Japan, U.S. agree on trade deal; challenge remains

August 26, 2019

Biarritz, France--Japan and the United States on Sunday reached a basic accord on a proposed bilateral trade deal featuring cuts in Japanese farm tariffs, but the issue of whether Washington will impose additional tariffs on automobile imports from Japan remains unresolved.

The two economic giants aim to sign the deal in late September, when their leaders meet on the occasion of a U.N. General Assembly session in New York.

In reaching the latest accord, Japan failed to obtain a U.S. pledge to exempt Japanese automobiles and auto parts from possible additional tariffs now being studied by President Donald Trump's administration.

In Japan, the bilateral pact, if signed, will be discussed at an extraordinary parliamentary session that is expected to be convened in October. Pundits say Tokyo's clinching of any deal without a solution to the auto tariff issue could trigger a domestic backlash.

Japanese Prime Minister Shinzo Abe and Trump, meeting on the sidelines of a three-day Group of Seven summit in Biarritz, southwestern France, from Saturday, confirmed the basic trade agreement and respectively instructed officials in Tokyo and Washington to speed up work related to the compilation of the text of the bilateral pact.

The basic accord calls for opening up Japanese farm markets to the levels promised under the Trans-Pacific Partnership free trade deal at a maximum. Under the TPP, the tariff on beef, for example, is to be slashed in stages to 9 pct from the current 38.5 pct.

"We'll realize an environment where the United States will not be inferior to TPP member countries," said Toshimitsu Motegi, Japanese minister responsible for the bilateral negotiations.

The United States made concessions on industrial products, agreeing to eliminate or lower tariffs on a wide range of items. But it did not accept Japan's request to remove U.S. auto tariffs, according to sources familiar with the situation.

During the latest talks with Trump, Abe pledged that Japanese companies will purchase some 2.5 million tons of U.S. corn for animal feed. The measure is intended to help the United States deal with falls in grain shipments to China resulting from the two countries' trade battle.

The focus of Tokyo-Washington trade negotiations is now on whether Japan can escape additional U.S. auto tariffs of possibly up to 25 pct. The planned new duties are based on Trump's claim that imports of foreign-made automobiles and parts pose a national security threat.

For the Japanese auto industry, the United States is the largest export destination, with shipments to the country accounting for more than 30 pct of overall exports. The additional tariffs are widely expected to cause negative effects on Japan's economy and employment.

In a press conference held after his talks with Abe, Trump said auto tariffs on Japan "stay the same."

Motegi said he took the remark by Trump as suggesting that Washington will not impose the additional tariffs on Japanese cars.

But a senior Japanese government official suggested that the fate of Japanese cars remains to be seen, stressing that the U.S. president has the absolute right to decide whether to exempt Japan from the measure. Jiji Press