Photo/IllutrationMichael Froman (Photo by Yuko Lanham)

Former U.S. Trade Representative Michael Froman believes that the Trans-Pacific Partnership 12-country free trade agreement can be the foundation for future trade talks between Japan and the United States.

“We have not yet heard from the new administration specific ideas about what it is they would seek in a bilateral negotiation with Japan,” Froman said in an interview with The Asahi Shimbun on Feb. 8. “In the TPP, Japan and the United States worked very closely together, on a series of issues, reached agreement on a series of issues, and that forms a foundation on which future discussions might proceed.”

Upon taking office, new U.S. President Donald Trump withdrew the United States from the TPP.

Regarding the summit between Prime Minister Shinzo Abe and Trump, Froman said, “Prime Minister Abe has invested enormous political capital in the TPP, in joining the TPP, throughout the negotiation, and in securing the approval of the Diet. And he has talked about and looked to the TPP as a key lever in his structural reform, the ‘third arrow’ of Abenomics.”

Froman added, “I think it will be important for him to convey to President Trump just how central that exercise is to him.”

On possible U.S.-Japan bilateral trade talks, “the Trump administration appears to have a strong focus on bilateral trade balances ... autos are one significant part of that deficit,” he added, suggesting that the automotive industry could be one of the major issues.

Froman took a wait-and-see stance on Trump’s call for a wide range of protectionist policies.

“It has been less than three weeks since the new administration came into office. I think we all need to give them time and space to get their people in place, to get organized,” Froman said.

“They will hear from a wide range of stakeholders, whether it’s our trading partners, whether it’s businesses and other constituents, farmers and others, who care deeply about the global trading system, or whether it’s partners in Congress, on Capitol Hill, who have a long experience in these issues and will want to see the United States continue to show leadership in terms of maintaining an open, rules-based, trading system,” Froman said. “And so I think it’s too early to make judgments there.”

Froman stepped down from his position as the U.S. Trade Representative last month and became a distinguished fellow at the Council on Foreign Relations, a major U.S. think tank.

Excerpts from the interview follow:

Q: Prime Minister Shinzo Abe will be traveling to the United States to participate in a summit this week with President Donald Trump. What can he hope to achieve in this first meeting?

Froman: I think it is an important opportunity for the two of them to share their views, to share their strategies about how to deepen trade relations. I imagine the prime minister will want to hear from the president what his approach to not just Japan but to the Asia-Pacific region might be, and it will be an opportunity, as well, for the prime minister to convey his views on the TPP and how it relates to his own economic strategy in Japan. And I think that will be an important discussion.

Q: What do you think the U.S. side can gain from Japan if they engage in bilateral Japan-U.S. trade talks?

A: I think we have not yet heard from the new administration specific ideas about what it is they would seek in a bilateral negotiation with Japan. Obviously, in the TPP, Japan and the United States worked very closely together, on a series of issues, reached agreement on a series of issues, and that forms a foundation on which future discussions might proceed. But what the new administration might look for, beyond the TPP, is not yet clear.

Q: What are main remaining issues between the United States and Japan?

A: I would put it in a couple different ways. First, I think the Trump administration appears to have a strong focus on bilateral trade balances, and from their public comments it appears that they will be looking for actions that could be taken that would reduce, or eliminate, the deficit between the United States and key trading partners. Obviously, autos are one significant part of that deficit.

In the TPP, we worked very closely with Japan to develop a series of measures to address non-tariff barriers to Japan’s market for our auto producers, and set up a series of obligations and enforcement mechanisms for those measures. Beyond that, I think it’s not yet clear what the new administration will be seeking, either in the auto-specific sector or more generally, to address what they consider to be concerning the trade deficit between the U.S. and key trading partners.

Q: What do you think about Trump’s stance on reducing bilateral trade deficits, to boost the economy? Do you think it’s a good idea?

A: Economists have a wide range of views on this. There certainly are a lot of factors that go into trade balances, other than trade policy, per se, including different growth rates, et cetera. And so, we had a very large trade surplus in the middle of the Great Depression. We had a growing trade deficit in the 1990s, when we added 20 million jobs to the U.S. I don’t think anyone would prefer the Great Depression to the economic expansion of the 1990s.

So, I think the trade deficit is one metric that some people look to. But, of course, it’s a reflection of a complicated set of factors.

I think where the trade deficit reflects either unfair trade practices, where we’re taking in imports that may be being dumped or unlawfully subsidized or, on the other hand, where it reflects barriers to our exports into other countries, well, that very much is a focus of trade policy.

Q: Trump is also talking about trying to introduce much stronger provisions on currency in the bilateral negotiations. What do you think about that?

A: We have an agreement among the 12 finance authorities of the TPP countries on what an appropriate exchange rate policy is, and on what transparency requirements there are, so that there’s visibility into when a country is intervening in its currency, how often, how much. And then there’s an accountability mechanism, where the finance authorities hold each other accountable to those--to the appropriate exchange rate policy. So, TPP would be the first trade agreement that actually has a currency set of disciplines associated with it.

