U.S., Japan Reach Trade Deal on Farm Goods, Digital Trade

Date: Wednesday, September 25, 2019
Source: The Wall Street Journal

Limited accord Trump, Abe signed on sidelines of United Nations General Assembly will lower agricultural tariffs in Japan, industrial tariffs in the U.S.

President Trump and Japan’s Prime Minister Shinzo Abe signed a trade-enhancement agreement that will lower agricultural tariffs in Japan, industrial tariffs in the U.S. and set new rules for digital trade between the world’s first- and third-largest economies.

The limited accord, reached on the sidelines of the United Nations General Assembly on Wednesday, is potentially the first step in a broader trade agreement between the two countries.

“Japanese tariffs will now be significantly lower or eliminated completely on beef, pork, wheat, cheese, corn, wine and so much more,” Mr. Trump said, adding the deal will open markets for about $7 billion in U.S. agricultural products.

Mr. Trump notified Congress last week that the U.S. and Japan were prepared to enter a limited agreement that would lower some tariffs and set terms of digital trade. The U.S. and Japan kept the negotiations limited in scope to avoid the need for Congress to vote on the deal.

Messrs. Trump and Abe had previously announced in August at a Group of Seven summit in France that they had reached an agreement in principle to lower agricultural and industrial tariffs.

Lower Japanese agricultural tariffs would allow U.S. farmers to better compete in Japan. American agricultural exporters have been disadvantaged in the Japanese market ever since Mr. Trump pulled out of the 12-nation Trans-Pacific Partnership at the beginning of his presidency. The other 11 nations had completed that deal and thus obtained lower tariffs in Japan’s market.

The Office of the U.S. Trade Representative said U.S. farm products would now be granted the same advantage in the Japanese market as the countries that signed the TPP.

Japan will lower tariffs on about $2.9 billion of beef and pork, and eliminate tariffs on $1.3 billion of goods, including almonds, certain fruits and nuts, and sweet corn. An additional $3 billion will have tariffs eliminated in stages, including wines, cheeses and whey, ethanol and other items.

For its part, the U.S. will reduce or eliminate tariffs on some industrial goods from Japan including certain machine tools, fasteners, steam turbines, bicycles, bike parts and musical instruments, the USTR said. The U.S. will also reduce agricultural tariffs on items including certain plants and flowers, green tea, chewing gum and soy sauce.

Tokyo and Washington also agreed on a set of provisions related to digital trade, including a prohibition on imposing tariffs on digital products transmitted electronically, including videos, music, e-books, software and games, according to the USTR. The deal ensures barrier-free cross-border data transfers.

In the letter to Congress last week, the Trump administration left open the possibility of doing a comprehensive trade agreement in the future and said it would continue to collaborate with Congress on future negotiations. Mr. Trump on Wednesday said such a deal will be signed in the future.

Business groups welcomed Wednesday’s deal but called on the Trump administration to continue negotiations on the full scope of U.S.-Japan trade issues.

“Today’s news will spur economic growth and boost sales on both sides of the Pacific, especially for American farmers and ranchers and the digital economy,” said Myron Brilliant, the head of international affairs at the U.S. Chamber of Commerce.

“However, it’s not enough,” Mr. Brilliant said. “The Chamber strongly urges the administration to hold fast to its commitment to achieve a comprehensive, high-standard trade agreement with Japan that addresses the full range of our trade priorities, including services, intellectual-property protection, and regulatory barriers to trade.”

The president vowed that the deal will help “reduce our chronic trade deficit” with Japan. In 2018, the U.S. exported $75 billion of goods to Japan but imported $142 billion, leading to a trade deficit of $67 billion

For its part, Japan had expected to receive protection from the Trump administration’s threatened tariffs on automobile imports. The Trump administration has determined that such imports threaten U.S. national security and has the authority to impose tariffs on the basis of that finding. The initial U.S. announcement, however, made no mention of any assurances to Japan that it would avoid the tariffs.

A joint statement signed by the two countries, however, offered an indirect assurance that the U.S. wouldn’t hit Japan with auto tariffs, saying the two sides will “refrain from taking measures against the spirit of these agreements.”

The nations made a similar agreement when their talks began a year ago, and the U.S. has since refrained from adding tariffs against Japan. The statement also said “both nations will make efforts for an early solution to other tariff-related issues,” without specifying a timeline.

 

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