The United States has proposed eliminating tariffs on imported Japanese vehicles over 30 years in bilateral talks related to a wider Pacific free trade pact, but Japan rejected it because the phaseout period is unusually long, sources close to the matter said Friday.
The proposal comes as Japan resists pressure to eliminate tariffs on U.S. beef in bilateral talks holding up the Trans-Pacific Partnership agreement. The goal of the pact, in principle, is to eliminate all tariffs.
Tokyo has been urging Washington to eliminate auto tariffs while the United States has placed priority on improving market access for U.S. farm products, including beef.
But Washington has given up on demanding that Japan completely abolish beef tariffs and is now calling on Tokyo to cut them to less than 10 percent from the current 38.5 percent.
But Japan has refused because such a drastic cut would undermine the new free trade pact it agreed to with Australia on Monday.
In that agreement, Japan will incrementally lower its 38.5 percent tariffs on frozen beef to 19.5 percent in 18 years, and to 23.5 percent for chilled beef in 15 years.
Japan and the United States are striving to make progress before U.S. President Barack Obama visits Tokyo later this month for a summit with Prime Minister Shinzo Abe. But the outlook remains uncertain due to their considerable differences.
The bickering between Tokyo and Washington, the two largest economies in the TPP negotiations, is holding up the entire deal, which involves 12 countries.
The United States levies a tariff of 2.5 percent on Japanese cars and 25 percent on trucks. Washington agreed to abolish the auto tariffs incrementally prior to Tokyo’s entry into the TPP negotiations.
In its bilateral FTA with South Korea, the United States agreed to abolish auto tariffs within 10 years — much shorter than the period proposed to Japan.
The Japanese and U.S. trade chiefs are expected to hold more talks in Washington late next week after failing to bridge their differences over the autos issue and tariffs on U.S. farm products, including beef, during their 18 hours of talks Wednesday and Thursday.