Status of vehicles still uncertain as US and Japan head for trade pact
US President Donald Trump and Japanese Prime Minister Shinzo Abe are expected to clinch a deal on farm tariffs and digital trade when they meet in New York this week.
Full details of the agreement have not been disclosed. Below are some key elements about the pending agreement.
Trump’s announcement of an initial deal last week left unanswered questions over whether the agreement would deliver Japan one of the main prizes it seeks: a US pledge not to impose national security tariffs of up to 25% on Japanese vehicles and vehicle parts under section 232 of US trade law.
Japanese foreign minister Toshimitsu Motegi, who is in charge of talks with US trade representative Robert Lighthizer, has said he wanted to reconfirm in writing that the tariffs would not be imposed.
Japanese officials have said that under a September 2018 agreement, the US would not impose added vehicle tariffs while trade talks were under way. Fresh assurances could echo that vague wording, saying both sides would “refrain from taking measures against the spirit of this joint statement during the process of these consultations”.
Japanese vehicle exports account for about two-thirds of its trade deficit with the US and added tariffs would deal a blow to Japan’s trade-reliant economy. A preliminary deal announced on August 25 included reduced US tariffs on unspecified industrial products but Lighthizer said these did not include vehicles. Tokyo has sought removal of a US 2.5% tariff on vehicles and vehicle parts.
Japan is expected to agree to cut tariffs on imports of US beef and pork to around levels granted to signatories of the multilateral Trans-Pacific Partnership (TPP), officials have said.
Japan will permit low import tariffs on about 240,000 tons of US beef, with the quota covering about 90% of the amount Japan imports from the US, the Nikkei business daily said, adding it would eventually rise to 290,000 tons.
Lower tariffs would allow Trump to please US farmers ahead of the 2020 presidential election. The farmers had been disadvantaged in Japan’s market after the US withdrew from TPP after Trump took office in 2017. It would also let Abe keep a pledge to domestic producers.
Lighthizer said in August that wheat, dairy products, wine and ethanol would also benefit from the deal.
Washington will make it easier for Japan to increase USbound beef exports by scrapping a 200-ton annual low-tariff quota, affording Japan the same beef trade status as Australia, New Zealand and Canada, Japanese media reported.
In announcing the initial agreement last month, Trump referred to Japan’s decision to front-load planned purchases of US maize imports to cope with damage to its crop from an armyworm infestation. But Japanese officials said the country’s total imports of maize for animal feed wouldn’t increase.
WINE IMPORTS
Japan has agreed to phase out tariffs on US wine imports over five to seven years, which is about the same as the eight-year TPP time-frame, media said, potentially cutting the cost of US wine by about 13%.
However, the amount of US rice that will be allowed to enter Japan without tariffs would be much less than the 70,000 tons accepted under the TPP, a Japanese source familiar with the matter said on condition of anonymity.
Japanese finance minister Aso Taro has said that a currency provision aimed at preventing competitive devaluation would not be included in the final deal. That demand by US legislators would tie Japan’s ability to intervene in currency markets should the yen spike and threaten the country’s export-reliant economy.
US technology industry officials say they expect a digital trade agreement with Japan to be closely aligned with provisions in the new US-MexicoCanada Agreement, which follow the US model for internet development.
Those provisions aim to ensure the free flow of data across borders without taxation, prohibit data server localisation requirements and limit governments’ ability to demand that companies disclose their source code.
A CURRENCY PROVISION AIMED AT PREVENTING COMPETITIVE DEVALUATION WOULD NOT BE INCLUDED IN THE FINAL DEAL