Sunday, April 19, 2015
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Author: Tridivesh Singh Maini, Jindal School of International Affairs

Ever since former prime minister P.V. Narasimha Rao reshaped India’s foreign policy in the 1990s under the so-called ‘Look East’ policy India has strengthened ties with Southeast Asia. The current government of Prime Minister Narendra Modi has unequivocally said that it is keen to progress from the ‘Look East’ policy to ‘Act East.’

The post-Cold War world has compelled India to reshape relations with important countries, such as the US and Japan. India’s increasing economic clout has also meant that the outside world has paid greater attention to it.

Since the 1990s, India has moved from being a sectoral partner of ASEAN to being a dialogue partner. Trade between India and ASEAN is tipped at US$76 billion (as of 2013–2014), which — while far below its potential — is up more than 20 per cent compared to a decade ago. This has been facilitated by the India–ASEAN free trade agreement (FTA) in goods. Bilateral trade is likely to increase further, with both sides setting a target of US$100 billion by this year.

In the strategic sphere too, India has strengthened ties with Vietnam and Singapore. India has been carrying out joint naval exercises with Singapore near the Andaman Islands for two decades. India signed a military agreement in 2003, which includes joint exercises and training. And in September 2014 the two countries decided to strengthen cooperation in the context of counterterrorism.

India has extensive strategic ties to Vietnam, which include interactions between defence services and assistance in the maintenance of defence equipment. During Indian President Pranab Mukherjee’s visit to Vietnam, a US$100 million line of credit was signed between the EXIM Bank of India and Vietnam’s Ministry of Finance, specifically for defence procurement.

India is also no longer ambivalent about its role in Southeast Asia, especially in regards to the South China Sea dispute. This was evident in Modi and US President Barack Obama’s joint statement. Modi also stated: ‘We have a shared interest in maritime security, including freedom of navigation and commerce, and peaceful settlement of disputes in accordance with international law’.

India has begun to place special emphasis on Cambodia, Myanmar, Laos and Vietnam. It has ramped up financial aid and development assistance, and has set up a special desk at the Ministry of External Affairs. India is now assisting these countries in areas like information technology as well as English-language training.

Steps are also being taken to enhance both land and sea connectivity with Southeast Asia. Myanmar is the only gateway through land to South East Asia. A trade zone connecting Behiang in Manipur with Myanmar’s Chin province is being discussed, while a land customs station at Zawkhatar in Mizoram is also likely to be inaugurated soon. Chief ministers of north Indian states are involved as key stakeholders, not just in the context of ties with Myanmar but the overall Act East policy.

India is also seeking to build closer maritime links with Southeast Asia. The Shipping Corporation of India initiated a bi-weekly container shipping service to Myanmar in October 2014. It is likely that similar services will also be launched to Vietnam and Cambodia.

But if India wants its Act East policy to be successful it needs to take a number of further steps.

First, India must strengthen important infrastructure projects such as the trilateral highway linking India–Myanmar–Thailand and infrastructure on land borders with Myanmar.

Second, India needs to utilise its diaspora more effectively. So far, it has engaged only with the Indian diaspora in Singapore, Malaysia and to some extent Thailand. India needs to pay greater attention to the Indian community in Myanmar.

Third, there is scope for greater engagement with countries like Indonesia and the Philippines. There is immense potential for strengthening India–Indonesia relations not just due to their common past, but also due to the similar backgrounds of Modi and Indonesian President Joko Widodo, who were both strong regional leaders before becoming heads of state.

Finally, a large number of Indian states are beginning to engage with Southeast Asian countries, especially Singapore and Malaysia. While it is logical to make northeastern states key stakeholders in the Act East policy, it is also important to rekindle ties between other Indian states and ASEAN countries.

Indian cities that share a common history and heritage with countries in ASEAN can deepen relations on the basis of religious history. For instance, the Buddhist site of Sarnath near Varanasi receives a large number of tourists, many from Thailand. There are a number of sites in Madhya Pradesh such as Mahurijhari that can similarly be linked with ASEAN countries. Links between cities in states such as Kerala, which were part of the Spice route, can also be built. Already, UNESCO and the government of Kerala signed an agreement in 2014 to revive the Spice Route Project.

There is immense potential for India finally to play a greater role not just in South Asia but in Asia as a whole.

