From Tokyo to Austin

A discussion with Japanese diplomats will inevitably turn to the shinkansen, the island nation's legendary bullet train system. A shinkansen is officially classified as late if it is one minute behind schedule. The average delay is 36 seconds. Houston Consul-General Nozomu Takaoka smiled. "We have a different sense of punctuality."

Texas could be getting its own bullet train system. Private transit firm Texas Central is proposing a high-speed link between Dallas and Houston. For the huge amount of business traffic between the two cities, a 90 minute, 205 mph train ride could be revolutionary. Quicker, more comfortable, and no messing with airport security. Plus, the environmental impact per passenger-mile makes I-45 look like the nightmare everyone knows it to be.

But Takaoka wasn't in Austin to talk about trains. He was part of a delegation to promote U.S.-Japanese relations as part of the Walk In U.S., Talk On Japan goodwill missions. Ambassador Yasuo Saito, former ambassador to Saudi Arabia, Russia, and France, described the purpose as being "to speak to the American people and talk the importance of a bilateral relationship between the United States and Japan." This is his third such tour, having visited Virginia, North Carolina, Georgia, and Tennessee. "We basically discuss the state of economic recovery in Japan, and also how are we facing the new geo-political situation in Asia."

A key component of that regional change is the growth of the Japanese economy. Saito said, "After 15 years of deflation, we are almost back." He credits Abenomics – the name given to the economic policies of Prime Minister Shinzō Abe, whose "three arrows" of fiscal stimulus, monetary easing and structural reforms have been extremely controversial. However, many critics see it as just discredited European-style austerity policies under a different name, with particular fury for cutting business taxes while increasing value added sales taxes.

The next stage of that economic growth is the highly controversial Trans-Pacific Partnership, a proposed 12-nation agreement that could revolutionize the region. The deal finds its roots in a 2006 agreement between Brunei, Chile, Singapore, and New Zealand, called the Trans-Pacific Strategic Economic Partnership Agreement. For the last seven years, talks have gone on to add seven more countries to that list: Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam. The process of negotiating a 12-nation trade treaty has been mind-numbingly complex and secretive, with the full text still not available.

However, documents released by WikiLeaks show a great degree of tension caused by the U.S., whose negotiators seem responsible for weakening many key components, including environmental regulations. The Electronic Frontier Foundation has raised particular concerns about highly restrictive intellectual property regulations found in the draft documents.

It's not like there's no precedent for concern, and another such deal may be tough for many people to swallow, since previous free trade agreements have been called out for shipping jobs overseas. However, Saito counters, "As the size of the economy expands, there'll be more jobs created."

That's what the argument may boil down to. The U.S. has seen manufacturing jobs fly overseas for decades, to Mexico and Asia. Japan has seen the same phenomenon, with firms moving to India and Thailand. All the while, Chinese industry has undercut everyone, often by an attitude to environmental concerns and workers' rights so cavalier that it makes Texas look like a union nirvana.

Tokoa argued that the TPP could reverse that situation, and that the deal could actually encourage further Japanese investment in the U.S. It's already is already the biggest single overseas investor in America, a fact re-enforced by the recent acquisition of HCC Insurance by Tokio Marine of Japan. One of the single biggest pieces of employment news in recent years was the opening of Toyota's Texas facility in 2006, and the 2008 relocation of all work in their New United Motor Manufacturing plant in California to San Antonio. Locally, there's the recently announced partnership between the Japanese New Energy and Industrial Technology Development Organization and UT Austin to research the holy grail of the IT industry, energy efficient data centers.

Tokoa explained that, while the TPP negotiations are being held at the highest level, its reception and longevity may be based on "how the American people feels about it, and I want their opinion to be based upon facts." For example, 50% of America's trade deficit is with China, and only 10% with Japan. If the TPP passes, he said, "It absolutely works for the U.S."

But then there's been Congressional opposition to the deal. Discussion has revolved around three acronyms: TPP; TPA, standing for Trade Promotion Authority; and TAA, or Trade Adjustment Assistance. TPA is basically a way for Congress to grant the executive branch power to negotiate trade agreements, upon which Congress can then only either pass or reject with no meaningful amendments. Some Republicans hated this because, even though it gave them the free market they wanted, it also empowered the Obama administration. However, Democrats hated it because in the TPA deal the GOP wanted to cut out the TAA (a federal program to assist workers who lose their jobs due to a changing import/export scene).

Finally, Obama managed to get both TAA and TPA passed, which meant energy and attention could return to the TPP. That was vital for all parties, since nothing was more likely to derail the deal than Congress rewriting seven years of international, multi-party negotiations on the fly. Or, as Saito expressed with more diplomacy, "Eleven negotiating economies would have no confidence in the negotiations."

Saito posits that this isn't just about finance. The metaphorical tiger in the room is China.

For the last few decades, the Chinese economic model has been built on rapid expansion of exports. That fact alone was enough to encourage bi-partisan support in the Senate to re-authorize the US Export-Import Bank: As Sen. Lindsey Graham, R-South Carolina, put it, if China wasn't going to dissolve its ExIm bank, then hamstringing U.S. exports was a unilateral suicide pact.

But that Chinese growth model inevitably will collapse one day. So China has to make sure it still has a role in the global economy. Put simply, if the 11 nation deal fails, then someone else will set the rules for the region, and that means China. Saito said, "TPP is not simply economic. TPP has an important geo-political meaning." If the deal fails, then China has an opportunity to re-write the rules of commerce and international engagement in the Pacific and beyond. Saito said, "We will have failed in placing rules and regulations in this part of the world, where there is 40% of the world economy, 30% of world trade, and someone else will write rules that maybe are not good for the US or Japan."

This isn't some theoretical concern. China is already holding its own trilateral negotiations with Japan and Korea. Japan wants such deals, but not necessarily if Beijing writes the ground rules. Saito said, "It is, in my view, important, that TPP goes first, so that other negotiations follow the model of TPP."

In all this, there's an unstated reality that the U.S. has taken its eye off Asia for the last couple of decades. In that time, China has truly reached global superpower status, with massive influence not just in the Pacific Rim, but an increased role in Africa's rising economies. Saito politely said that Japan "welcomes a rebalancing," not least so people are aware of the importance of the alliance.

Then there's the military reality. Sino-Japanese relations have become increasingly tense, in no small part due to disputed territories in the South China Sea. However, Japan does not have a standing army – an issue that has been under deep scrutiny in recent months, with constitutional scholars arguing that Japan cannot enhance its own national self-defense. Instead, it depends on what is known as collective self-defense, and military agreements with the U.S. Saito said, "It's never been more important to maintain the alliance, and strengthen the alliance between the two countries in light of globalization."