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Japan takes home the challenge of maintaining free trade as future assignment

  • September 27, 2019
  • , Nikkei , p. 3
  • JMH Translation
  • ,

Mikio Sugeno, Washington bureau chief


The Japan-U.S. trade agreement that Prime Minister Shinzo Abe and U.S. President Donald Trump sealed represents the first example of President Trump’s achievement in his trade policy that focuses on bilateral deal-making. A “mini deal,” which narrows down the scope of products subject to negotiations, was achieved as Japan extended a helping hand to the Trump administration, which was rushing to produce results. But the deal could harm global trade rules based on a multilateral trade mechanism. Japan is taking home the challenge of protecting the free trade regime, which is on the verge of collapse, as a future assignment.


Both Abe and Trump hailed the trade agreement, but what they sealed is a “mini deal” on limited items. When Japan and the U.S. started trade negotiations a year ago, they chose to begin with seeking an “early harvest’ agreement on goods.


Over the past year, it became even more necessary for the U.S. to reach a quick agreement with Japan. In the U.S. the congressional ratification of the United States-Mexico-Canada Agreement (USMCA), a replacement for the North American Free Trade Agreement (NAFTA), has been delayed due to the opposition camp. Amid escalating trade tensions between the U.S. and China, American farmers are feeling desperate as they are taking a hit from China’s retaliatory tariffs.


Japan was cautious about entering bilateral negotiations in the beginning, but as it sized up the U.S. situation, it shifted course to adopt an “a strategy of embracing talks.” The personal ties between Abe and Trump also played a part. Kentucky Governor Matt Bevin, who is close to President Trump, told me: “President Trump is quietly working with Prime Minister Abe to craft a trade policy tailored to the 21st century.”


But the challenge lies ahead. After the “mini deal” was reached this time, Japan and the U.S. will move to the second round of trade talks.


President Trump hailed the latest agreement by saying that it “can lead to reducing U.S. trade deficits with Japan.” This underscores that the issue of trade deficits with Japan remains his concern.


If little progress is made [in the second round of talks], the U.S. may press for the inclusion of clauses that set a quantitative cap on exports to the U.S. and warn of currency devaluations, as it included them in the U.S.-South Korea free trade pact and the USMCA both indirectly and directly. It will probably demand Japan open markets for pharmaceuticals and financial services, which it put off including in the agreement this time.


At a press conference on Sept. 25, Prime Minister Abe expressed his commitment to become a “flag bearer of free trade.” But the Japan-U.S. joint statement carries no letters of “free trade.” Keeping in place the “TPP-11,” a trade pact from which the U.S. withdrew, and the Japan-U.S. trade agreement, also creates another challenge in the multilateral free trade mechanism.


Demanding President Trump change his mind is not a realistic approach. Then, how should Japan build momentum for cooperation between Japan, Europe and the U.S. in dealing with the reform of the World Trade Organization and China’s improper business practice and inadequate institutional reform? Prime Minister Abe and the leaders of other countries except the U.S. are being tested over their abilities to maintain free trade. (Slightly abridged)

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