Tridivesh Singh Maini is a Senior Research Associate with the Jindal School of International Affairs, Sonepat, India.

A version of this article was first published here on Global Asia Forum.

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Why India needs to ‘act’ East

Author: Terry Russell, Denpasar

Timor-Leste’s new Prime Minister, Rui Araujo, has inherited a policy of decentralising the nation’s governance. Given capacity issues, this process is unlikely to bring broader-based rural development to Timor-Leste in the short term. But, if managed effectively, greater decentralisation could have some positive impacts on village-level infrastructure and autonomy.

Timor Leste Prime Minister Rui Maria de Araujo talks to former prime minister Xanana Gusmao and former president Ramos Horta, 21 March 2015. (Photo: AAP)

Administrative decentralisation is embedded in Timor-Leste’s Constitution. Recent laws, most notably Decree-Law no. 4/2014 on Administrative Pre-deconcentration, have now provided the legal framework for increased decentralisation to the districts. Under these laws, district managers continue to be appointed by the national-level government. Yet now these managers will have a bigger budget and direct authority over most of the offices operating at district level.

Considering the lack of institutional capacity even at national level, Timor-Leste is highly unlikely to find sufficient institutional capacity in its districts. The government needs to devolve budgetary power gradually so that the districts put the skills and systems in place before being given a large budget.

The main mechanism for devolving budgetary power to district governments has been through the government’s PDID program (Planeamento Desenvolvimento Integrado Distrital, Integrated District Development Planning). This program has also been the main mechanism for enabling district governments to gain experience in planning and procurement. Since 2012, PDID and its predecessor program PDD have been allocated a total US$193.7 million for small-scale infrastructure development in Timor-Leste’s 13 districts. That’s an average of only around US$5 million annually per district. Decentralisation is clearly moving slowly and so is the building of experience at the district level.

But slowing down devolution of budgetary power does not mean giving up on rural development in the short term. Timor-Leste’s government still has other tools for rural development. One less promising way is simply to continue directing its national budget through line ministries to develop agriculture, education, health and other services in the districts. Since 2002, this appears to have had no success in lifting Timor-Leste’s rural poor out of subsistence farming and has had only limited success in providing services to rural areas.

An alternative way — one that produces more bottom-up planning and less bureaucratic red tape — is through the PNDS program (Programa Nasional Dezenvolvimentu Suku, National Program for Village Development). Here, money goes straight from the national to village level, with district-level government only playing a technical support role.

The PNDS is modelled on Indonesia’s PNPM program, which gives grants directly to communities for high-priority, small-scale infrastructure projects. While it’s still early days, PNDS has so far been praised for its success in improving physical infrastructure and village-level planning.

The PNDS has limitations. It does not directly boost local production and it is not big enough to provide major infrastructure. It can refurbish schools and health posts but it cannot provide for ongoing costs. The government’s 2015 budget has allocated only US$20 million for the PDID and PNDS programs combined. This represents only around 1.3 per cent of the national budget: the government is clearly not in a hurry to stake everything on the program. But while the budget may not be sufficient for each of Timor-Leste’s 442 villages to receive the initially planned US$50,000 it will benefit many and will do so quickly.

Finally, the upcoming Suco Law formally recognises village councils as an arm of the government and provides a monthly allowance to each village chief and sub-village chief, as well as other members of the Suco Council. It will thus increase the accountability of village officials to the demands of the government.

The Suco Law and the PNDS and PDID programs will provide small-scale infrastructure, with some impacts on village-level and district-level governance. Decree-Law no. 4/2014 on Administrative Pre-deconcentration devolves decision-making to district level government structures, but in the short term these structures will lack skills and funding to have significant impacts.

Ultimately, none of the above elements of decentralisation provide confidence that government services and economic vibrancy will improve in rural Timor-Leste in the short term. Instead, the main hopes for improved government services come from national investment in large-scale road networks and telecommunications infrastructure. This will be of direct benefit to rural people, improving access to agriculture, health and education services in remote areas.

