment to tackle thorny issues.

To help us in our assessment, we have gone out to our stakeholders and Congress to solicit their views. We have asked for their input. We put out a Federal Register Notice, and have received over a hundred comments.

The KORUS process that we undertook in 2009 with respect to the US-Korea FTA showed us that by taking the time now to really go out to our stakeholders, understand their concerns, and work through them pays off in the long run.

And in Korea we saw it really paid off when the Korea FTA passed our Congress with strong bipartisan support this past October.

We have also started our consultations with Japan, having two meetings last month. On February 7, my counterpart from the Ministry of Foreign Affairs came to Washington with a team from different ministries to consult on TPP. We updated Japan on our domestic consultation process and views of our stakeholders. And Japan updated us on its domestic process as well.

And just last week, we had a team of issue experts come to Washington for two days of meetings where they met with the different TPP negotiating leads to go chapter by chapter to understand clearly the expectations in the various areas.

We plan to continue this engagement in the weeks ahead, although no dates have been set yet.

In terms of Japan joining the TPP, like any TPP member, it is not just a decision that the United States makes, it needs to be made by consensus by all TPP partners, and our TPP partners are also seriously considering Japan's bid.

There is no doubt that our process is a bit more elaborate than the other TPP countries. But in many respects we have more work to do because unlike many of the other TPP members, we do not have a free trade agreement currently with Japan.

Once each of the TPP members makes its decision individually, then we'll need to make a collective decision.

While all this is going on, as I mentioned earlier, the TPP negotiations are continuing in Melbourne as we speak. And frequent rounds will be held on a regular basis, building on the momentum from Honolulu, and moving forward as quickly as possible.

To be clear, there are two tracks now proceeding simultaneously. The TPP negotiations are proceeding on one track, and our assessment of Japan is proceeding on a separate track. At some point, these tracks will most merge. And how quickly that happens will depend on how quickly Japan and the United States can work together so that we are sure that Japan is ready for the TPP negotiations.

Let me make it clear that in all of this substance must drive the process. It's not about picking a date for a decision. But it's about ensuring that we do our homework. That we do our due diligence. That we clearly understand each other's expectations. That we take meaning steps to address concerns. And that what we have is a strong confidence that we will succeed.

And through all of this we should keep in mind the potentially ground-breaking work we are undertaking and what the TPP is about and what it's not about.

So let me make it clear, and this is less for the Amchams than for my Japanese friends and the Japanese press. I want to make it clear what the TPP is not about first and then what it is about.

• It is not about forcing Japan or any other country to privatize its healthcare system.
• It is not about requiring countries to allow for private service providers of healthcare, including for so-called ‘mixed' medical services.
• It is not about asking countries to mandate that English be used in their schools.
• And it is not about seeking the entry of unskilled labor into TPP member countries.
• And it is not about requiring other countries to recognize professional licenses from other countries.

Let me tell you what TPP is about. It is about a group of countries in the Asia- Pacific region coming together with a shared goal of negotiating an ambitious and comprehensive trade agreement that sets a high standard for others to follow.

It's about being on the forefront of shaping the trade rules for the 21st century.

And it's about enhancing our respective competitiveness, supporting the creation and retention of jobs, promoting higher living standards, and preparing our economies for our children and for the future.

Let me conclude by saying that the prospect of Japan joining the TPP - it's important; it's historic. And frankly it's exciting.

But that said, it presents real challenges as well, not only for Japan but for the United States and the other TPP members. We need to be prepared to address these challenges head on. By doing so, we have the opportunity to shape and define how economic integration will occur going forward in this dynamic where all of you do your business.

Thank you very much.