Washington keeps auto levy, gets assurances of level insurance field

Japan-U.S. TPP deal sets stage for Congress verdict

by Reiji Yoshida

Staff Writer

Tokyo and Washington concluded preparatory negotiations Friday over Japan’s entry into the Trans-Pacific Partnership talks, signing a joint statement that allows the U.S. to maintain tariffs on Japanese autos for the time being.

Currently, the United States imposes a 25 percent levy on imported trucks from Japan and a 2.5 percent charge on cars. The two sides agreed that the tariffs will be maintained for the longest period of time permissible under the TPP framework, and this condition should be effectively better than that allowed under the free-trade agreement between the United States and South Korea, according to the joint statement.

In parallel with the TPP talks, Japan and the United States will also launch bilateral talks to lower nontariff barriers between the two countries in such areas as insurance, investment, intellectual property rights, government procurements, food safety, and animal and plant health standards, the statement also said.

Friday’s agreement clears a major obstacle for Japan’s accession to the multilateral trade liberalization talks, as Tokyo requires the approval of all 11 TPP member countries, including the United States, to take part.

The Obama administration is expected to soon notify Congress of its decision to permit Japan’s entry into the TPP talks, which in principle aim to abolish all tariffs among member states.

It will take 90 days for Congress to make a decision about whether to approve the move, meaning Prime Minister Shinzo Abe’s government won’t be able to participate in the free-trade discussions until July at the earliest.

“I believe the national interests of Japan have been firmly protected with this agreement,” Abe told reporters after a Cabinet meeting to approve the Japan-U.S. deal. “By participating in the negotiations, we’d like to play a leading role in the TPP (discussions).”

At the outset of the Cabinet meeting, Abe also said Japan’s participation in the trade talks will help strengthen its ties with democratic countries in the free-market system, most notably the U.S., and thereby well serve Japan’s national interests, including security. “I believe this will have big implications for national security,” he said.

But Japan is expected to pay dearly to win U.S. approval to join the TPP process, swallowing many of America’s demands during the negotiations. Unlike the protections for the U.S. auto industry, no specific steps for protecting Japan’s agriculture sector were included in the joint statement.

Separate from the agreement, Tokyo also pledged to level the playing field for U.S. insurance companies so they can compete against rival “kampo” life insurance products offered by the government-backed Japan Post Insurance Co.

Earlier Friday, Deputy Prime Minister and Finance Minister Taro Aso told a news conference that the government will not approve any new kampo products for at least several years to ensure that “fair competition conditions” are achieved. The announcement was seen as a concession to U.S. demands in preparatory talks about Japan’s entry to the TPP talks, although Aso denied any linkage.

Protecting the American automobile industry and helping U.S. insurers expand their business in Japan have been among Washington’s main concerns regarding Japan’s participation.

After Abe and U.S. President Barack Obama met in Washington in February, the two leaders released a joint statement saying “certain manufactured products” are “trade sensitivities” for the U.S.

Abe’s administration, meanwhile, is frantically trying to protect the domestic farm sector, particularly rice, dairy, sugar, wheat, beef and pork products. Friday’s agreement recognized that agricultural products are especially sensitive for Japan.

Earlier in the day, the transport ministry said it will expand the auto import quota to 5,000 units per model a year from 2,000 under simplified procedures.

Of the 11 TPP member countries, Canada, Australia, New Zealand and Peru have yet to approve Japan’s participation in the talks, but government officials in Tokyo said they expect the four countries to soon give the green light.

Vietnam, Malaysia, Brunei, Singapore, Chile and Mexico have already declared their intention to accept Japan into the negotiations. The member nations aim to hammer out the final framework of the TPP and ink an agreement by the end of the year, leaving Abe’s government just a few months to fight Japan’s corner and defend its national interests. With time rapidly running out, Abe on March 15 announced Japan’s intention to join the negotiations and to begin lobbying the 11 members for their approval.