The main hope for economic growth comes from a large-scale source that has nothing to do with decentralisation: foreign investment. For example, Dutch-based brewery giant, Heineken, will begin construction of a brewery at Hera just east of Dili in 2015. Its total investment will range between US$30–45 million and is expected to provide 200 jobs directly and 800 indirectly. Also planned for construction in 2015 is a cement factory near Baucau, with investment from a Western Australian company. This investment has been projected to create thousands of jobs. Several large hotels will be constructed, including in Oecussi and just west of Dili, while hopes and planning continue for a gas processing plant at Beacu and a petrochemical refinery at Betano.

No one can safely say when district governments will have sufficient skills and systems to handle a larger portion of the national budget. The Special Social Market Economy Zone in Oecussi is already trying to handle a large budget — almost US$82 million in 2015. Hopefully it will provide important lessons before large budgets are devolved to other district governments. In the meantime, rural areas in the other 12 districts will remain largely reliant on the national government for any improvements in government services and economic vibrancy.

The relative impotence of decentralisation in the short term should not cause despair. Instead, it should be a spur to building skills and systems at district level in preparation for rising power. And it should also stimulate more innovative and efficient governance at the national level. Rural Timor-Leste has waited too long already.

Dr Terry Russell worked with the UNTAET mission in East Timor in 2001–2002 and has, as an NGO worker and consultant, made regular visits to Timor-Leste since its independence.

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Decentralisation and rural development in Timor-Leste

Author: Alice Beban France, Cornell University

While the majority of Cambodians live off the land, access is precarious. Recently the Cambodian government has been making some encouraging reforms, but troubling signs remain.

Rapid, unregulated development with unclear property rights has left an estimated 770,000 people affected by land disputes. Smallholder property claims are pitted against companies with Economic Land Concessions (ELCs), long-term leases that allow for the development of land for industrial agricultural purposes. Development programs awarding private communal land titles have so far done little to stem the tide of disputes.

New land disputes continued to erupt in 2014 and there have already been reports of new urban eviction threats in 2015. The central problem is the opacity of the land sector. It is unclear whether or not the recent ELC cancellations are meaningful because there is almost no public data available for state land boundaries, titled areas, or agribusiness investment.

In a pre-election land titling push in 2012–14, thousands of university students were sent around the country to survey and title land to more than 600,000 land owners occupying state land. The government has promised that titling will continue in 2015 under the auspices of the Department of Land Management. In Cambodia’s chaotic post-conflict scramble for resources, land titling has long been held out by the government and donors as key to quelling disputes and spurring investment.

But, a growing number of reports link Cambodia’s land titling campaign with land grabbing and deforestation, particularly in indigenous communities. An alarming number of people whose land was surveyed by the student volunteers are still waiting for their land title. Seventy-four per cent of people whose land was surveyed between 2012–14 are still waiting for at least one title according to an upcoming nationwide report from the NGO forum. People whose land was passed over and left untitled by the student measurement teams are worried.

In the wake of the titling campaign, some people have sold land under pressure from powerful urbanites buying up large swathes of land. These deals fly under the radar of government and CSO monitoring. In Ratanakiri, northeast Cambodia, land sales have continued inside an indigenous community awarded Communal Land Title. The logic of promoting the collateral potential of land title for farm investment is also questionable in a country with high amounts of rural indebtedness and a high-risk banking sector.

A lot more than land title is needed to provide land security in Cambodia. Titles, community training and stakeholder meetings provide nicely packaged quantitative data for donor agencies but the real outcome measurement remains: are people still losing land?

Some innovative approaches to tackling this question have emerged, including exposing the roles of consumers and investors tied to increased commercial land pressure. The Blood Sugar Campaign, targeting European and US sugar buyers, has encouraged the European Union to launch an investigation. A new report exposes the illegal timber trade satisfying Chinese demand for luxury timber and the International Finance Corporation (IFC, part of the World Bank) is currently investigating a complaint about an IFC funded rubber company filed by sixteen upland communities.

Community activists have become more closely linked nationally and regionally. Donors are realising the need to move beyond brief technical fixes to more long-term support for legal and community empowerment. Discourses linking land rights with food security and the need for dignified farming livelihoods are also growing.

But activism is limited by ongoing intimidation and harassment including the imprisonment of Boeung Kak lake activists for blocking traffic, frequent reports of harassment, attempts to buy off community activists and NGOs, and the recent refusal to extend the visa of a foreign activist. The National Assembly is quietly debating draft media laws that will restrict freedom of speech, agricultural laws that may restrict farmers’ crop choices and includes punishments for those who do not abide by the rules. There is also a controversial NGO Law requiring greater government oversight for NGOs. These regressive legal maneuvers may affect the ability of communities and NGOs to fight for their land.

