NEW YORK/TOKYO -- Japanese officials and businesses worry that the launch of trade agreement on goods (TAG) negotiations agreed upon by Prime Minister Shinzo Abe and U.S. President Donald Trump on Sept. 26 (Sept. 27 Japan time) will result in unilateral concessions by Tokyo to Washington's demands to further open up Japan's markets.
Some observers see that the TAG, said to focus on cutting tariffs on farm and industrial products, would effectively be a bilateral free trade agreement (FTA). Japan has been trying to avoid an FTA with the United States because Tokyo believes that it would lead to greater opening of the domestic market than the country wants.
Ominously, the joint declaration issued after the Abe-Trump summit in New York mentioned not just the agricultural and automotive sectors, but also included investment and services as future negotiation areas. Nevertheless, Abe told a press conference after he met Trump that a TAG is "different from a comprehensive FTA."
Japanese government officials have their concerns. "We may be forced to negotiate a full range of items," said a concerned senior bureaucrat at a government agency handling economic matters.
A person close to a Japanese car manufacturer said that the latest agreement "simply means the real issues are shelved." The joint statement declares that the U.S. seeks to "increase production and jobs in the United States in the motor vehicle industries." It is possible that the Trump administration will demand that Japanese car makers produce more vehicles in the U.S. or curb their exports to that country on their own.
Trump did agree to suspend the imposition of import restrictions on Japanese vehicles and parts, and major makers such as Toyota Motor Corp. welcomed the decision. But "there is no guarantee" that tariff hikes on Japanese cars won't happen eventually, a senior official of another automaker pointed out.
Farm industry officials are worried, too. The joint declaration says that tariff cuts on farm products set in Japan's previous economic partnership agreements are "the maximum level" for the TAG negotiation. "I wonder if that will really be the outcome," said an individual in the farm sector, worrying that the Trump administration may demand concessions greater than Japan made for the Trans-Pacific Partnership (TPP) free trade framework.
Central Union of Agricultural Co-operatives Chairman Toru Nakaya issued a statement on Sept. 27 asking the Abe administration "to thoroughly maintain the transparency of the negotiations." A 60-year-old dairy farmer in the northernmost prefecture of Hokkaido worries that Japan may fail to prevent the TAG talks from expanding into FTA negotiations.
"President Trump wants America first, and he is good at bilateral negotiations. I wonder if (tariff cuts) can be contained within TPP standards," he said.
U.S. Trade Representative Robert Lighthizer told reporters on Sept. 26 that the TPP and the upcoming bilateral negotiations are very different, suggesting that the U.S. side may demand more than Japan accepted under the trans-Pacific agreement. President Trump himself has attacked the TPP as "terrible" and it is not clear if he would accept tariffs at levels set by the agreement.
The Trump administration, bent on increasing beef and other exports, may demand after the November congressional midterm elections that Japan open up its economy. The current Japanese tariff on U.S. beef is 38.5 percent, which could drop to 9 percent if TPP standards are applied. It is possible the U.S. will demand further cuts and threaten to apply punitive tariffs on Japanese products if Tokyo refused to comply.
Meanwhile, the Japanese government intends to use the TAG negotiations as a venue to invite the U.S. back into the TPP. But Kazuhito Yamashita, senior fellow at the Canon Institute for Global Studies, noted that there would be "no need for Washington to join the trans-Pacific agreement if the TAG lowered tariffs to TPP levels."
(Japanese original by Kenji Shimizu and Masahiro Nakai, North America General Bureau; Akiko Kato and Naoya Matsumoto, Business News Department)