At a glance, it may appear U.S. President Donald Trump has scored a significant victory after his latest talks with Prime Minister Shinzo Abe in New York.
After taking a defensive posture on trade since Trump was inaugurated in 2016, Abe has finally agreed to strike a compromise and accept what his government had long rejected — bilateral trade talks with the U.S.
But examining the substance, Tokyo enters the negotiations without having to make critical concessions beyond those of its current multinational trade deals with other countries.
At the same time, Japan’s government has also gained a temporary reprieve from what it feared most: additional U.S. tariffs on Japanese automobiles and auto part exports, which total as much as ¥5.5 trillion a year and account for 60 to 70 percent of Japan’s trade surplus with the U.S.
“(The U.S.) won’t impose (new) tariffs on automobiles while we are in talks, and it has been confirmed by the two leaders and Cabinet members, too,” Chief Cabinet Secretary Yoshihide Suga told a news conference in Tokyo on Thursday.
“We have created a negotiating environment that can wipe out various concerns” held by interest groups in Japan, Suga said.
“This is just the beginning of the trade negotiations,” and the exact substance of the talks has yet to be nailed down, he added.
New bilateral negotiations will start in January at the earliest and could drag on over the year.
While automakers may have breathed a sigh of relief with the tariffs shelved for now, Japanese farmers are concerned the upcoming trade talks with the Trump administration could lower tariffs on U.S. agricultural products — in particular, pork — which could flood Japan’s market with cheap imports.
But as Suga pointed out, Trump has agreed to “respect” Japan’s stance that any trade deal with the U.S. should not go beyond the upper limits of multilateral pacts Japan has already agreed to so far with other countries, including those in the Trans-Pacific Partnership free trade agreement.
The joint statement released by Japan on Wednesday reads, “For Japan, with regard to agricultural, forestry, and fishery products, outcomes related to market access as reflected in Japan’s previous economic partnership agreements constitute the maximum level.”
Experts say Japan agreed to come to the negotiating table as it witnessed other countries offer incremental concessions on trade to win over a U.S. president hungry to score political points before congressional elections in November.
“Japan noticed that the U.S. deals with the European Union and Mexico were not as harsh, especially as Trump appears willing to make a deal to produce results before the midterm elections,” said Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute.
However, Mireya Solis, a senior fellow at the Brookings Institution in Washington, warned that the deal reached Wednesday “is just the beginning of a long and winding road.”
Solis said that Abe will have to strike a deal with the U.S. without inviting a political backlash from his own base, or inflaming tensions among the TPP participants who expect any concessions to the U.S. to not go beyond the levels negotiated in their own deals.
In the long run, the eventual concessions Tokyo will be forced to make are unclear, said Toshiki Takahashi, chief economist at the Institute for International Trade and Investment.
“America may demand concessions from Japan on the auto tariffs, such as an export cap on vehicles similar to the deal reached between the U.S. and Mexico,” said Takahashi in a phone interview with The Japan Times.
While Japan perceived the economic risks posed by escalating trade tensions with the U.S., the security implications may also have been on the minds of those in Abe’s government.
“There is growing anxiety among U.S. allies … about broader U.S. commitment and trade ties,” said Shihoko Goto, a senior associate for Northeast Asia at the Wilson Center in Washington.
Goto elaborated that these anxieties stem from the “seismic shift in the security landscape … with the United States taking on a less proactive role as a Pacific leader.”
So making peace with the U.S. on trade could help smooth over broader security concerns, according to Goto.
“For the Abe government … successful negotiation of a trade deal would more broadly reflect its ability to strengthen Japan’s relations with the United States at a time of great uncertainty,” she said.
Staff writer Tomohiro Osaki contributed to this report.
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