Cambodia’s experience with the student-led land titling campaign shows that ‘big man rule’ can accomplish a massive amount in a short time. When Hun Sen speaks, people listen. Cambodia’s ruling regime is built on land as a political tool. Land is distributed to elites to bring them into the orbit of the prime minister and facilitate the private accumulation of national resources. Land title is given to poor people as part of pre-election campaigning.

The challenge for the government now is to use this big man power to create long-lasting change rather than short-term political gain. This requires more than gifting land titles or confiscating under-performing or already logged land concessions. Fundamental changes to social policy are needed that see land not as a political tool but as a livelihood.

Alice Beban France is a PhD Candidate with the Department of Development Sociology at Cornell University funded by an award from Fulbright-Hays.  

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Time to sow the seeds of land reform in Cambodia

Authors: Murray Hiebert and Nigel Cory, CSIS

Malaysian opposition leader Anwar Ibrahim’s seven-year fight against sodomy charges ended on 10 February 2015. His five-year prison sentence was widely seen as a victory for his political opponents in using the law to silence him (again). The opposition coalition will struggle to overcome the loss of its leader. But Prime Minister Najib Razak is expected to face minimal international pressure on the verdict.

Anwar’s case was seen by many as an attempt by the ruling United Malays National Organisation (UMNO) party, which has been in power since Malaysia’s independence in 1957, to eliminate Anwar from the political landscape. In 2013, the opposition coalition came close to achieving Malaysia’s first change of government. It won the popular vote in the national elections, but fell short of gaining a majority of seats in the highly gerrymandered electoral system. Anwar was seen as the lynchpin to the opposition’s success.

There were accusations of political interference in Anwar’s sodomy trial from the start. Reports stated that Najib met the man Anwar allegedly sodomised two days before the act reportedly took place in 2008. Anwar’s lawyers raised questions early in the trial about whether the DNA samples had been properly maintained and had possibly been contaminated. They also expressed concern that the major evidence presented against Anwar was the alleged victim’s statements which were never corroborated by other sources.

In January 2012, a High Court judge agreed that the DNA had been compromised and acquitted Anwar. But the Court of Appeals overturned this ruling in March 2014. The judges argued that the High Court had made a mistake in doubting the integrity of the DNA and reinstated the original guilty verdict and a five-year prison sentence. At the time, the United States and other countries condemned the verdict saying that it showed Malaysia’s judiciary was neither independent nor fair.

The opposition coalition is at a critical juncture as it prepares to elect new leaders. The problem is that there is no clear successor. The next generation significantly lacks Anwar’s charisma and political skill. In the meantime, the opposition leadership has fallen to Anwar’s oldest daughter Nurul Izzah Anwar. The 34-year-old, who has twice served as a member of parliament, represents the next generation in political leadership, but there are many doubts about her ability to fill Anwar’s shoes.

The opposition’s task of rebuilding is made harder with the death of Nik Aziz Nik Mat in February 2015. Nik Aziz was the head of the opposition Pan-Malaysian Islamic (PAS) party, one of the component parties of the opposition coalition. Anwar and Nik Aziz were essential in keeping the disparate members of the coalition together and on message. The contest to replace Nik Aziz in his own party will be crucial to determining PAS’s future in the opposition. There is a faction within PAS that wants to break away to join UMNO because of their shared Islamic values and policies.

Najib has not gained much politically from Anwar’s removal as his main opponents are within his own party. Former prime minister Mahathir Mohamad has mounted an increasingly bitter fight to undermine and remove Najib.

Although the domestic struggles are obvious, the foreign policy implications for Malaysia are less clear. Malaysia is safe from criticism from its neighbours in ASEAN as the group adheres to the principle of non-interference in the affairs of other countries. The problem for Najib is that the international spotlight will focus on Malaysia in 2015 as it serves as the chair of ASEAN and the host of the East Asia Summit (EAS).

