By Yorisumi Watanabe, professor at Keio University
The Japanese and U.S. governments staged a compromise by agreeing to enter into negotiations on concluding a Trade Agreement on Goods, or TAG. The agreement enables U.S. President Donald Trump, who is facing the midterm elections in November, to appeal to his supporters by saying that he will “begin bilateral negotiations with Japan.” The agreement also gives Japan the benefit of being able to fend off the major problem of the U.S. threatening to impose higher auto tariffs.
The U.S. may be thinking about having the TAG lead to a future bilateral free trade agreement with Japan. In that sense, the U.S. and Japan achieved a common goal but have different motives. Prime Minister Shinzo Abe explained that a TAG is “totally different from an FTA.”
A TAG may not be necessarily based on the assumption of abolition of tariffs. It may allow Japan and the U.S. to meet each other half way in areas of cooperation, such as jointly building factories and infrastructure in the U.S., depending on the negotiations.