The new administration has talked about the importance of currency, and again, they have not laid out in any detail what it is they seek to do, beyond what we did with the TPP countries. But I imagine that will be an issue for further discussion.

Q: Is there any advice you would give to Abe for that meeting?

A: I think it will be important for the prime minister to convey clearly just how much is at stake in terms of both our bilateral relationship but also the position of the United States in the Asia-Pacific region, in terms of continuing the kind of U.S. engagement and leadership that we have shown in the past.

Prime Minister Abe has invested enormous political capital in the TPP, in joining the TPP, throughout the negotiation, and in securing the approval of the Diet. And he has talked about and looked to the TPP as a key lever in his structural reform, the “third arrow” of Abenomics.

I think it will be important for him to convey to President Trump just how central that exercise is to him, to his politics, and to Japan’s continued reform efforts, and how it’s important to ensure that it continues to move forward, in some form or another.

Q: Including the TPP?

A: In some form or another. The provisions that were agreed to in the TPP have been--are very important, to both the U.S. and Japan, in terms of setting high standards for the region, and also encouraging reform of key sectors in Japan. And so, finding a way to further that effort, I think, will be an important message for the prime minister to convey.

Q: How do you see the prospects of the TPP?

A: I understand that a number of the TPP countries are considering moving ahead as the “TPP-11,” to move ahead with it without the United States. I think that reflects the collective view that what was agreed to in the TPP, in terms of both market opening and high standards, is very important for the region. It sets an important set of “rules for the road” at a time when there are competing visions of how the region should be organized and what the rules of the road for trade might be.

President Trump has clearly stated the administration’s position on this. But, at the same time, there are the 11 other TPP countries--and, by the way, there are a dozen additional countries who have expressed interest in joining the TPP at some stage. It will be important for those countries to determine whether, and, if so, how to move the TPP forward, with or without the United States.

Q: How much are you concerned about the new administration’s trade policies?

A: It has been less than three weeks since the new administration came into office. I think we all need to give them time and space to get their people in place, to get organized, to run whatever policy process they’re going to run, to make decisions on a number of these issues. And I imagine, as they do that, they will hear from a wide range of stakeholders, whether it’s our trading partners, whether it’s businesses and other constituents--farmers and others--who care deeply about the global trading system, or whether it’s partners in Congress, on Capitol Hill, who have a long experience in these issues and will want to see the United States continue to show leadership in terms of maintaining an open, rules-based, trading system.

And so, I think it’s too early to make judgments there, but obviously we have benefited enormously over the years from the open, rules-based, trading system. We are an export powerhouse. We export more than $2 trillion from our economy every year to the rest of the world. Over 11 million workers in the United States owe their jobs to exports. And we know that export-related jobs pay up to 18 percent more, on average, than non-export related jobs.

So, for all those reasons, I think it will be important to continue to make progress toward opening other markets and maintaining an open, rules-based trading system.

Q: What do you think about renegotiating the North American Free Trade Agreement? Do you think it’s a good idea?

A: When Senator (Barack) Obama was running for president, he called for the renegotiation of NAFTA, and he was very explicit about what he meant. He said that labor and environmental issues, rather than being treated as side issues that were not enforceable, should be core to the agreement and fully enforceable, just like any other provision. And that’s exactly what we did in the TPP.

So, the TPP renegotiates NAFTA by requiring labor and environmental protections, it raises intellectual property rights protection, it creates new disciplines around the digital economy, it establishes rules for the digital economy. It gives access for us to dairy and poultry in Canada, which we did not get in NAFTA, access to energy in Mexico which we did not get in NAFTA, consistent with their recent energy reforms. So, in our view, the TPP was the renegotiation of NAFTA.

In terms of what further steps the Trump administration might take, again, they have not yet laid out in any great detail what they are seeking, beyond what has already been done in the TPP. But those are the kinds of discussions that President (Enrique) Pea Nieto and Prime Minister (Justin) Trudeau have been having and will continue to have with President Trump and his administration.

Q: I want to also ask you about the U.S. presidential election. How did you view the results of the election? How did you see the people’s frustration toward globalization or anti-trade sentiment?

A: Well, I think the election here very much underscored that there is a very significant part of our country that, notwithstanding the economic recovery of the last seven years, feels very anxious about their economic well-being and the economic well-being of their families, and that reflects a long period of wage stagnation and widening income inequality. Even though wages have begun to tick up in the last two years, it’s too little and too slowly.

Now we know, and economists will tell us, that 80 percent or more of the impact on jobs and wages comes from technology and automation, not trade. But you don’t get to vote on technology, and you don’t get to vote, really, on globalization. Globalization is a historic trend and it reflects containerization of shipping, which made shipping costs so much easier and, therefore, allowed for supply chains to develop. It reflects the spread of broadband, so that you could provide services from anywhere in the world. That is just happening, regardless of any trade agreement.

