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Editorial: Develop Japan-U.S. trade pact and parlay it into future agreement

  • September 27, 2019
  • , Nikkei , p. 2
  • JMH Translation

Japan has concluded a new trade agreement with the United States, which withdrew from the Trans-Pacific Partnership (TPP) trade pact. Prime Minister Shinzo Abe and U.S. President Donald Trump met in New York and signed a joint statement that includes the final agreement.


Although the liberalization of trade of farm and industrial products will likely move forward to some extent, the agreement does not seem to offer an example for major nations. We hope that the United States and Japan will continue their negotiations to achieve a more comprehensive agreement with a high level of liberalization.


The agreement lowers tariffs on beef and pork imports to Japan to the levels found in the TPP and reduces or eliminates tariffs on machine tool and fuel cell imports to the U.S. The United States postponed the elimination of tariffs on automobiles and auto parts, and Japan avoided introducing a tariff-free quota for American rice.


We welcome the conclusion of an agreement between the world’s largest and third largest economies in place of the TPP and their aim of further expanding trade. Although there are sensitive areas that both Japan and the U.S. protected, there are considerable benefits for consumers who can buy inexpensive imports.


The United States confirmed that it will not invoke high tariffs on cars, and Japan reportedly avoided quantitative limits on its exports to the U.S. and the addition of a currency clause that would tie Japan’s hands on its currency policy. There are fewer problems with this agreement that with the U.S.-ROK free trade agreement (FTA) and the revised version of the North American Free Trade Agreement (NAFTA).


But the agreement is a partial pact that covers trade in goods and digital trade and will not have as much impact as the TPP, which advances liberalization in a broad range of fields, including services and investment. With hopes pinned on being reelected as president in the November 2020 election, Trump prioritized restoring the competitiveness of American farm products, and Abe also desired a quick conclusion.


The two countries plan to bring the agreement into force as early as January 2020 and start the next round of negotiations. We would like to see them hurry to resolve the remaining issues, while highlighting the [positive] effects of the liberalization already agreed upon. For Japan to stem the spread of protective trade, it needs to develop this agreement and parlay it into a future deal.


A key matter is the elimination of tariffs on cars and auto parts, which the U.S. carried forward. If this is not realized, it may violate the rules of the World Trade Organization (WTO), which requires trade agreements to remove about 90% of tariffs on trade. Japan should continue to work on the U.S., encouraging it to consider once again the elimination of tariffs as agreed in the TPP.


It would be impermissible for President Trump to renege on his agreement with Prime Minister Abe and try to impose high tariffs on cars and manage exports and currency exchange. Removal of the high tariffs on steel and aluminum already in place is also a topic for future negotiations.

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