Japan-U.S. economic dialogue highlights differences in views on trade

The first round of Japan-U.S. economic dialogue between Deputy Prime Minister Taro Aso and U.S. Vice President Mike Pence on April 18 highlighted the two countries' differences in views on trade negotiations.

Japan is in favor of establishing a framework for multilateral trade negotiations such as the Trans-Pacific Partnership (TPP) free-trade pact, while the United States prioritizes bilateral trade talks.

"Japan and the United States should work together to establish a deregulation framework for trade and investment and spread it to the entire Asia-Pacific region," Aso said after the meeting, while Pence emphasized that Washington is sticking to bilateral trade and investment talks with its partners, pointing to the possibility that Japan-U.S. economic dialogue could move forward accordingly.

The No. 2 men in the Japanese and U.S. governments agreed that "common strategy on trade and investment rules," "cooperation on economic and structural policies" and "sectorial cooperation," such as in investment in infrastructure, would be key issues for the bilateral economic dialogue. The two countries will hold specific consultations in the next round to be held this year and beyond.

Prime Minister Shinzo Abe and U.S. President Donald Trump agreed this past February to establish the bilateral economic dialogue. Since then, Japan has attempted to prioritize talks on fields in which the two countries can cooperate, such as energy and investment in infrastructure and to prevent the trade imbalance from emerging as a point of contention, according to a senior official of the Economy, Trade and Industry Ministry. Japanese officials feared that if discussions focused on the bilateral trade imbalance, Washington could demand Tokyo drastically liberalize its market to imports, such as agricultural products.

Against the backdrop of such concerns, Aso expressed Japan's willingness to cooperate with the United States in fields in which both countries can bring benefits to each other, including the high-speed railway project in the U.S. and imports of U.S. shale gas.

Aso told a joint news conference following the meeting that, "Japan-U.S. economic relations that were symbolized by the phrase 'trade friction' are a thing of the past. We're entering an age of cooperation."

With regard to the establishment of trade rules, Aso underscored the importance of using the fruits of TPP talks to create a multilateral free trade framework covering the Asia-Pacific region.

However, Pence dismissed the view saying, "The TPP is a thing of the past" for the United States, adding that bilateral talks would benefit both the U.S. and its partners.

In a separate move, U.S. Secretary of Commerce Wilbur Ross, who also visited Japan, held talks with Economy, Trade and Industry Minister Hiroshige Seko and Foreign Minister Fumio Kishida on April 18, and expressed strong hope for a bilateral free trade agreement.

A source close to the talks said Ross stopped short of making specific demands such as the liberalization of Japan's agricultural market. However, Ross said he will hold another round of talks with Seko in the United States in June, displaying strong enthusiasm about rectifying the bilateral trade imbalance.

Ross had told The Financial Times that the aim of his visit to Japan was to ascertain whether the Abe government would agree to bilateral trade talks, and he is highly likely to step up his demands on Japan.

The U.S. agricultural industry initially expressed displeasure at the Trump administration's decision to pull the U.S. out of the TPP, as the industry had expected its exports to Japan would increase thanks to the lowering of import tariffs under the pact.

However, American farmers in general are no longer keen on the TPP and place priority on pressuring Japan to open up its market. Nick Giordano, vice president of the U.S. National Pork Producers Council, has warned that if Washington were to miss the chance to hold bilateral trade talks with Japan now, the U.S. agricultural industry would lose its share in Japan's market.

Aided by such public opinion, the Trump government is expected to step up its efforts to bring Japan to bilateral trade negotiations following the next round of economic dialogue.