Lingering U.S.-Japan Trade Policy Differences

April 11, 2014 07:48 AM
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President Obama to visit Japan April 24-25; USTR Froman to meet Japanese official next week in D.C.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Unsettled trade policy issues between the US and Japan remain in reaching an agreement on the Trans-Pacific Partnership (TPP) trade pact two weeks before President Barack Obama journeys to Tokyo. Japan’s Economy and Finance minister Akira Amari will reportedly meet next week with US Trade Representative Michael Froman in Washington with a goal of concluding bilateral Trans-Pacific Partnership (TPP) negotiations before President Obama’s visit to Japan Apr. 24-25.

Our teams arrived expecting that the talks would be tough and our expectations have been met,” US Trade Representative Michael Froman said Thursday at the end of two days of talks in Tokyo. “We understand the challenges. These changes relate to fundamental reforms and the market opening of sectors in Japan that have traditionally been closed.” While some progress was made, he said “considerable differences remain in our positions on key issues.”

As expected, differences over agricultural products and automobile tariffs have held up a deal ahead of a visit by President Obama to Japan on April 24-25, where he will meet with Japanese Prime Minister Shinzo Abe.

Japan, which joined the four-year-old talks only last year, is fighting to maintain import tariffs in five “sacred” agricultural categories – rice, wheat, dairy, sugar, and beef and pork products – while the US has sought ways to help US carmakers.

Hiroshi Oe, Japan's ambassador to the talks, said the treatment of beef, pork and milk were among the issues that remain unresolved in bilateral talks. Japanese farmers are among the most protected in the world, according to the OECD, with half of average incomes coming from subsidies and price supports. That compares with one-fifth in the EU and one-tenth in the US.

White House summit with Japan impact. Japan's Economy Minister Akira Amari said it was not time to say whether or not an agreement in principle will be possible when Obama meets Abe April 24-25 in Tokyo.

One of the key areas of dispute is beef tariffs. Froman said negotiators will keep discussing autos and agriculture. Japan is considering cutting tariffs on US beef to the high single digits, from 38.5 percent, the Nikkei newspaper said on Thursday, without citing a source. Froman declined to comment on the report. US negotiators are pushing for a larger cut, the paper said.

Impact of Japan trade agreement with Australia depends on who is talking. Japan reached a trade agreement with Australia April 7 that involved cutting tariffs on Australian frozen beef by almost half over 18 years and abolishing levies on Japanese car exports. Tariffs on rice, a particularly sensitive political issue in Japan, were excluded from that deal. While Japanese officials said they hoped the Australian agreement would provide an incentive to break through the deadlock in talks with the US, Froman said it would have no impact. “We're looking for a level of ambition that is significantly higher than that,” he said.

Froman has said he will now work to achieve an agreement within 2014, but trade observers say an early conclusion of the ambitious trade pact will become even more difficult if agreements are not made by the time of the Japan-US summit, with US midterm elections set for November. Australia, Brunei, Canada, Chile, Mexico, New Zealand, Peru, Singapore and Vietnam are also party to the TPP talks.

The Japan Times entered into the TPP issues today when, in a commentary item, it said, “There is also [US\ congressional unease over what TPP means for offshore manufacturing, possibly in Japan, of US defense technologies. A Department of Defense report from last October warned of a threat to US defense capabilities from offshore manufacturing in the form of a compromised supply chain for key weapons systems components. In a separate telephone interview with The Japan Times, Lori Wallach, director of the Washington-based Public Citizen’s Global Trade Watch, said Japan’s participation in the TPP is of less concern in Washington compared to what the deal means for US-China relations. 'The only reason for the US to include Japan in TPP is to sell beef, pork and rice, and to try to change Japan’s health care system to allow more pharmaceuticals. Brunei was treated by the US with more respect. But I’m more surprised that Abe accepted (the US) treatment,' Wallach said.”

Comments: I have seen many bilateral trade agreements come (mostly) and go (a few). This one will eventually be settled, I think. But perhaps not at the total elimination goal some US farm groups want. But Froman has previously said if Japan doesn't reach an accord with the US on major areas, the TPP can move along without them. We will have to see whether or not that was just trade negotiator bluster or not.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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