The United States is expected to pursue setting higher standards to qualify for reduced tariffs in upcoming trade talks with Japan, such as by raising the percentage of auto parts to be made in either of the two countries, sources close to the matter said Monday.
The inclusion of such country of origin rules in a bilateral trade deal could serve as a blow to Japanese automakers, which export their vehicles partly made up of components supplied from countries such as China and Thailand, where labor costs are low.
According to the sources, negotiators will start off the first round of the talks, slated for April 15 to 16 in Washington, by narrowing down the scope of the negotiations. Rules of origin, customs procedures, food safety regulations, and safeguard measures are expected to be included.
As for products to be granted preferential tariff treatment, the United States may also ask for labor provisions that require parts to be made by workers who earn wages comparable to those in the United States.
The proposals will fall in line with U.S. President Donald Trump’s goal to reduce the country’s huge goods trade deficit, which he has targeted under his “America First” mantra, and to create jobs in the manufacturing industry.
Similar rules were included in the revamped deal the United States signed with Canada and Mexico in November after Trump threatened to pull out of the North American Free Trade Agreement.
Under the new deal, 75 percent of parts used in automobiles must be made within the bloc in order to qualify for zero percent tariffs, up from the 62.5 percent under NAFTA. Also added was a provision for 40 to 45 percent of parts to be made by workers earning at least $16 an hour.
The sources said the initial focus of the Japan-U.S. trade talks is likely to be on goods, rather than services although the United States is also seeking to expand market opportunities for its financial service suppliers.
The United States is demanding that Japan lower its tariff on beef and other farm products. Japan in turn plans to call for more access to the U.S. auto market.