The talks between Prime Minister Shinzo Abe and U.S. President Donald Trump, on the sidelines of the United Nations General Assembly in New York, resulted in an agreement for the two governments to start bilateral negotiations for a trade agreement on goods (TAG). While concurring to enter bilateral trade negotiations that Tokyo has so far strongly resisted, a joint statement by Abe and Trump said the United States would not impose the threatened higher tariffs on Japanese auto exports — which have been a major source of concern for Japan since it would have had a huge impact on its economy — as long as the TAG talks are under way. The U.S. also said it “respects” Japan’s position that it would not lower tariffs on agricultural imports beyond levels already promised in multilateral trade agreements such as the Trans-Pacific Partnership.
It looks like Japan managed to avert much-feared tariffs on its auto exports to the U.S. by agreeing to enter the bilateral trade negotiations, which it had shunned in favor of multilateral free trade regimes. The government says it held to its position on the domestically sensitive agricultural trade. Still, the Trump administration, with its “America First” protectionist agenda, has rejected multilateral trade talks and sought to take advantage of its position of power over other parties in bilateral negotiations to win trade terms favorable to U.S. interests. Since Japan relies heavily on the U.S. on matters of regional security, including the problems over North Korea, the upcoming talks will test how firmly the Abe administration can hold Japan’s ground. Tokyo is urged to maintain its emphasis on multilateral free trade rules even as it enters the bilateral talks with the U.S.
As it seeks to woo U.S. voters ahead of the crucial midterm elections in November, the Trump administration has stepped up its campaign to cut trade deficits with the U.S. trading partners, entering a trade war of retaliatory tariffs with China. Trump has also made it clear that the administration is unhappy with the U.S. deficit with Japan — nearly two-thirds of it from the automotive trade.
In earlier talks between the two governments, Japan urged the U.S. to return to the TPP, which the Trump administration pulled out of last year, while Washington called on Tokyo to enter bilateral free trade talks. The government says a TAG will focus on trade in goods and is different from the more comprehensive free trade agreements that Japan has concluded with other countries. But the joint statement says that Japan and the U.S. will also hold talks over other areas of trade and investments after the TAG talks are wrapped up. There’s a possibility that the bilateral talks could effectively develop into FTA negotiations.
The focus of the upcoming talks will likely be on farm products such as beef, as well as the automotive trade. The joint statement said Japan “respects” the U.S. position that “market access outcomes in the motor vehicle sector will be designed to increase production and jobs in the U.S. in the motor vehicle industry.” It also said Tokyo and Washington will explore ways to quickly resolve the problem of punitive tariffs on steel and aluminum that the U.S. imposed earlier this year on “national security” grounds.
As the Trump administration increasingly turns its back on the global free trade regime that the U.S. has years helped build, Japan has taken the initiative to rebuild the TPP following the U.S. pullout. It has concluded an economic partnership accord with the European Union and is seeking to wrap up talks with other Asia-Pacific economies including China on a Regional Comprehensive Economic Partnership. In his address to the U.N. General Assembly ahead of the summit with Trump, Abe declared Japan to be a flag bearer for free trade and vowed to do his best to strengthen the global free trade system. The agreement to hold the TAG talks with the U.S. may have been necessary to avert higher tariffs on its auto exports, but Japan’s position in the talks must be consistent with the position that Abe touted as the champion of multilateral free trade system.
Japan needs to work closely with the U.S., its key ally, on diplomatic and national security issues, particularly as North Korea’s nuclear and missile programs continue to pose a threat to regional security despite recent developments in its relations with South Korea and the U.S. There are also areas where Japan can work with the U.S. and other partners to strengthen the global free trade system. Japan and the European Union share the U.S. concern over China’s alleged intellectual property violations and other unfair practices that favor domestic businesses. The Abe-Trump statement called for cooperation among Japan, the U.S. and the EU to address such problems. Tokyo should call on Washington to work together to deal with these matters of global concern.