麻豆传媒在线

On December 30, 2018, the TPP agreement between 11 countries (hereinafter referred to as CPTPP) finally came into effect. The TPP negotiations sparked much debate and interest within Japan, and were even referred to as the "Opening of the Country in the Heisei Era." While 15 Economic Partnership Agreements (EPAs) have entered into force to date, this is likely the first time a trade agreement has garnered so much attention. What kind of impact will the CPTPP—which was at times said to even threaten the destruction of the Japanese economy—have in the future?

While Japan's interests in the area of tariffs were concentrated in the agricultural sector, such as the so-called "five sensitive items," I would like to focus here on the manufacturing industry, which accounts for the majority of Japan's exports, and consider the impact on those exports. To state the conclusion first, due to the existence of existing EPAs, the impact of the CPTPP on Japanese manufacturing exports is expected to be surprisingly small. Despite the intense debate that took place, it may feel like an anticlimax.

First, it is necessary to understand how exporting companies generally choose tariff rates. Normally, in trade between nations, a tariff rate called the Most-Favored-Nation (MFN) rate is used. However, in trade with EPA partner countries, companies are given the "right" to use tariff rates lower than the MFN rate, as defined within the EPA agreement. To utilize EPA rates, exporting companies must satisfy rules of origin and obtain certificates of origin, processes which involve a certain administrative burden. Therefore, EPA rates are selected only when sufficient profit can be gained by using them. In the case of companies that cannot obtain sufficient profit—because the EPA rate is not significantly lower than the MFN rate or because the export volume is small—the MFN rate will likely continue to be used even for exports to EPA partner countries.

Furthermore, it is important to note that there is not necessarily only one available EPA rate. For example, among the CPTPP member countries, the only ones with which Japan has not yet concluded an EPA are Canada and New Zealand. Since Japan has bilateral or regional EPAs with the other countries, EPA rates are already available for trade with them. Even if a company chooses an EPA rate over the MFN rate, if the CPTPP does not provide a lower EPA rate than the existing EPA, the existing EPA rate will likely continue to be used as before.

In particular, EPAs that entered into force earlier tend to provide lower EPA rates. Tariff reduction methods under EPAs include those where elimination occurs immediately upon entry into force, and those where reduction and elimination occur gradually over several years. In the former case, tariffs will have already been eliminated under the existing EPA, and in the latter case, the rates of the EPA that entered into force earlier will be at a lower level.

Additionally, when EPA rates are the same, there is a tendency to use the rate of the EPA that entered into force first. This is related to the aforementioned compliance with rules of origin and certificates of origin. Companies accustomed to complying with an existing EPA will not go out of their way to use a new EPA if the tariff rates are the same. This trend is also evident in trade with ASEAN countries, with which Japan has concluded both bilateral and regional EPAs. In fact, for exports to Japan, almost all countries primarily use bilateral EPA rates; the only exception is Vietnam, where the regional EPA entered into force before the bilateral EPA, and thus the regional EPA is more widely used.

Therefore, excluding trade with Canada and New Zealand, for trade to be conducted using CPTPP rates, it is crucial that the CPTPP provides rates lower than existing EPA rates. However, now that many years have passed since the existing EPAs entered into force, cases where the CPTPP provides lower rates are rare, such as some automobiles in Mexico and some automobiles and auto parts in Peru and Vietnam. For these reasons, it is expected that, except for a few cases, very few transactions will be conducted using CPTPP rates. This is not because the content of the CPTPP is poor, but rather the effect of existing EPAs and a result of rational decision-making by companies.

However, even if the CPTPP provides tariff rates similar to existing EPAs, the possibility remains that the CPTPP will be selected. The rules of origin that exported goods must satisfy are determined by item and by agreement, and in some cases, the rules of origin defined by the CPTPP may be easier to satisfy. Furthermore, the CPTPP allows companies to create their own certificates of origin rather than using a third-party institution (self-certification system). If a company, such as a large corporation, has a sufficient internal system in place, it can reduce the burden of origin certification, which may lead to the selection of the CPTPP. I would like to keep a close eye on the utilization status of the CPTPP in the future to see how significant these effects will be.