Japan and the United States have launched ministerial trade talks and to Tokyo’s relief, Washington stopped short of making tough demands over key issues such as agricultural products and automobiles, according to those familiar with the discussions. Still, concerns remain as to whether Japan could be forced to bow to pressure from President Donald Trump, who is pursuing an “America First” policy.
Japan and the United States have agreed to hold talks on Japan’s opening of its agricultural market to the world based on levels that Japan accepted in the Trans-Pacific Partnership (TPP) free trade pact. The United States appears desperate to move ahead with bilateral trade talks because the country has been placed in a disadvantageous position over exports to Japan after the TPP accord went into force without participation by Washington.
After the bilateral negotiations, economic revitalization minister Toshimitsu Motegi recalled that the two countries “got off to a good start.” The ruling Liberal Democratic Party (LDP) is attempting to emphasize the trade talks as an achievement made by the government of Prime Minister Shinzo Abe as the summer 2019 House of Councillors election is drawing near.
However, the bilateral trade talks will enter their key phase from now on. President Trump, who is seeking re-election in the next presidential election in 2020, is scrambling to garner votes from farmers and workers in the automobile industry. There are fears that Trump will intensify his pressure on Japan in a bid to win concessions from Tokyo.
Calls persist within the United States urging Japan to liberalize its agricultural market more than called for under the TPP agreement. If Tokyo were to give in to such demands, it would place Washington, which has broken away from the TPP pact, at a more advantageous position than parties to the accord. This would be the equivalent of putting the cart before the horse.
Concerns remain as to whether the United States will threaten to place quantitative restrictions on car imports from Japan.
The Trump government pressured Mexico and Canada into accepting measures to effectively place quantitative restrictions by reviewing the trilateral North American Free Trade Agreement. Washington views such measures as a key bargaining chip in talks aimed at reducing its trade deficit.
What is also worrisome is that the United States is insisting that a provision should be added to trade agreements to ban parties from devaluating their own currencies to be advantageous to their exports.
Tokyo and Washington have already agreed not to intentionally devaluate their own currencies through such measures as market intervention. However, a decline in the value of a currency as a result of a credit easing policy is internationally accepted. If such a currency provision is incorporated in trade agreements that are legally binding, Japan’s monetary policy could be bound by the desires of the United States.
The fate of the bilateral trade talks depends largely on what President Trump will say during bilateral summit discussions next week.
Prime Minister Abe has stated that Japan will play a leading role in promoting free trade. If so, he should encourage Trump to exercise prudence in preventing Japan-U.S. talks from further harming the world’s free trade system.