US, Japan move closer to limited trade deal

Trump, Abe outline possible deal that could open Japanese markets to $7 billion in U.S. goods

President Donald Trump, seen at a rally in Pennsylvania, made his preference clear earlier this year in the Tennessee Senate race (Tom Williams/CQ Roll Call file photo)
President Donald Trump, seen at a rally in Pennsylvania, made his preference clear earlier this year in the Tennessee Senate race (Tom Williams/CQ Roll Call file photo)
Posted August 26, 2019 at 9:13am

The United States and Japan have reached a tentative agreement that could give President Donald Trump a trade win for his farm constituency and could protect Japan against steep auto tariffs that the administration is threatening to impose on imported vehicles.

Trump and Japanese Prime Minister Shinzo Abe outlined the agreement in principle on agriculture, industrial tariffs and digital trade Sunday during the G-7 summit in France. U.S. Trade Representative Robert Lighthizer said the agreement, if finalized, would open Japanese markets to an additional $7 billion in U.S. products.

[Trump increases China tariffs as stocks tumble amid latest trade tensions]

Abe said negotiators will continue to fine-tune the language. The two leaders said they hoped to sign the agreement in New York in late September when the U.N. General Assembly meets. There was no mention of whether Congress would have a role in approving the agreement.

Senate Agriculture Chairman Pat Roberts, a Kansas Republican, welcomed the Trump-Abe announcement and said he looked forward to seeing details. Roberts said the proposed trade agreement is needed. 

“U.S. farmers and ranchers currently face a disadvantage in Japan relative to other countries in the Trans-Pacific Partnership, and this agreement will allow our producers to remain competitive as reliable suppliers,” Roberts said in a statement.

Senate Finance Chairman Charles E. Grassley, an Iowa Republican, told reporters during an Aug. 20 conference call that he didn’t think an agriculture-only agreement with Japan would require congressional approval. If it did, Grassley said he thought it would pass both chambers of Congress. It is unclear if the proposed agreement’s inclusion of industrial tariffs and digital trade would change the dynamics.

The final language will clarify points of agreement and obligations. During the media briefing, Trump said Japanese companies would buy “hundreds of millions of dollars of corn” from the U.S., according to White House press pool reports.

“And one of the things that Prime Minister Abe has also agreed to is, we have excess corn in various parts of our country, with our farmers, because China did not do what they said they were going to do,” Trump said, according to a transcript released by the White House. The comment reflected Trump’s frustration with Beijing’s infrequent purchases of U.S. agricultural goods during the ups and downs of U.S.-China trade talks.

Trump has previously made assertions about Chinese commitments to buy farm goods that proved inaccurate.

Abe didn’t mention a dollar value for purchases.

“With regard to the potential purchase of American corn, in Japan we are now experiencing insect pests on some agricultural products. And there is a need for us to buy some of the agricultural products,” Abe said.

The U.S. sold $12.9 billion in agricultural products to Japan in 2018, making it the fourth-largest agricultural export market, according to the Agriculture Department’s Foreign Agricultural Service. In May 2019, Japan agreed to end the last restrictions on U.S. beef imports adopted in 2003 after a U.S. cow tested positive for bovine spongiform encephalopathy, also known as mad cow disease.

U.S. competitiveness

Lighthizer said a final agreement would enable U.S. agriculture to compete in Japan with rivals from nations that receive favored treatment under the Japan-EU Economic Partnership Agreement and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

Trump told reporters that current U.S. auto tariffs on Japan would remain the same under the proposed agreement. The current tariff on imported Japanese autos is 2.5 percent.

American beef, pork, wheat and other agricultural sectors have said they were concerned that they were losing market share in Japan because their products faced higher tariffs than rivals in nations with trade pacts with Japan. U.S. agriculture groups are particularly concerned about CPTPP, a revised version of the Trans-Pacific Partnership, a multi-nation trade agreement Trump withdrew the U.S. from in 2017.

Trump and Lighthizer have called TPP, which was negotiated by the Obama administration, badly flawed. However, agriculture groups and farm-state lawmakers of both parties argue that it would have given the U.S. expanded access to Japanese markets and served as a gateway into growing Asian markets.

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