CEAC Commentary

February 22, 2019 

Miscalculation on the Job Creation Effect from the TPP11


The TPP11, Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a framework primarily initiated by the Japanese Government, entered into force on 30th December, 2018. It could fairly be said that the year 2019 began with the birth of the TPP11. While this news was pictured in a good light in mass media out of expectation on the advent of the cross-border free trade area in the Pacific rim, we should nevertheless be attentive also to its latent risks, taking into account some crucial defects or unrealistic aspects found in its theoretical underpinning, including the principle of comparative advantage.

The substantial question in this writing is whether the TTP11 would really bring such merits –job creation— as the supporters of the TPP11 have advocated. Generally, the job creation has been understood as a positive factor for creating employment opportunities. Particularly, in the post war period, most of the developed nations have been suffered from high unemployment rates constantly and the job creation has been one of the most important subjects of their economic policy, which should be achieved in any related policies in the fields of commerce, finance, industry and so on.

As responding to the expectation for the job creation, at the meeting of the Council on Economic and Fiscal Policy held on 21st December, 2017, the Japanese government announced that by calculation, TPP11 would create 460,000 new jobs, and Japan-EU Economic Partnership Agreement would do so for 290,000. Altogether, 750,000 people are supposed to have employment opportunities in near future. If we follow the current standard, that job creation equals good, Japanese people would welcome the estimated numbers of new employment brought by these two agreements.

This positive evaluation, however, may change completely when the circumstances of domestic employment. Today, among the member states of the TPP11, Japan is the only one pointed out to be facing a serious manpower shortage. In other words, even if the TPP11 creates 460,000 new jobs, or 750,000 with Japan-EU EPA, these large numbers of new jobs would be nothing but a negative factor to accelerate the labor shortage. If this concern becomes a reality, how will the government of Japan cope with this new problem?

Both of the agreements of the TPP11 and the Japan-EU EPA include no provision for approving the freedom of movement of people, which is one of the basic principles of the European Union. In other words, liberalization of domestic labor market is left to discretion and competence of each member states. Therefore, the mechanism of autonomic adjustment for balancing redundancy and employment among member states cannot function in them as a built-in form; reversely, too much increase of immigration by this mechanism is the very reason that the people of the United Kingdom decided to secede from the EU. In the context of this situation, it is noteworthy that the government of Japan managed to amend the Immigration Control Act late last year.

Although the number of foreign workers coming in to Japan is limited to 340,000 for five years, without a consensus or support of the people, the government basically opened its labor marke, including the other status like permanent residency, especially for unskilled foreign labors. From this point of view, it can be inferred that the government intends to resolve the labor shortage problem brought by the TPP11 and the Japan-EU EPA by supplying foreign workers outside the frameworks of these two agreements. But there seems to be some problems as follows.

Creation of a free trade area, or an integrated market means the escalation of international competition. Thus Japanese companies, which are in adverse condition in terms of labor cost, must have the intention of employing foreign workers actively in pursuit of lower labor cost in order to strengthen their competitiveness. The above-mentioned amended immigration law, however, places Japanese employers under an obligation to pay wages equivalent to or more than those of Japanese. As it has been the target of criticism, the income level of Japanese may continue to deteriorate gradually to the extent that all average wages of member states would be equalized; as for the way of the wage level equalization, bottom-up growth of developing nations seems to be preferable to leveling off with the decline in income of ordinary people in developed nations.

Moreover, Japan may face the problem of flooding immigrants. The government of Japan encourages start-up businesses by foreign entrepreneurs, and welcomes foreign companies and capitals as its economic strategy; it seems reasonable to suppose that they try to employ foreign labors by choice when they establish businesses in Japan. Thus, Japan will suffer from sudden increase of population of foreigners, and face risks that the local communities are exhausted by preparations for receiving foreign residents, and straggle with intercultural discords between Japanese and foreign people who newly come from various countries.

Actually it is uncertain whether 7650,000 new employments would be created in Japan by the fruits of the TPP11 and the Japan-EU EPA in the midst of the present U.S. vs. China trade war. Nonetheless, the course of the government of Japan is doubtful, if it would metamorphose the country into a multiracial or multicultural nation and, if the Japanese society would be threw into chaos as the results of those agreements on commerce.

What kind of future will it be for us? This year, 2019, the increase of the immigration, which would compel to change at any levels of society, from daily lives of people to the nation-state system, will remain one of the most knotty problems that we all should deliberate discreetly.

(This is an English translation of the article written by KURANISHI Masako, Political Scientist, which originally appeared on the e-forum “Hyakka-Somei (Hundred Ducks in Full Voice)” of CEAC on January 18, 2019.)