Negotiations for an ambitious trade pact among Pacific countries made significant progress over the weekend but there is still a gap between Japan and the United States over market access and other hurdles, trade representatives said on Monday.
The 12-nation Trans-Pacific Partnership (TPP) is central to President Barack Obama's policy of expanding the U.S. presence in Asia and the president has expressed hopes of concluding a deal by the end of the year.
But while all sides hailed the progress made during the latest round of talks, no breakthrough was forthcoming on the thorniest questions.
"There is no prospect for an agreement on market access (between Japan and the United States) at the moment," Japanese Economics Minister Akira Amari told a news conference in Sydney.
"I expect we will reach results that satisfy both (countries)," he said, adding they would hold further talks.
An agreement between Tokyo and Washington is crucial to securing the broader pact as other partners are reluctant to commit until they see how those two resolve their differences, particularly over access to each other's markets in sectors such as agriculture and automobiles.
Australian Trade Minister Andrew Robb, who hosted the meeting, said the shape of an "ambitious, comprehensive, high-standard and balanced deal" was forming.
"There is a real sense that we are within reach of the finish line and the prize does look very attractive," Robb said, describing the negotiations as at the "compromise stage".
"We are seeing a preparedness to make some of the difficult decisions. This includes some of the key issues that we've been circling for a long time in the whole IP (intellectual property) area and market access and state-owned enterprises and other areas."
The United States insists that Japan should lower barriers to agricultural imports, but Japan wants to protect sensitive products, including pork, beef, dairy and sugar.
U.S. Trade Representative Michael Froman said that by definition the issues left at the end of any negotiation are those that are the most difficult to solve.
"We certainly have outstanding issues with Japan on market access - on agriculture, on autos and we are not done yet," he told Reuters.
"And while we are making progress, we are not at a satisfactory resolution yet and that's why the work is going to continue."
Other major outstanding issues include intellectual property rights, particularly on products such as pharmaceuticals, environmental protection and country-specific issues around state-owned enterprises.
Opposition over those issues was visible in Australia, with anti-TPP protesters gathering on Saturday outside the hotel in Sydney where the negotiations were taking place.
Concerns that the agreement would help to drive up pharmaceutical prices must be taken as seriously as any potential trade benefits, Australian Medical Association President Brian Owler said on Sunday.
"I think it's very important that the interests of the Australian government but also of patients and individual consumers in Australia are protected through trade agreements," he told the Australian Broadcasting Corporation.
But Robb dismissed those concerns and similar worries that provisions for investor-state dispute settlement, or ISDS, in the agreement could see Australian laws such as its tobacco packaging legislation overturned by global business giants.
"The fact is that for 30 years now Australia has progressively engaged with now 28 countries with investment agreements which include an ISDS ... and the sun is still coming up every morning," Robb told reporters.
"I think a lot of the statements that have certainly been made in Australia amount to deliberate scaremongering - not all of them, but a lot of them amount to deliberate scaremongering by those who have fundamentally an anti-trade agenda." (Additional reporting by Kaori Kaneko in Tokyo; Editing by Chris Gallagher, Kim Coghill and Alan Raybould)