Faculty Fellow, Research Institute of Economy, Trade, and Industry (RIETI), Japan
After five and a half years of negotiations, the Trans-Pacific Partnership (TPP) agreement was reached on October 5, 2015. Yet it is too early to celebrate as the agreement must be ratified by the participating countries including those where anti-TPP protestors have significant political influence. The TPP is a free trade agreement (FTA) among 12 Asia-Pacific countries, which together account for approximately 40% of the world's gross domestic product (GDP). Not only is it extremely ambitious in the level of liberalization in trade in goods, investment, and services, but also comprehensive in its coverage, setting rules for such areas as electronic commerce, government procurement, intellectual property, labor, and the environment. The TPP has high potential to promote economic growth and improve people's living standards by facilitating the free cross-border movement of key factors of economic activity, such as goods, people, money, and information. Failure to bring the TPP into force would be a great loss to not only the TPP countries such as Japan and the United States but also the global economy.
TPP and the revitalization of the Japanese economy
Following the collapse of its economic bubble, Japan plunged into a prolonged period of stagnation which now has come to be referred to as the "lost two decades." Thanks to the expansionary monetary and fiscal policies under the leadership of Prime Minister Shinzo Abe and his second Cabinet formed in December 2012, the Japanese economy was boosted in 2013. But the effect was short-lived and the economy has been sluggish since 2014. The stagnation of the Japanese economy can be partly attributable to external factors such as a slowdown in the global economy. However, internal factors—i.e., a shrinking and aging population, massive government debts, and slow responses to structural problems such as the closed nature of the market—are more serious. In revitalizing the Japanese economy, which is currently in such a dire predicament, the TPP will be playing an important role.