While there’s impetus for negotiations to move quickly, defining the scope could be tricky during the lead-up to discussions, says Asia Society vice president.
The near-term activation of several free trade agreements involving Japan will incentivize the U.S. to hustle in reaching a bilateral FTA with Tokyo, but early indications suggest that defining the scope for such a deal will be difficult, Asia Society Policy Institute Vice President Wendy Cutler said during a Center for Strategic and International Studies panel discussion Friday.
The U.S. and Japan on Sept. 26 released a joint statement saying they intend to launch trade agreement negotiations after the completion of necessary domestic procedures.
Cutler’s discussions with colleagues in Japan indicate that country, in their view, hasn’t agreed to FTA talks, but rather a “pretty narrowly scoped negotiation,” while the Trump administration is currently consulting with Congress to define the scope of talks as U.S. stakeholders already are requesting negotiations include provisions ranging from digital economy to environment to intellectual property, she said.
Moreover, the joint statement envisions a two-stage negotiation, which could mean that U.S.-Japan bilateral trade talks necessitate two separate congressional votes, Cutler said.
“I kind of find that hard to believe, but I don’t really know what the alternative would be if this would be a two-stage negotiation,” she said.
The joint statement says: “The United States and Japan will enter into negotiations, following the completion of necessary domestic procedures, for a United States-Japan Trade Agreement on goods, as well as on other key areas including services, that can produce early achievements. … The United States and Japan also intend to have negotiations on other trade and investment items following the completion of the discussions of the agreement mentioned above.”
As the U.S. agriculture community will watch several other countries gain preferential trade access to the Japanese market when the Trans-Pacific Partnership enters into force Dec. 30 and when the EU-Japan Economic Partnership Agreement enters into force, expected in 2019, it will incentivize “some kind of early harvest,” Cutler said.
But it remains to be seen whether agricultural concessions granted by Japan in the TPP and EU-Japan deal will be viewed by both the U.S. and Japan as a ceiling in bilateral talks or whether the U.S. will ask for more.
The joint statement says that market access outcomes for agricultural, forestry and fishery products reflected in Japan’s previous economic partnership agreements constitute the maximum level.
Meanwhile, other issues that could have impacts on the U.S.-Japan talks are administration attempts to push the U.S.-Mexico-Canada Agreement (USMCA) through Congress, U.S.-China trade tensions and ongoing U.S. work toward bilateral trade agreements with the EU and U.K., Cutler said.
“By the time we get back into a regional agreement, we’re going to need to take that next step, and this is a real opportunity to do that,” U.S. Chamber of Commerce Senior Vice President for Asia Charles Freeman said during the panel.
The U.S. business community would like to see provisions for transparency and openness in pharmaceuticals and advanced medical devices trade, and financial services and automobiles are also important areas of negotiations, he said.
Language on digital trade and state-run economies would be ripe for U.S.-Japan talks, Cutler added.
U.S. Section 232 tariffs, especially as they could relate to autos from Japan, also will likely be a big issue factoring into talks, as the Trump administration’s threat of tariffs was a “prime motivator” for Japan to agree to bilateral talks with the U.S. after it had resisted for a year and a half, Cutler said.
“I would suspect that we’ll see the threat of 232 going forward,” she said. “With respect to what Japan will do, it’s an open question. I would just put on the table that unlike other trading partners, Japan didn’t counter-retaliate on steel and aluminum tariffs.”
Japan has brought a case at the World Trade Organization against the United States’ use of Section 232 steel and aluminum tariffs, but autos is “so big” in the context of the bilateral relationship, “it’s hard for me to see that Japan would accept that and just go to the WTO and wait for a resolution,” Cutler said.
Speaking of the U.S.-Japan relationship in a broad context, Kazumasa Kusaka, former vice minister of Japan’s Ministry of Economy, Trade and Industry, said the U.S. and Japan share security interests, so Japan sees the “whole picture” of our bilateral relationship.
He noted that Japan’s response to a semiconductor trade dispute during the 1980s with the U.S. was “different” than how other countries might respond to trade conflicts.
The result of that dispute was a 1986 agreement between Washington and Tokyo designed to ensure Japanese semiconductor exports were being sold at fair prices as well as the growth of U.S. semiconductors’ market share in Japan, among other things.
Kusaka questioned whether retaliation ultimately helps countries reach a better solution or whether it merely escalates “political and social momentum” in the target country.
“So retaliation is a kind of conversation, so why don’t we talk, sit together?” he asked. “One form of conversation is retaliation. So retaliation is not the object.”
Several issues complicate U.S.-Japan talks
