The first round of the ministerial trade talks between Japan and the United States, held over two days in Washington last week, ended without much progress as both sides stuck to their respective positions. The U.S. administration of President Donald Trump reportedly pressed Japan to enter bilateral negotiations with a possible free trade deal in mind. Meanwhile, Tokyo emphasized the importance of a multilateral free trade regime and urged Washington to return to the Trans-Pacific Partnership, which the Trump administration withdrew from last year.
The U.S. attempts to win concessions from its trading partners in bilateral talks by taking advantage of its position of power over them run counter to the principles of the free trade system that is based on multilateral rules. Tokyo should not deviate from its commitment to multilateral free trade arrangements as it seeks to reduce simmering bilateral trade frictions with the U.S.
While launching the ministerial trade dialogue with Japan, the Trump administration has also been weighing the imposition of stiff tariffs on the imports of automobile and automotive parts on “national security” grounds — on top of the additional tariffs that it introduced on steel and aluminum imports earlier this year. Economy revitalization minister Toshimitsu Motegi, who is representing Tokyo in the talks, is believed to have urged U.S. Trade Representative Robert Lighthizer to remove Japan from the potential target list of the automotive tariffs, but was apparently not given a clear answer. There’s a chance that the automotive import curbs could be launched by the Trump administration — which is bent on reducing the U.S. trade deficit — before the U.S. midterm elections in November.
The threatened tariffs on imports of automobiles and automotive parts are not only unjustifiable from the viewpoint of free trade, but would also damage U.S. economic interests. Japan’s tariffs on automobile imports have already been cut to zero, whereas the U.S. still imposes a 2.5 percent tariff. Although the U.S. remains a major destination of Japanese vehicle exports, Japan’s automakers have expanded vehicle production at their U.S. plants to 3.8 million units. Import curbs on automobiles and automotive parts would no doubt severely affect the automakers and the Japanese economy, but they would also hurt U.S. consumers by raising the price of imported Japanese cars.
Such an action would be even less justifiable if the U.S. intends to push Japan into entering bilateral negotiations under the threat of the automotive tariffs. Tokyo should continue its efforts to talk the U.S. government out of imposing this protectionist measure.
Since the Trump administration — with its “America First” agenda — pulled the U.S. out of the TPP, Japan has taken the lead in reinstating the regional free trade pact, which is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), along with the 10 other remaining members, and it has completed domestic procedures for the official launch. Tokyo has also recently signed an economic partnership agreement with the European Union and is also negotiating the Regional Comprehensive Economic Partnership (RCEP) with other Asia-Pacific economies including China. Easily acquiescing to U.S. demands for bilateral negotiations could compromise Japan’s other efforts to establish multilateral free trade arrangements.
The U.S. is deemed likely to push Japan to open up its farm trade more to imports — such as beef, over which it claims that Japan maintains unfair trade obstacles — through bilateral negotiations. Behind the push is said to be concern among U.S. farmers that they could be left at a disadvantage in terms of tariffs on their exports at a time when the Trump administration has pulled out of the TPP and Japan has concluded the EPA with the EU.
In the talks last week in Washington, Motegi is said to have told Lighthizer that the TPP remains the best trade deal for the two countries. The government should continue its efforts to persuade the U.S. to return to the TPP, although the Trump administration is said to keep turning a deaf ear to such calls as it sets its eyes on winning votes from domestic supporters in the November midterm elections.
The next round of the Japan-U.S. trade dialogue will be in September — when Prime Minister Shinzo Abe is also expected to meet with Trump on the sidelines of the United Nations General Assembly in New York. Increased trade frictions with the U.S. should be averted, but efforts to that end should not deviate from the principles of a multilateral free trade system. The Japan-U.S. trade dialogue should be a venue for constructive efforts to expand trade and investments between the two countries in ways that are compatible with international free trade rules.