US-Japan trade deal hits snag as Tokyo seeks assurances on car tariffs

US President Donald Trump has refrained thus far from following through on his threat to impose tariffs of up to 25 percent on Japanese car and parts imports. (AP)
Updated 24 September 2019

US-Japan trade deal hits snag as Tokyo seeks assurances on car tariffs

  • The limited trade deal is not expected to include changes to tariffs and trade rules governing autos
  • That is the biggest source of the $67.6 billion US trade deficit with Japan

UNITED NATIONS/WASHINGTON: A US-Japan trade deal hit a last-minute snag as Japanese officials sought assurances that the Trump administration will not impose national security tariffs on Japanese-built cars and auto parts, people familiar with the talks said on Monday.
US President Donald Trump and Japanese Prime Minister Shinzo Abe have been aiming to sign a trade deal at a meeting this week during the United Nations General Assembly in New York that provides increased access to Japan for US agricultural goods and bilateral cuts in industrial goods tariffs.
But the limited trade deal is not expected to include changes to tariffs and trade rules governing autos, the biggest source of the $67.6 billion US trade deficit with Japan.
Trump has refrained thus far from following through on his threat to impose tariffs of up to 25 percent on Japanese and European car and parts imports, citing ongoing trade negotiations with these partners.
The New York Times earlier reported that Japan was demanding a “sunset clause” that would cancel any trade benefits for the United States if Trump imposes the auto tariffs on Japanese vehicles.
Japanese Foreign Ministry spokesman Masato Ohtaka said that Japan still hoped to sign the US trade deal by the end of September and that there was still time to work out remaining issues.
“Frankly speaking, we still have some time and all my colleagues in the government are making their best efforts to actually meet this target,” Ohtaka said.
Japanese Chief Cabinet Secretary Yoshihide Suga, speaking in Tokyo, told a news conference: “With the UN General Assembly meeting in mind, we are accelerating the remaining work, including the wording of a trade agreement.”
Executives at two automakers briefed on the matter said Japan has expressed concerns about signing a deal without assurances that Trump will refrain from imposing tariffs on Japanese automotive exports as he benefits from Japanese agricultural concessions.
These people, speaking on condition of anonymity, confirmed that the issue could delay the signing of a US-Japan trade deal until subsequent weeks.
Japanese Foreign Minister Toshimitsu Motegi told reporters after talks with US Trade Representative Robert Lighthizer that significant work was under way to finalize the deal but that he did not expect much delay beyond an end-September target signing off on the deal. He added he expected a “good ceremony” when Abe and Trump meet.
Asked about the US threat of added tariffs on Japanese autos, Motegi said: “I think the content will not be something to worry about.”
Details of the US-Japan trade deal have not been disclosed, but people familiar with it say that it will provide US farmers who have been battered by the US trade war with China some relief through increased access to Japan, including for American beef and pork.
But some people say it will provide less than the access they would have received had the United States remained in the Trans-Pacific Partnership trade deal, which Trump pulled the United States out of on his third day in office in January 2017.
The deal also includes a modernization of digital trade rules, which is expected to reinforce the US model of Internet development, prohibiting cross-border taxation of e-commerce and data localization requirements.
Trump and Abe a year ago at the UN General Assembly agreed to discuss an arrangement that protects Japanese automakers from further tariffs while negotiations are under way.
The trade deal would not require congressional approval, using a trade law provision that allows the US president to make executive agreements to mutually reduce tariffs with a foreign trading partner.


Japan lower house passes US trade deal but auto tariffs still in limbo

Updated 19 November 2019

Japan lower house passes US trade deal but auto tariffs still in limbo

  • There is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts
  • Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years

TOKYO: Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including US farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with US President Donald Trump was “win-win.”
Japan and the United States last month formally signed the limited trade deal to cut tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
The deal will give Trump a success he can trumpet to voters but Abe has said it will bring as much benefit to Japan as to the United States.
Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years, when the benefits fully kick in. It also estimated ¥212.8 billion of overall tariffs on Japan’s exports to the United States will be reduced.
But the figures were based on the assumption the United States would eliminate its tariffs on Japanese autos and auto parts — a major sticking point.
Without those tariff cuts, the reduction in overall US tariffs on Japanese goods would be a little over 10 percent of the government’s projection, according to an estimate by Japan’s Asahi newspaper and Mitsubishi UFJ Research and Consulting.
After the deal is ratified, Japan and the United States have four months to consult on further talks, and Trump has said he wants more trade talks with Japan after the initial deal.
But Japanese government sources familiar with the talks say the momentum to negotiate a deeper deal appears to have waned for now with Washington preoccupied with talks with Beijing.
“It’s unclear whether Washington seriously wants to continue trade talks,” one of the sources said.
“The question is how much time the United States can allocate for talks with Japan, even if we start negotiations. There’s limited time to conclude talks before the presidential elections.”
Japan and the United States already appear to have different interpretations of what was agreed on car tariffs.
Japan has said it has received US assurance that it would scrap tariffs on Japanese cars and car parts, and that the only remaining issue was the timing.
But Washington has not confirmed that.
US Trade Representative Robert Lighthizer has said cars were not included in the agreement, and that it was only Japan’s ambition to discuss car tariffs in the future.
A US document only said customs duties on autos and auto parts “will be subject to further negotiations with respect to the elimination of customs duties.”
“The deal was left vague on the issue of tariff cuts on Japanese auto and auto parts. Otherwise, we couldn’t have reached the agreement,” another source said.
There is also uncertainty on whether Trump will drop threats to impose steep tariffs on Japanese car imports under “Section 232” that gives him authority to do so on national security grounds.
Abe said he had got an assurance from Trump that he would not do that, though analysts say the president could always change his mind, or at least keep Japan guessing.
Opposition parties have attacked Abe for a deal they say is unfair. Critics say Trump could drag his feet on further negotiations unless he is sure he can win more concessions.
“There’s a chance Trump will put pressure on Japan on trade to appeal to his voters,” said Junichi Sugawara, senior research officer at Mizuho Research Institute. “There’s a possibility he could renew his threat over auto tariffs.”