The United States’ cautious reaction to Anwar’s jailing stands in contrast to its condemnation of Malaysia following his first imprisonment. The US appears to have decided that it cannot afford disengagement and high-handed rhetoric because it has considerable interests attached to the 2015 ASEAN summit and EAS meeting. Malaysia also plays a critical role in the Trans-Pacific Partnership trade negotiations, which could be completed this year.

The US administration appears to remain committed to building its comprehensive partnership with Malaysia. It has maintained its invitation for Najib to visit Washington ahead of the EAS. Protests about Anwar’s imprisonment will likely arise during Najib’s visit, but the White House seems likely to downplay those concerns due to its broader interests in Malaysia and the Southeast Asian region.

Murray Hiebert is a senior fellow and deputy director of the Sumitro Chair for Southeast Asia Studies at CSIS.

Nigel Cory is a researcher with the Sumitro Chair for Southeast Asia Studies at CSIS and previously served as an Australian diplomat in Malaysia.

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How will the jailing of Anwar Ibrahim impact Malaysia’s foreign relations?

Author: Peter Drysdale, East Asia Forum

This week is the fourth anniversary of Japan’s disastrous Tohoku earthquake and the massive tidal wave that fractured the ageing Fukushima nuclear power facilities, leading to a shutdown of Japan’s 48 nuclear power plants on top of the six decommissioned at Fukushima. Finally rated at a magnitude of 9.0, the earthquake was the most powerful recorded in Japan and the third most powerful in the world since modern measurements have been taken in 1900. Over 18,000 people perished or were lost, most of them in the tsunami that followed the quake. The tsunami reached heights of over 40 metres and washed through three to four storey buildings as it swept cars, trucks, boats and planes away on its path inland. The tsunami inundated the Fukushima nuclear facility causing level 7 meltdowns at three reactors and requiring evacuations within a radius of up to 20 kilometres. The earthquake shifted Honshu, Japan’s main island, 2.4 metres to the east towards the Americas and its force moved the earth on its axis by an estimated 10–25 centimetres.

Japanese Prime Minister Shinzo Abe bows to Emperor Akihito and Empress Michiko in front of the altar for the victims of the 11 March 2011 earthquake and tsunami at the national memorial service in Tokyo, Japan, 11 March 2014. (Photo: AAP).

These are the terrifyingly impressive physical effects of the Tohoku tragedy. The way in which the impact effects of a disaster on this scale were managed is a testimony to the resilience and capacity of the Japanese people — not only their remarkable capacity to face natural calamity stoically but also the social capital, skills and organisational know-how they brought to dealing with it on a grand scale and with great efficiency. Casualties would have been much higher if systems had not been put in place or if warning systems had not been heeded in coping with the event. The national government, Self Defense Forces and civil society swung into action expeditiously. Both civilian and emergency services displayed remarkable effectiveness in coping with the immediate disaster. International assistance was forthcoming and accepted rapidly. Though thousands of displaced residents still live in temporary accommodation and the fallout from Fukushima nuclear power facility breakdown is still far from under control, Japan’s immediate response to its worst natural disaster in modern times is widely and properly seen as witness to the strength of Japan’s national character.

Yet Tohoku exposed disturbing flaws in Japan’s social and institutional structures that have raised deep questions about trust in national governance and continue to drive national self-reflection.

How could the nuclear accident and meltdown at Fukushima have happened amid assurances of the safety of Japan’s large nuclear energy program?

The Japanese nuclear energy industry’s pre-disaster regulation system was constricted by what has been called the Galápagos syndrome — that is, it was allowed to evolve independently of regulatory best practices elsewhere in the world. Japan’s Nuclear Safety Commission even dismissed International Atomic Energy Agency (IAEA) recommendations in 2008 ‘claiming the current nuclear regulation system had been functioning effectively to ensure safety at an outstanding level, even by international standards’. But, the old regulatory agencies — the Nuclear and Industrial Safety Agency (NISA) and the Nuclear Safety Commission (NSC) — lacked teeth and their constitution was deeply conflicted. NISA was located within the Ministry of Economy, Trade and Industry (METI), involving a serious conflict of interest, as illustrated by METI’s plan, announced in 2010, to increase Japan’s energy self-sufficiency to 70 per cent by 2030, the vast bulk of this to be made up by nuclear. This would have represented a massive expansion above the roughly 30 per cent of Japan’s energy supplies, which were met by nuclear prior to 3/11. The utilities under regulation in turn were compromised by employing officials post first retirement (amakudari) in key jobs affecting regulatory compliance and the upgrading of standards. The risks in Japan’s nuclear program were under-estimated and a genuinely independent risk-assessment and regulatory agency was absent. As Yoichi Funabashi and Kei Kitazawa point out the ‘culture of secrecy and technical loftiness within the Japanese nuclear community…, allowing the industry to minimize the disclosure of detailed information about its operation, and to develop its own safety assurance practices’ did not measure up to global standards.

