Prime Minister Shinzo Abe and U.S. President Donald Trump came to a basic agreement on a bilateral trade deal during talks on the sidelines of the recent Group of Seven summit of major industrial nations in France. The two governments will now work out the fine print, apparently with an eye to signing the pact at a meeting next month.
The primary focus of the negotiations was how far Japan was willing to lower tariffs on U.S. agricultural products, and how far Washington would do the same for Japanese auto imports. The United States put enormous pressure on Japan to reduce duties on agricultural goods, but accepted that any such changes would stay within levels Tokyo has already agreed to under the 11-nation Trans-Pacific Partnership (TPP) free trade deal, which Trump pulled out of early in his White House tenure. This is a matter of course.
Driving U.S. demands is this: When the TPP went into force at the end of 2018, American farm product imports like beef were suddenly at a competitive disadvantage versus those from TPP member states like Australia. If the U.S. could extract tariff concessions from Japan over and above the reductions set out by the TPP, it would give American imports the upper hand. Allowing that to happen would have been a massive muddling of Japan’s priorities.
However, there is a problem with what was agreed. Namely, the United States will not be repealing its tariffs on Japanese auto imports, though the country had agreed to this when still a party to the TPP. The Trump administration, keen to preserve jobs in the U.S. auto sector, torpedoed Tokyo’s demands to bring down the duties, effectively shelving the issue.
The goal of free trade is to open the markets of the countries concerned to stimulate economic activity in all of them, raising all boats. For the United States to ditch the TPP and then demand agricultural product duty reductions while giving not an inch on auto tariffs is shockingly selfish.
Furthermore, to force Trump’s demands through, his administration hinted that Washington was pondering the imposition of hefty duties on Japanese car imports. Some in the Japanese government insisted that Tokyo’s top negotiating priority was avoiding these tariffs.
Following his talks with Trump, though separate from the trade deal agreement, Abe also announced that Japan planned to boost purchases of American corn. This, too, seems like a sop to Trump to help dodge those devastating auto tariffs.
Yet even after all this, Trump has made no pledge to take the duties off the table. It is deeply unfair for the United States to keep the threat of these auto tariffs on the boil to extract yet more concessions from Tokyo down the road.
It must be pointed out that there is no dire need for this trade deal from the Japanese perspective. That there should be a bilateral pact at all was only agreed in September last year after Washington, looking to strike a deal seriously slanted in favor of the United States, essentially strong-armed the Japanese government into the negotiations after Trump stomped out of the TPP. It seems, in the end, that the U.S. has got everything it wanted.
It is also bizarre that none of the details of the basic agreement have been made public even after its announcement. Abe has insisted that the pact “will be a major plus for the economies of both countries,” but his words are hardly convincing.
So, has the Abe government struck a deal in Japan’s interests? The prime minister has a duty to explain exactly what this “plus” agreement means for his country.