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Japan may be pressed to make concessions beyond TPP in trade talks with the U.S.

Japan and the U.S. have started mulling the launch of bilateral talks with an eye on tariffs. This would seem to suggest that Japan is showing consideration to the U.S. as U.S. President Donald Trump is growing anxious to produce results before the midterm congressional elections. Unlike in multilateral negotiations, such as talks on the Trans-Pacific Partnership free trade pact, the balance of power may have greater agency in bilateral talks. Japan may be pressed to accommodate possible unilateral Trump administration demands in the farm and auto sectors by hinting at a hardline approach.

 

“We cannot make concessions beyond what Japan has agreed to in the TPP talks,” said a beef producer in Ashikaga, Tochigi Prefecture. Japanese farmers are growing wary of the prospect of Japan-U.S. trade dialogue. A huge cut in Japan’s tariff on U.S. beef means that the prices of imported U.S. beef will drop. This could cause Japanese beef prices to fall as well.

 

At the end of July, just before the first round of Japan-U.S. talks were to begin, U.S. Trade Representative Robert Lighthizer, who is responsible for cabinet-level trade talks, pointed out that “Japan’s trade barrier to beef is a problem.” Under the TPP, of which Australia is a member, Japan’s beef tariff will be cut to 9% within 16 years of the deal’s effectuation from the current 38.5%. U.S. beef is not subject to this cut as the U.S left the deal. U.S. farmers are demanding a bilateral free trade agreement be clinched with Japan, as they are put at a disadvantage against Australian rivals in the Japanese beef market. The U.S. may demand Japan cut the beef tariff beyond the TPP rate to clinch a deal under terms more favorable than those for Australia. 

 

The Japanese government has been watching out for bilateral talks. “The situation is different from when we negotiated the TPP,” said a government official. “In the TPP talks, the 11 nations could pit themselves against the U.S., but in bilateral talks, the U.S. may act tougher toward us.”

 

Meanwhile, President Trump is growing anxious to produce results before the midterm elections by pledging to “bring jobs back to the U.S.” He is ramping up pressure by imposing additional tariffs on half of the products from China.

 

The U.S. is considering an additional tariff on cars as well. This prompted the Japanese government to start bilateral talks with the U.S. “We cannot shelve bilateral talks any longer,” said a source to the Japanese government.

 

Tough negotiations are also expected to take place in the auto sector. At an upcoming summit, Prime Minister Shinzo Abe will call on President Trump not to make Japanese cars subject to additional tariffs.

 

But President Trump is giving weight to voters particularly in the Midwest as those states are home to the U.S. automobile production and will hold the key to the midterm elections and presidential race, which is scheduled to take place in two years. There are concerns that Washington may make more concrete demands, such as the imposition of quantitative restrictions on Japanese car exports to the U.S. and construction of auto factories in the U.S.

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