US-Japan trade agree­ment takes ef­fect with sec­ond round in doubt

Muscat Daily - - BUSINESS -

Tokyo, Japan - A trade deal be­tween the US and Japan that cuts tar­iffs on some agri­cul­tural prod­ucts and in­dus­trial goods took ef­fect on Wed­nes­day, with lit­tle in­di­ca­tion the two sides would meet a pledge to soon start a new round of talks broad­en­ing the pact.

Un­der the deal, Japan re­duced tar­iffs on beef and ad­di­tional US agri­cul­tural prod­ucts to the same lev­els it grants other trad­ing part­ners in the Trans-Pa­cific Part­ner­ship re­gional trade agree­ment. Japan failed to se­cure its goal of re­duced tar­iffs on the cars and auto parts it ex­ports to Amer­ica.

Pres­i­dent Don­ald Trump had threat­ened the close US ally with puni­tive tar­iffs on a US$50bn a year sec­tor that is a corner­stone of its econ­omy. While there has been no writ­ten pledge from Trump to halt ex­tra tar­iffs on au­tos, Japan’s gov­ern­ment has said US of­fi­cials - in­clud­ing the Pres­i­dent - gave as­sur­ances that they would not be in­tro­duced. In one con­ces­sion to Prime Min­is­ter Shinzo Abe, Japan’s po­lit­i­cally sen­si­tive rice in­dus­try was ex­cluded from the agri­cul­tural mar­ket open­ing with the US.

Trump was ea­ger to make a deal with Japan to boost his re­elec­tion cam­paign by ap­peas­ing US farm­ers who have been largely shut out of the Chi­nese mar­ket as a re­sult of his trade war with Bei­jing. Amer­i­can agri­cul­tural pro­duc­ers, also reel­ing from bad weather and low com­mod­ity prices, are a core com­po­nent of Trump’s po­lit­i­cal base.

The US and China agreed to the first phase of a broader trade agree­ment in De­cem­ber, but have yet to sign the deal that hinges on China in­creas­ing pur­chases of Amer­i­can farm goods such as soy­beans, and mak­ing new com­mit­ments on in­tel­lec­tual prop­erty, forced tech­nol­ogy trans­fer and cur­rency.

The US and Japan said in a state­ment pub­lished when their ini­tial deal was made in 2019 that they in­tended to agree to other ar­eas for fur­ther trade open­ings within four months and start ne­go­ti­a­tions on is­sues in­clud­ing tar­iffs, trade in ser­vices and bar­ri­ers to in­vest­ment.

But nei­ther side seems up for a fresh bat­tle on trade af­ter Trump se­cured a deal he could trum­pet to farm­ers. Japan could face threats on other fronts if it starts a fresh round and isn’t keen to sit down again with its sec­ond-big­gest trade part­ner.

“The sec­ond round of talks with Japan will be a low pri­or­ity for the Trump ad­min­is­tra­tion,” said Ju­nichi Sug­awara, se­nior re­search of­fi­cer at the Mizuho Re­search In­sti­tute. Trump was al­ready strug­gling to reach agree­ments with China and the European Union as he heads into the Novem­ber election.

The US is likely to de­mand a clause on cur­rency ma­nip­u­la­tion, Sug­awara said. While Japan says the two lead­ers have agreed to have their fi­nance min­is­ters dis­cuss ex­change rate mat­ters, the is­sue was still likely to come up in a com­pre­hen­sive agree­ment.

(Bloomberg)

A file photo shows US Pres­i­dent Don­ald Trump (left) shak­ing hands with Ja­panese Prime Min­is­ter Shinzo Abe in Osaka, Japan

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