Japanese Prime Minister Shinzo Abe has described the recent bilateral trade deal reached with the United States as “something of a win-win for both countries.” But the contents of the trade pact are far from a “win” for Japan.
Under the trade deal, Japan will immediately reduce tariffs on U.S. beef and pork to around the same level as seen in the Trans-Pacific Partnership (TPP) pact, despite the U.S. having withdrawn from the TPP under President Donald Trump. “This is a huge victory for America’s farmers, ranchers, and growers,” Trump said of the agreement.
However, one other focal point of the bilateral trade talks — the elimination of tariffs on Japanese automobiles — was shelved, though it had been promised by the U.S. under the TPP framework. The reason: to protect the American auto industry. The issue was relegated to “ongoing discussion” status, but it is believed that complete elimination of Japanese auto tariffs will be close to impossible.
The purpose of free trade is to mutually open up major markets and invigorate economies. Under the trade pact between Japan and the European Union that went into effect this year, Japan reduced tariffs on agricultural products, while the EU scaled back automobile tariffs.
In this round of trade talks with Japan, the U.S. decided to exclude automobiles — which make up 30% of Japan’s exports to the U.S. — from tariff reductions. This limits the benefits of the trade deal for Japan.
In addition, Prime Minister Abe last month revealed a plan for Japanese corporations to import vast amounts of U.S.-made corn, separate from the trade pact, which has pleased Trump to no end. Prime Minister Abe explained the move as a measure against pest damage, but experts who say there has not been much damage to crops have raised doubts about whether that is the real reason for the move.
The reason Japan went so far to accept the U.S.’s demands was because President Trump had hinted at the possibility of levying additional high tariffs on Japanese cars — a far cry from eliminating pre-existing ones.
President Trump’s top priority is re-election in the 2020 presidential election. Farms and automobile factories are concentrated in states that tend to sway elections.
The latest trade talks reached their conclusion speedily — it was in September 2018 that the two leaders agreed to begin negotiations. The Japanese government appeared to have wanted to finish the discussions before being confronted with any excessive demands, by letting Trump, who was in a hurry to yield results, have the stage.
The Japanese government has explained that the Japan-U.S. joint agreement signed by both Trump and Abe includes a provision that will avoid any additional tariffs. However, the phrasing only goes as far as to adhere to the joint statement that was released in September of last year. Considering how unpredictable President Trump is, it’s hardly a safeguard. The risk of additional tariffs has not been completely eliminated.
The government will submit the draft trade pact at an extraordinary session of the Diet set to be convened next week. Legislators should thoroughly deliberate whether the draft pact benefits Japan.