Japan may gain stalling tactic on trade after U.S. elections

31, Oct. 2018

By Kylie Sertic

WASHINGTON, Kyodo - The U.S. midterm elections are often seen as a referendum on the sitting president's popularity, but the results of the 2018 races are likely to have more far-reaching consequences no matter which party controls Congress.

For Japan, the question of bilateral trade negotiations -- which the two governments are expected to start in mid-January -- looms large.

If the Republican Party maintains its majority in both the Senate and the House of Representatives in the Nov. 6 elections, President Donald Trump's "America First" policy will continue unhindered, meaning he will keep pushing Tokyo to conclude a bilateral trade agreement in Washington's favor, according to experts.

However, if the Democratic Party takes control of one or both chambers of Congress, the party will have the ability to exercise oversight of the Trump administration's activities including handling of foreign affairs, the experts say.

With polls indicating a possible Democratic takeover of the House, Tobias Harris, vice president of Teneo Intelligence, a business strategic consulting firm in Washington, said a Democratic-controlled House may give Japan some leverage.

In the upcoming contests, all 435 seats in the House and 35 of the 100 seats in the Senate are up for grabs. Polls suggest the Republicans are likely to retain their majority in the upper chamber.

Given that trade deals must be ratified by both houses, Harris, who specializes in U.S.-Japan relations, said, "Japan knows that if it's dealing with a Trump administration that can't actually promise that it will be able to ratify anything, there's an incentive to Japan to stall and try to drag negotiations out in the hopes of outlasting the Trump administration."

Trump and Japanese Prime Minister Shinzo Abe agreed in September to start negotiations for a bilateral trade agreement. The move is a concession by Tokyo, which dropped its earlier insistence on a multilateral approach to trade issues in the face of Trump's threat to impose tariffs on Japanese automobile imports.

A prevailing concern about the upcoming trade talks is the prospect of auto tariffs, despite Trump and Abe agreeing that such duties would not be put in place while talks are under way.

While Abe has a temporary reprieve, speculation remains as to what Trump will do. Brushing aside protests from Japan and other countries, Trump pushed ahead with invoking global tariffs on steel and aluminum imports earlier this year, citing concern about U.S. national security.

"It's a very tricky balance trying to find the sweet spot in terms of how far Japan can hold out versus how much they can trust that the Trump administration is going to take the hardest line and actually follow through on it," Harris said.

"To that extent, a divided Congress deepens the uncertainty surrounding what the Trump administration can actually do," he said.

Other experts also point to such uncertainty, but add that even if the Democrats retake the House, they are unlikely to strongly constrain the administration's efforts to apply pressure to Japan on a bilateral trade deal.

"Democrats will try to gum up the works of Trump's foreign policy generally, because they want to deprive him of successes for political reasons, and because ideologically they oppose some of his approaches," said Benjamin Self, vice president of the Maureen and Mike Mansfield Foundation in Washington.

"But that's less true with regard to trade," said Self, an expert on U.S.-Japan relations. "The Democrats express an anti-free trade sentiment and always have."

While holding out may be Japan's only hope to avoid concessions, the Trump administration is likely to call for an increased access to Japan's agricultural market, regardless of the election results, according to experts.

Farmers, ranchers and other agricultural goods producers have strong political clout with Congress, especially the Senate, to convey their concerns about farm exports.

"So let's assume that the Republicans retain control of the Senate, this will remain a priority issue for them and the White House," Self said.

Referring to Agriculture Secretary Sonny Perdue's recent calls on Japan to cut tariffs on agricultural products below levels agreed to under the Trans-Pacific Partnership, Self said, "Japan was afraid of what a bilateral (pact) would entail, that the Trump administration would be asking for more and giving less."

"But at least from the Japanese point of view, they should have confidence, regardless of who takes the House, that they can hold the line at TPP," an 11-member regional free trade agreement from which Trump withdrew the United States last year, he said.

Perdue was throwing hardballs despite the shared understanding between Trump and Abe that Washington would not demand deeper farm tariff cuts than levels Tokyo has agreed to in other trade pacts such as the TPP and the Japan-European Union FTA. (Kyodo)