The new round of bilateral trade talks that Prime Minister Shinzo Abe and U.S. President Donald Trump have agreed to represents a radical policy shift for Japan, which has placed its principal trade policy priority on multilateral frameworks.
The two leaders have struck a deal to launch negotiations for a bilateral agreement to reduce tariffs, which is to cover all trade in goods between the two countries.
Tokyo has been urging Washington to return to the Trans-Pacific Partnership (TPP) trade pact among Pacific-Rim countries while trying to avoid talks for full trade liberalization with the United States, which has much more powerful leverage at the bargaining table because of its superior economic might.
Japan has agreed to set up a bilateral “economic dialogue” and a new framework for ministerial trade talks with the United States as diplomatic maneuverings to avoid negotiating the bilateral Free Trade Agreement (FTA) demanded by the Trump administration.
But the Abe administration has knuckled under to strong pressure from Trump, who has been threatening to impose high tariffs on auto imports from Japan.
The governments of the two countries hope to start as soon as possible the talks under a new framework called Trade Agreement on Goods (TAG), which is supposed to be focused on tariffs on goods.
At a news conference following his meeting with Trump, Abe claimed that a TAG agreement will be “totally different” from any of the comprehensive FTAs that Japan has negotiated with its trade partners.
But the joint statement issued after the meeting between the two leaders also referred to investment and services as areas the two countries should discuss in their trade talks.
There is a good possibility that the envisioned TAG deal will morph into a sort of FTA.
The Abe administration should make clear to the Japanese people which areas will actually be covered by the bilateral trade negotiations.
During their latest summit, according to the Japanese government, Abe and Trump confirmed that the United States will not impose additional tariffs on cars from Japan while the TAG talks are under way and also that Japan will not liberalize its market for farm products beyond the levels on which it has agreed with the other TPP partners.
But that is no reason for unreserved optimism.
The Trump administration is seeking to gain the upper hand in trade talks with other countries with the threat of high tariffs that ignore international trade rules.
Washington, for example, has successfully pressured South Korea into agreeing to effective voluntary restrictions on its steel exports to the United States in return for exempting the country from the massive new tariffs Trump has slapped on a wide range of steel imports. The Trump administration did not promise to keep South Korea off the list of targets for new automobile tariffs.
Trump did not make any commitment, neither, to exempting Japanese car exports from additional tariffs over the long term.
As for the level of U.S. access to the Japanese agricultural market, the joint statement only said Washington would “respect” Tokyo’s position on the issue.
It is quite possible that the Trump administration may pressure Japan to make further concessions by threatening to walk out of the trade talks or bringing up security issues.
No matter how hard the United States may press Japan to accept its demands, however, the Abe administration should not compromise its basic principle of fair and free trade.
Japan should reject any exceptional measures, such as quantitative restrictions on its exports.
Japan should instead concentrate its trade policy efforts on accelerating the process of enforcing its economic partnership agreement with the European Union and the TPP11 (the revised TPP negotiated after the U.S. withdrawal) to enhance multilateral trade frameworks as counterbalances against Trump’s America First trade agenda.
It also has a duty to work closely with other countries that respect the principle of free trade to keep pressing the United States to change its stance.