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U.S. and Japan enter 2-way trade talks, but differ on goal



NEW YORK — The U.S. and Japan agreed on Wednesday to enter bilateral trade talks in a deal that will protect Japanese automakers — the country’s largest export sector — from further tariffs as long as the negotiations are ongoing.


But the two nations appear to hold different views on the nature of any final deal.


Tokyo has been resisting the Washington’s push for a bilateral free trade deal. Instead, Japan has pressed its ally to return to the Trans-Pacific Partnership, a multilateral Pacific Rim trade agreement from which U.S. President Donald Trump withdrew shortly after taking office last year.


Japanese Prime Minister Shinzo Abe told reporters in New York that talks were aimed at something “completely different from the free trade agreements that Japan had made in the past.” But Robert Lighthizer, the lead U.S. trade negotiator, said the two sides would aim for a full free trade agreement approved by the U.S. Congress, Reuters reported.


Abe had resisted Trump’s push for bilateral talks for almost two years, but with Japan’s economy heavily dependent on exports, the president’s threat of auto tariffs forced him to reconsider.


“This was something that for various reasons over the years Japan was unwilling to do, and now they are willing to do,” Trump said at the summit with Abe on the sidelines of the U.N. General Assembly. “So we’re very happy about that, and I’m sure that we will come to a satisfactory conclusion — and if we don’t, ohhhhhh.”


A shift to bilateral talks would give the president a boost ahead of midterm congressional elections in November.


“During the discussion, we agreed that there will be no additional tariff on autos,” Abe told reporters later. He added that for agricultural goods “we agreed that the terms of the past Economic Partnership Agreements will be the limit.”


In a statement issued after the meeting, the two leaders said their countries will enter into negotiations for a “United States-Japan Trade Agreement on goods,” with a goal of producing early achievements.


“The United States and Japan will conduct these discussions based on mutual trust, and refrain from taking measures against the spirit of this joint statement during the process of these consultations,” the statement read.


Japan’s lead negotiator and economic revitalization minister, Toshimitsu Motegi, said he understands those words to mean that the U.S. will not impose its threatened 25% tariff on Japanese auto imports as long as negotiations are underway.


As for Japan’s farm products, “market access as reflected in Japan’s previous economic partnership agreements constitute the maximum level,” the statement says. Motegi said Japan stressed to the U.S. side that it will not accept market liberalization exceeding the levels agreed on under the TPP.


A Japanese government official said that Trump indicated he would respect Tokyo’s stance.


U.S. Secretary of Agriculture Sonny Perdue issued a statement saying: “Japan is an important customer for our agricultural products and we look forward to the great potential this breakthrough represents.”


Lighthizer said on a conference call just after the summit that he expects the talks will happen in two “tranches,” with the first set aiming for an “early harvest” on reducing tariffs and other barriers to trade covering goods. The trade representative said he will begin notifications to Congress soon to launch negotiations under the U.S. “fast track” trade authority law.


Motegi said it will take time for the talks to start due to required congressional procedures. But he added that the creation of a free and fair framework on tariffs by the two nations will “have a good impact on the global economy as a whole.”


In addition to lowering tariffs, the talks are expected to cover simplifying the customs process as well. The two leaders did not discuss currencies or any voluntary restraint of auto exports, Motegi added.


“This agreement is better for Japan than we had expected,” Hiroshi Ugai, an economist at JPMorgan Securities Japan, wrote in an emailed note.


Ugai said that two risks remained: The U.S. may plan again to impose tariffs on autos imports from Japan after the trade talks, and Trump may say that the Japanese yen is undervalued.


Wednesday’s meeting between the two leaders follows a second round of “free, fair and reciprocal” trade talks held in New York on Tuesday. Motegi and Lighthizer reached a basic agreement on ways to promote trade between their countries.


Separately, Trump and Abe confirmed their commitment to fully implement United Nations sanctions to push North Korea toward denuclearization.

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