Japan Trade

Japan's parliament approves trade deal with U.S.

04, Dec. 2019

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TOKYO, Kyodo - Japan's parliament approved a trade deal with the United States on Wednesday that cuts tariffs on farm and industrial goods, clearing the way for its entry into force on Jan. 1 next year.

The deal, agreed by Prime Minister Shinzo Abe and President Donald Trump in September, cleared the upper house following its passage in the lower house last month. The White House says it does not need to consult the U.S. Congress, meaning domestic procedures in both countries have effectively wrapped up.

Trump has pushed the deal as a way to shrink his country's massive trade deficit with Japan, and to mollify American farmers who were at a disadvantage against international competitors after his decision in 2017 to withdraw from the Trans-Pacific Partnership regional free trade pact.

Japan will lower or remove tariffs on $7.2 billion in U.S. farm goods, including a gradual reduction of its 38.5 percent duty on American beef to 9 percent.

Other U.S. products including pork, wine and cheese will also get greater market access, putting the United States on a level playing field with TPP members such as Australia and Canada.

In return, the United States will remove or reduce duties on Japanese industrial goods such as manufacturing equipment and air conditioner parts.

But the deal does not provide for the removal of the United States' 2.5 percent tariff on Japanese automobiles, which Tokyo desperately wants and Washington had granted under the TPP before it pulled out. Instead, it states that auto duties are "subject to further negotiations."

Despite the Abe administration's assurance that this is a "win-win" arrangement that will be a boon for Japanese consumers, opposition lawmakers have argued that Tokyo is getting the short end of the stick.

They have also criticized the administration's claims that the trade deal will boost Japan's gross domestic product by 0.8 percent, or around 4 trillion yen ($37 billion), because the estimate presupposes the removal of the auto tariffs, which they argue is far from certain.

After the deal enters into force, the countries have agreed to conclude preparatory consultations within four months to set the scope for further trade talks. Discussions between lead negotiators, Japanese Foreign Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer, will then start again in earnest.

Trump is seeking a full-fledged free trade agreement that covers areas including services and investment, and will likely step up pressure on Tokyo as the 2020 U.S. presidential election nears.

Japan, meanwhile, is hoping to convince the United States to return to the TPP, now a grouping of 11 Asia-Pacific economies, and does not want to make concessions that would discourage such a move.

The House of Councillors on Wednesday also approved an agreement with the United States on digital trade that sets rules for cross-border data flows and establishes that tariffs will not be levied on electronically transmitted content. (Kyodo)