Representatives of Japan and the U.S. agreed to focus on negotiations over goods including automobiles and agricultural products in the first ministerial trade talks that newly started [on April 15]. They also agreed to negotiate over digital trade.
The agreements are in line with the joint statement announced last September. This is an appropriate move. The Trump administration is dissatisfied with its trade deficit with Japan. What is called into question is whether Japan can maintain this stance throughout the bilateral trade talks.
As the U.S. will unlikely come back to the Trans-Pacific Partnership (TPP) pact for the time being, it is significant to conclude a trade agreement with Washington in lieu of the TPP.
However, the U.S. may take a hard line to gain what it wants. Japan should not yield to Washington’s pressure. It would be unreasonable if an agreement to be concluded with the U.S. through the trade talks this time would adversely affect the TPP signatories and the EU, which concluded an Economic Partnership Agreement with Japan.
Japan should not fall into controlled trade with the U.S. An agreement to be concluded with Washington must remain compatibile with the TPP. At the same time, Tokyo should leave room for the U.S. to eventually return to the TPP in the future. That should be Tokyo’s minimum goal.
One major item on the agenda in the ongoing talks is to define the scope of negotiations. Some U.S. representatives call for concluding a comprehensive agreement with Japan including services and investment rules.
The U.S. will likely increase pressure on Japan while negotiating items in various sectors. Even if that is the case, Japan should remain composed, because it is the U.S. that wants quick results.
The U.S. export of agricultural and livestock products to Japan is a good example. As Washington left the TPP, the U.S. cannot receive the benefits of tariff reduction, and American farmers are are becoming increasingly vociferous in their complaints. Bearing in mind the next presidential election, the Trump administration naturally aims to swiftly turn around this unfavorable situation.
It is not wise, however, for the U.S. to force concessions from Japan that exceed the TPP conditions. The more the ongoing negotiations become tangled, the longer farmers’ complaints will continue.
Even if Washington demands Japan’s quantitative restrictions on automobile exports to the U.S., Tokyo cannot accept a deal that runs counter to international rules. The same applies to a currency clause that prevents competitive currency devaluation. It is inappropriate for the U.S. to try to include in a trade agreement a provision that could bind Japan’s monetary policy. Finance ministers of the two countries should separately discuss the matter.
In negotiations with South Korea, Canada, and Mexico, the U.S. made those countries accept quantitative restrictions and a currency provision. Washington may regard those results as an achievement, but they are simply negative examples for Japan. Tokyo has no reason to follow suit.
The U.S. may apply more pressure on Japan by hinting at additional tariffs on cars. If Tokyo yields to the pressure, Japan would lose the trust of the international community as a flag-bearer for free-trade. Japan should keep this in mind in negotiations with the U.S.