You don’t get to vote on technology, you don’t get to vote on globalization. But you do get to vote on trade agreements. So, trade agreements become the scapegoat, the vessel into which people pour their legitimate economic anxieties, but the scapegoat politically. And I think that’s why we saw such a disproportionate focus on the TPP or on trade agreements, in this election. It reflects that underlying sense of anger and frustration by people who feel that the system has left them behind.

As a government, we don’t do a good enough job at helping people or communities who are adversely affected by change. But that change is happening, and that change is only going to accelerate due to technological developments. And, therefore, I think the real focus should be not on whether we raise barriers to imports or withdraw from or renegotiate trade agreements, but on what we need to do to provide the necessary support for people, and for communities, going through change, so that they are supportive, and see change more as an opportunity than as a threat. And that, I think, is an area where there needs to be a lot more attention, intellectually, but also politically.

Other countries, and certain states in the United States, do it better than we do at the federal level, in terms of understanding how change affects individuals and communities, and being proactive about helping people transition, or making sure they have the skills necessary to succeed in a rapidly changing environment, and that’s something that we need to focus much more on.

Q: Are you talking about the Trade Adjustment Assistance?

A: TAA is one of the programs we have, but it really doesn’t go far enough. First of all, it only affects people affected by trade, when a vast majority of the dislocation in our economy is coming through technology. And secondly, it is an after-the-fact program. It doesn’t think through, “Well, these industries, or these kinds of jobs, may be declining. These kinds of jobs are emerging. How do we make sure that, first of all, we’re preparing our young people with all the skills that they need to succeed in this environment, but also helping current workers get the new skills they need, throughout their life, to transition to the faster-growing parts of the economy?” And so I think we need to rethink that whole structure, in terms of how we provide that kind of assistance.

Of course, the rise of populism is not unique to the United States. We see it in Europe and elsewhere. We see the distrust of institutions or pushing back against the center, something that is not just unique to the United States. But I think, here in the U.S., it’s awfully easy to either blame immigration or blame trade deals for the problems in the economy that we’ve not adequately addressed through our own domestic policies, and I am hopeful that, coming out of this campaign--it’s for the first we saw not just Democrats but Republicans saying we need to do more for people and communities who are feeling dislocation, that there could be support, potentially, for doing--for being--more proactive in this area.

Q: What kind of role do you think Japan can play in terms of leadership of the trade negotiations and agreements?

A: I think Japan plays an absolutely critical and central role in how the trading regime of the Asia-Pacific and, therefore, the global trading system, is going to evolve. It played a very important role in the TPP, in helping set high standards for the region, and for many of the countries in the TPP, it was Japan’s participation that made the TPP particularly attractive. Many of them already had access to the U.S., but it was working closely with Japan to integrate the region that made it a particularly worthwhile activity.

I think that Prime Minister Abe and Japan has an absolutely central leadership role to play in whatever the next chapter is on this issue. And my hope would be that, because Japan understands and appreciates the importance of defining a set of high standards for the region and not having a “race to the bottom,” that it will continue to play an even increased leadership role, going forward.

Q. What would be a kind of good way to actually deal with China, in terms of trying to bring them into the international trade arena?

A: It is important that China take on responsibilities commensurate with its role in the global economy. As the second-largest country in the world, as in many respects the first-largest trading country in the world, it has an enormous amount at stake in the global trading system, and it needs to take some responsibility for that system. That means playing by the rules. That means being proactive in helping to advance the negotiating agenda. And that means working with other countries to ensure that the open, rules-based, system continues to evolve in a way that reflects the changing dynamics of the global economy.

In the eight years of the Obama administration, I think we made progress on a number of issues with China through our various mechanisms. The Strategic and Economic Dialogue, the Joint Commission on Commerce and Trade, the long list of summit meetings between our presidents. But there’s still a long way to go. And I think that requires a really concerted effort by the global community to convey messages to China. For example, on excess capacity. That when they over-build, in steel, or aluminum, or solar panels or other products, it distorts global trade, and they have a responsibility for avoiding that kind of distortion that has an adverse impact on workers and businesses in other countries.

The bilateral investment treaty was an interesting exercise because it was clearly an area that the Chinese, or at least part of the Chinese system, saw as an important avenue for promoting reform within China, fundamentally changing the relationship between the government and party, on one hand, and the economy on the other, moving from a system in which everything is prohibited unless it’s approved, to something where everything is permitted unless it’s specifically regulated.

We made significant progress in those discussions. We did not complete the negotiations. But I think it will be important to continue to take steps to encourage that reform effort in China, which is not only in the interests of the Chinese but in the interests of all of us, in a global system, that China moves toward a more market-oriented economy, where there is less likelihood of distortion.

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Michael Froman became U.S. Trade Representative under the Obama administration in 2013. In the TPP, he negotiated the trade pact with his counterparts of 11 other member countries, including Akira Amari, former minister in charge of economic revitalization, and reached an agreement in a cabinet-level meeting in Atlanta in 2015. He previously worked at Citigroup. Former President Barack Obama was his classmate at graduate school at Harvard.

(This article is based on an interview by Daisuke Igarashi in Washington.)