Japanese politics was dominated by energy, as Llewelyn Hughes points out in the wake of the disaster of 11 March 2011. The Japanese government’s decision ‘to shut-down all the remaining 48 nuclear units introduced real concerns of brownouts, previously unthinkable in Japan’s gold-plated power system. The parliament commissioned the first independent inquiry in Japan’s post war history, and gave it the task of finding out what happened, and how a similar event can be avoided’.

In 2012, a new regulatory agency, the Nuclear Regulation Authority (NRA) was established under the umbrella of the Ministry of the Environment to replace NISA and NSC. It has adopted newer stricter safety standards. It has approved the re-opening of four nuclear power units (Kyushu Electric’s Sendai units No. 1 and 2 and Kansai Electric’s Takahama units No. 3 and 4). But there remains a major question of public trust in the Japanese government’s applying the lessons of Fukushima in its rush to re-open Japan’s closed nuclear power plants.

In this week’s lead essay, Tatsujiro Suzuki calls this loss of trust, which has not been sufficiently resolved even four years after the accident, ‘the most serious challenge that nuclear policymakers and the nuclear industry now face in Japan’. As Suzuki reports, just two weeks ago, the Tokyo Electric Power Company (TEPCO) issued a press release saying that the source of high radiation levels in one of its drains (leading into the sea) came from a puddle of rainwater that had accumulated on the rooftop of Unit 2 at the Fukushima Daiichi Nuclear Power Station… This particular incident was worse than usual because TEPCO was aware of the high level of radioactivity in the drain but failed to notify either the Nuclear Regulation Authority or the local government’. There is a climate of self-censorship in the media (that even impinged upon the one year anniversary address of the Emperor) that gives priority to not causing a panic among the public over research to establish how bad the Fukushima fallout is in all its knock-on effects and making information publicly accessible. There are also concerns about talk of bringing NRA under the direct control of the Cabinet Office, contrary to best regulatory practice and international advice, after a three-year review of the authority.

These are big stakes issues. As Simon Avenell also writes this week, the experts at Tokyo University reckon that there is a 70 per cent chance that a magnitude 7.0 or higher quake will hit Tokyo by 2016 and a 98 per cent chance it will hit in the next 30 years. So, in the face of these probable events, being confident about the management and regulation of Japan’s nuclear power facilities is no mere technical matter.

Peter Drysdale is Editor of the East Asia Forum.

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Rebuilding trust after the Fukushima disaster

Author: Aurelia George Mulgan, UNSW Canberra

Australia’s farmers, particularly beef producers, may have celebrated too early when the Japan–Australia Economic Partnership Agreement (JAEPA) took effect on 15 January 2015. The deal may be gazumped by another that is taking shape between Japan and the United States in the Trans-Pacific Partnership (TPP) negotiations. Some elements of the proposed US–Japan agreement are reminiscent of the kind of bilateralism — or US-specific agricultural market concessions — that characterised Japan’s trade policy in earlier decades. Those deals significantly disadvantaged Australian agricultural exporters.

Japan has a long history of offering inducements to the US government in order to settle difficult multilateral trade negotiations. In December 1993, at the 11th hour of the General Agreement on Tariffs and Trade negotiations, the Japanese government agreed to place tariffs on all remaining agricultural import restrictions and commit to a minimum access arrangement on rice imports. The deal was worked out principally in bilateral negotiations between the United States and Japan. It included ‘special treatment’ on rice that, since 2000, has virtually guaranteed market access for 360,000 tons of US rice annually. This accounts for roughly 47 per cent of Japan’s 770,000-ton minimum access tariff-free quota for rice imports.

