With Prime Minister Shinzo Abe determined to join negotiations for the Trans-Pacific Partnership free-trade pact, the focus has now shifted to how much deregulation Tokyo would have to sacrifice to Washington in the automobile and insurance sectors in exchange for the protection of Japan’s politically sensitive farm products, experts say.
Japan is set to work on a priority list of rice and other farm produce it wants to treat as exceptions from the U.S.-led free-trade pact and chances are slim that Tokyo will demand deregulation from Washington, they say.
“So far, the fields of focus are agriculture, automobiles and insurance,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
After strong calls from long-protected farmers and lawmakers who derive the bulk of their political support from the rural vote, Abe confirmed in his first meeting with U.S. President Barack Obama on Feb. 22 in Washington that Japan will not have to eliminate all trade tariffs to join the TPP talks.
“Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States . . . it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations,” a statement released after the Feb. 22 meeting said.
Despite vocal opposition from his own Liberal Democratic Party, Abe is expected to make a formal announcement to join the negotiations later this month.
According to experts, the Obama administration is apparently giving Tokyo cover on joining the talks as it seeks protection for some farm products because the U.S. also intends to maintain its own 2.5 percent tariff on Japanese automobiles. Tokyo has no tariff on U.S. cars imported to Japan.
The U.S. is also expected to call for Japan to deregulate its insurance and auto sectors in the TPP negotiations.
Washington has long urged Tokyo to open up its insurance market, which has been dominated by state-owned “kampo” life insurance firm.
The U.S. has also claimed that Japan’s low-tax treatment for “kei” minivehicles has hampered sales of larger U.S.-made cars. Kei cars have engine displacements of 660cc or less and are mostly produced by Japanese automakers.
Suzuki Motor Corp. President and Chairman Osamu Suzuki has taken exception to those claims, saying the special tax treatment for minivehicles should be dealt with separately from Japan joining the TPP talks.
Suzuki’s comment appear to point to the belief that Japan’s auto sector is, in fact, open and that U.S. automakers are simply not producing enough minivehicles to be competitive.
Masamichi Hasebe, chief researcher at Daiwa Institute of Research’s national policy proposal and planning office, terms Japan’s negotiating tactics poor.
“It is a very bad way of negotiating when Japan appears to think it’s enough that it can protect just rice (and other farm products),” Hasebe said, suggesting Tokyo should press for further deregulation from the U.S.
Kumano, of Dai-ichi Life, noted that the value of U.S. farm goods imported to Japan that face tariffs is much smaller than that of Japan’s tariffed car exports to the U.S.
2010 figures by the Ministry of Economy, Trade and Industry show Japan’s auto exports to the U.S. that face tariffs accounted for 32.2 percent of its ¥8.6 trillion in total exports to the U.S., while U.S. agricultural exports to Japan accounted for just 12.5 percent of its overall ¥5.4 trillion in exports to Japan, he said.
The government is reportedly considering rice and sugar as priority goods to maintain tariffs on. Other items on the list include wheat, dairy goods and beef.
So far, Japan does not seem inclined to demand further deregulation of other U.S. sectors, including the marine transportation and finance and investment areas that are listed in a 2012 METI report detailing unfair trade practices, Hasebe said.
Japan should demand further deregulation when it joins the TPP talks, Hasebe said.