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Analysis: Trade deal with U.S. will hurt Tokyo if auto tariffs stay

  • November 17, 2019
  • , The Asahi Shimbun , 6:30 p.m.
  • English Press

Although the government has touted the Japan-U.S. trade agreement as a “win-win” for both countries, Tokyo could exit a big loser unless tariffs on Japanese automobiles and auto parts are eliminated, an analysis showed.


Not cutting the tariffs would result in a little over one-10th of the government’s estimate of 212.8 billion yen ($1.95 billion) savings, according to the analysis by The Asahi Shimbun and Kazuyoshi Nakata, a senior researcher at Mitsubishi UFJ Research and Consulting.


Provisional calculations and the analysis were conducted based on data on calculated duties released by the U.S. Census Bureau and the tariff schedule in U.S. documents related to the trade agreement.


The analysis showed that the reduction would amount to only 26 billion yen or so if tariffs on automobiles and auto parts remained.

Although Tokyo has continued publicly insisting it is a “done deal,” the removal of such tariffs has yet to be finalized between the two countries.


The document on the pact written in English said: “Customs duties on automobile and auto parts will be subject to further negotiations with respect to the elimination of customs duties.”


Tokyo and Washington signed a trade agreement in October that cuts tariffs on U.S. farm goods, Japanese machine tools and other products.


Toshimitsu Motegi, who headed the Japanese envoy as trade minister when negotiations were under way and is now foreign minister, described the pact as “win-win” when asked about it at the Lower House’s Budget Committee on Nov. 6.


According to the government’s estimate, the reduction in overall tariffs on Japanese exports to the United States will be 212.8 billion yen after the pact.


The estimate was made on the basis of the 260 billion yen Japan paid to the United States in tariffs in 2018.


As for customs duties the United States will pay to Japan, the government cited a decline of 103 billion yen on the basis of about 157 billion yen it received in fiscal 2018.


“(Japan) has more wins by a two-to-one margin than losses,” Kazuhisa Shibuya, senior policy coordinator with the Cabinet Secretariat, characterized the trade agreement during a briefing on the deal on Oct. 18.


But the 212.8 billion yen figure quoted by the government includes tariffs that it says have been agreed to remove on Japanese automobiles and auto parts exports. Tariffs currently levied on automobiles is 2.5 percent and 2.5 percent for most auto parts.


Tokyo and Washington are now seeing little momentum for coming to the negotiating table to hammer out when the auto tariffs should be abolished, raising bleak prospects for Japan.


Opposition parties are calling on the government to present its estimate for the tariffs after subtracting auto-related figures.

But the government and Prime Minister Shinzo Abe’s Liberal Democratic Party have rejected the demand, maintaining that such tariffs will be abolished.


The Lower House’s Foreign Affairs Committee on Nov. 15 approved the proposal for ratifying the trade deal.


The government is set to gain Diet approval for the deal during the current Diet session to bring it into force on Jan. 1.


(This article was written by Hideki Kitami and Hirobumi Ohinata.)

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