Australia also gained country-specific concessions from JAEPA. This included preferential access for a large volume of pork and exemption from Japan’s ‘gate price safeguard’, as well as a country-specific quota for chicken meat. Australia also won duty-free quotas for natural cheese and other cheese products, as well as for ice cream and yoghurt.

But there is supposed to be a big difference between a bilateral economic partnership agreement and the TPP. Despite the TPP’s aspirations to be both a multilateral and a free trade agreement, in reality it looks like being neither. Negotiations have been proceeding on two fronts simultaneously: among all 12 participating countries and bilaterally between particular countries, principally Japan and the United States.

This dual-track trade diplomacy will inevitably result in bilateral agreements between particular countries with carve outs and country-specific concessions. The TPP will not observe one of the fundamental principles of the multilateral trading system: most-favoured-nation (MFN) treatment. The TPP participants will not only discriminate against countries that are not parties to the agreement but also countries that are. This means that any US-specific concessions on agriculture will not apply to Australia. And yet extending MFN status is how you make originally bilateral agreements into multilateral ones.

The deal that is shaping up between the United States and Japan on agricultural market access is likely to contain several provisions that will affect Australia.

Rice, wheat and sugar will be exempt from tariff reduction. But in return for maintaining these tariffs, Japan is examining a 50,000-ton special import quota for American rice in addition to the current 770,000-ton tariff-free minimum access quota.

Tariffs on American beef will be reduced from 38.5 per cent to 9 per cent over 10 or more years. There will be a 20–30 per cent reduction in tariffs on cheaper pork, from the current tariffs of 482 yen (US$4.03) per kilogram to around 100 yen (US$0.83) per kilogram. The 4.3 per cent tariff on high-end pork will also be removed and tariff quotas will be set for some dairy products with low level tariffs. Finally, the terms of the deal will not be applied to other countries.

Offers along these lines were made by TPP Minister Akira Amari to the United States in the TPP meeting last November. They were turned down. But now more stars appear to be aligning in the domestic politics of both the United States and Japan.

Since last November, both countries have significantly adjusted their positions. The US side has changed its stance to allow a certain level of tariffs to remain on key ‘sensitive’ agricultural items. At the same time, Japan has been prepared to accept a greater reduction in tariffs on the condition that a relatively low trigger level can be established for safeguard measures that will kick in if there are surges in imports. It is currently predicted that a TPP ministerial meeting will be held before the end of February when the Japan–US talks will be settled.

Australia has a limited defence against these measures. Its beef exporters, for example, will be paying a 30.5 per cent tariff on frozen beef and 32.5 per cent on fresh beef. These are expected to fall to 23.5 per cent in 15 years and 19.5 per cent in 18 years respectively.

JAEPA does include a provision for a review that can be triggered immediately if Japan provides one of Australia’s competitors with a better deal on beef. This provision aims to provide Australia with equivalent treatment, but it is not necessarily guaranteed and would be subject to bilateral negotiations at the time. Naturally, it would also have important implications for Japan’s relations with the United States, Australia’s main beef competitor in the Japanese market.

On rice, Australia can request that Japan allocate more minimum access rice for them as well. But, given Japanese farmers’ sensitivities on rice market issues, the outcome is by no means certain either. Japanese farmers are against the increases in minimum access rice even from the United States.

For Japan, the special minimum access deal put in place to settle agricultural market negotiations with the United States more than 20 years ago still generates large deficits in the special account budget of the Ministry of Agriculture, Forestry and Fisheries. Between 2002 and fiscal 2013, it accumulated a deficit of 277.8 billion yen (US$2.3 billion). This fiscal burden would only increase if the United States were granted another 50,000-ton special rice quota.

It seems that ‘getting in first’ — as Australia did with the JAEPA — may have only conferred a temporary advantage in Australia’s export trade in beef and other agricultural products with Japan.

Aurelia George Mulgan is Professor at the University of New South Wales, Canberra. She is co-editor with Masayoshi Honma of The Political Economy of Japanese Trade Policy (PalgraveMacmillan forthcoming 2015) and is grateful for Professor Honma’s assistance in writing this article.

