U.S. And Japan Hit Snag In Major Trade Pact Negotiations

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STEVE INSKEEP, HOST:

A big step for free trade requires two longtime allies to agree. The United States and Japan are two giant economies leading the effort to create a Trans-Pacific Partnership. It's a free-trade zone, a sort of NAFTA for the Pacific. Negotiations have gone on for months. The trouble is that a deal would require the U.S. and Japan to resolve some seemingly intractable issues. Here's NPR's Jackie Northam.

JACKIE NORTHAM, BYLINE: Let's face it - trade negotiations, even the multibillion-dollar ones, are often plodding, incremental affairs. At times both sides stare at each other, waiting for the other to blink. But sometimes, behind closed doors, there's intrigue, surprise, even high drama. Take, for example, a couple of weeks ago when Japanese Economy Minister Akira Amari met in Washington with Michael Froman, the U.S. trade representative. The chief negotiators were trying to shore up final details which would clear the way for passage of the Trans-Pacific Partnership, says Sheila Smith, the Japan specialist at the Council on Foreign Relations.

SHEILA SMITH: So there's a lot of high expectations on both Froman and Amari that they will come through and they will get this done. And everybody's kind of holding their breath.

NORTHAM: The two men were into their second day of negotiations. Accounts from people on both sides say it wasn't long after lunch had been delivered that Amari abruptly stalked out of the room, leaving behind a surprised American negotiating team and their sandwiches. Amari got on a plane and flew 14 hours back to Tokyo. Smith says the economy minister later appeared on Japanese TV, expressing his anger and frustration with the talks. Michael Green, an Asia specialist at the Center for Strategic and International Studies, says he's not surprised there were tense moments.

MICHAEL GREEN: My understanding is that well over 95 percent of the big pieces of this Trans-Pacific Partnership negotiation are fine between the U.S. and Japan. These trade negotiations are always hardest at the end because you're getting to the toughest domestic political issues.

NORTHAM: It all comes down to agriculture and automobiles. Japan wants the U.S. to drop or reduce tariffs on the import of passenger cars and on light trucks. The U.S. has a 25 percent import tariff on light trucks. On the flipside, the U.S. wants to open up markets to Japan's so-called sacred commodities - such as rice, pork dairy and sugar. These are backed by powerful political lobbies. Japanese tariffs on rice alone are a whopping 778 percent. Lack of agreement on these areas was probably the cause of the latest bust up, says the CFR's Smith.

SMITH: I suspect that the Japanese came to the table in Washington feeling like they had a good offer to provide the U.S. The U.S. side was either dissatisfied with that offer or was not quite ready themselves to make a similarly good offer.

NORTHAM: Whatever the cause, finalizing the TPP pact is stalled without an agreement between the U.S. and Japan, says Mireya Solis, a senior fellow at the Brookings Institution.

MIREYA SOLIS: We have to ask ourselves, how are we going to keep the momentum going on these trade talks? I think we have now reached the time when it really boils down to a question of leadership.

NORTHAM: Both Japanese Prime Minister Shinzo Abe and President Obama has stressed the importance of sealing the trade deal. Abe needs it to add credibility to his promise to reform and grow Japan's economy. The Obama administration needs the deal to help solidify the so-called pivot to Asia. The issue came up during a conversation last week between the two leaders - Solis again.

SOLIS: So I think they're trying to pick up the pieces, and they're trying to send the message that, you know, things are not as bad as they seemed given the failure of the meeting last month. But we have not in any way received any sense that they are actually there, that the breakthrough has happened.

NORTHAM: Negotiators are expected to meet again in Australia this week. Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.