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What the TPP portends for Japan–Australia agricultural trade

Author: Fu-Kuo Liu, National Chengchi University

The results of Taiwan’s local elections, held in November, came as a big surprise to many not only in Taiwan. The ruling Kuomingtang (KMT) was defeated by an unprecedented margin. The results were a sharp reversal from those of the 2012 presidential election, won by the KMT. In the municipal mayoral elections, the KMT came away with only one out of six municipalities and five out of sixteen municipal cities and counties. The results have significantly changed Taiwan’s political landscape. But they should not be considered a referendum on cross-strait relations.

Taiwanese President Ma Ying-jeou speaking at a campaign rally before Taiwan's local elections. President Ma resigned from his position as chairman of the Kuomingtang soon after the election results were confirmed, leaving the party in chaos. (Photo: AAP).

While most surveys conducted prior to the election predicted a likely loss for the KMT, none envisioned a defeat on such a scale. Many are wondering why the ruling government was so badly crushed. Importantly, the outcome breaks the pattern of traditional party strongholds at the local level in Taiwan. It may directly impact the 2016 presidential election and result in a possible change of course in cross-strait relations, which have been flourishing.

President Ma Ying-jeou resigned from his position as chairman of the KMT soon after the election results were confirmed, leaving the party in chaos. Ma’s unpopularity plagued the party during the campaign. His administration has been seen as indecisive, capricious, ineffective, weak, lacking momentum, and short-sighted. Two important groups of swinging voters determined the election: frustrated KMT supporters who chose not to vote and uncertain young voters who turned out in unprecedented numbers.

The Sunflower Movement, which began as a student demonstration in March 2014, clearly reflected the public’s concerns about the future of the nation and the future course of cross-strait relations. The government mishandled the occupation of the Legislative Yuan by students for over a month last year. Worse still, the government has not actively responded to students’ requests for a transparent and constitutional procedure for legislative scrutiny of cross-strait deals. The legislature’s decision not to ratify the Cross-Strait Service Trade Agreement (CSSTA) between China and Taiwan has been interpreted as a clear sign of rising anti-China sentiment in Taiwan society.

The crux of the political impasse, however, is the rivalry between President Ma and the speaker of the Legislative Yuan, Wang Jin-pyng, who is also a vice chairman of the KMT. Although the KMT has held a majority of seats for six years, most of Ma’s policy efforts have been crippled in the legislature. Ma’s tendency to circumvent legislative scrutiny on cross-strait deals has meant that legislators, dissatisfied with Ma’s methods, have boycotted proposed legislation. KMT supporters are frustrated with the ineffective and weak governance of Ma and his party. This election was definitely a vote of no confidence in the Ma administration.

Taiwan’s political landscape is always sensitive to cross-strait relations and regional security. While the decision of swinging voters to opt for the DPP won’t necessarily be permanent, it does add to the unpredictability of the future of cross-strait relations.

Following the KMT’s defeat, Beijing has tried hard to figure out what exactly is happening in Taiwan and is questioning whether it should adjust its present course, characterised by a relatively benign cross-strait policy. Similarly, the US government was surprised to learn that Ma has become such an unpopular figure among voters but has declined to make any clear comments on the future of cross-strait relations. It also stresses that the US continues to encourage both sides to improve relations.

All this has led some commentators to suggest that the vote was essentially a referendum on cross-strait relations. But this is mistaken. The elections were held at the local level and cross-strait issues were not touched upon at all throughout the campaign. Even the DPP quickly made clear that it would be wrong to interpret the election as a referendum on the KMT’s mainland policy. The election results should not be interpreted either as a failure of China’s or the KMT’s cross-strait policy.

Some worry about the increasing tendency towards anti-China sentiments rising up from Taiwan’s grassroots. It is true that the political changes in motion may add more unpredictability to cross-strait relations. In order to convince voters that it deserves their support, the DPP has to commit to finding common ground with China in the next few months. This is by far the greatest challenge to the independence-oriented party and its leadership.

The KMT’s defeat signaled an end to Ma’s exclusionist way of conducting cross-strait relations. But while the loss was a serious blow to the KMT and to the morale of its government, it does not mean that victory is out of reach in the 2016 general and presidential elections. The KMT will soon elect a new chairman to lead the party out of the woods. The big question is not how Beijing and Taipei should move forward quickly but how Taiwan’s leaders can convince its people to support further cross-strait economic development.

Fu-Kuo Liu is a professor at the Institute of International Relations, National Chengchi University, Taiwan.

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Taiwan’s shifting political landscape