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Japan braces for US jobs-focused Biden trade policy

Japanese Prime Minister Yoshihide Suga removes his face mask to speak to reporters on Jan. 21, 2021, at his office in Tokyo. (Kyodo)

TOKYO (Kyodo) -- As Japan cautiously awaits new U.S. President Joe Biden's policy on trade, expectations are that the new administration will continue to prioritize the protection of U.S. jobs and industries, whether it opts to return to the Trans-Pacific Partnership or resume bilateral negotiations.

    Trade talks are likely to differ substantially in style compared to those under his predecessor Donald Trump, with a new focus on multilateralism, but Biden is still likely to push for greater market access and make tough demands on trade partners to revive a U.S. economy hit by the coronavirus pandemic, analysts said.

    Even if trade negotiations, especially those with Japan, are low on the agenda in the initial stage of the Biden administration, Japan will eventually face pressures in areas such as autos and agriculture when negotiations resume, they said.

    "It is better to put off trade negotiations with the United States for as long as possible when you think about farmers in Japan," said a Japanese government source, since the United States was granted greater access to Japan's agriculture market under a deal that took effect in January 2020.

    Under the agreement, Washington won a reduction in tariffs on American farm products such as beef and pork, while Tokyo escaped higher duties on Japanese cars that Trump had threatened to impose on national security grounds.

    Japan touted the deal as "balanced" and "win-win" because Washington agreed to continue talks over Tokyo's demand that it scrap tariffs on Japanese cars, but critics say it has only benefited the U.S. and left Japan with little room for maneuver.

    Japan and the United States, the world's third-largest and biggest economies, agreed in October 2019 when the two nations signed the deal to continue negotiations for a more comprehensive trade agreement covering services and investment -- the "phase two" talks.

    Whether the Biden administration will resume these talks with Japan remains unclear. Even if he opts for a return to the TPP -- from which Trump withdrew the United States in 2017 -- it is likely Biden will demand that Japan renegotiate some aspects of the deal in specific trade areas.

    Biden served as vice president under Trump's predecessor Barack Obama, who pushed for the then 12-member TPP as a way to reduce China's influence in the Asia-Pacific region.

    Junichi Sugawara, a senior research officer at the Mizuho Research Institute, says that any trade talks with the Biden administration would be launched in the fall at the earliest as he would first focus on raising the competitiveness of domestic industries.

    "Biden in principle shares the 'America First' mantra with Trump, so even if he does not use provocative and high-handed Trump-like methods, he will urge Japan to further open up its market and make harsh demands," Sugawara said.

    "Moreover, Biden may even make new demands on environmental and labor standards, which are valued by the Democrats," he said, adding that U.S. pressure on Japan to coordinate with Washington on its anti-China policy may also increase at the same time.

    "Unfortunately, there will be no change in the fact that Japan will need to engage in a difficult balancing act between the United States and China," Sugawara said. Despite political and security tensions, Japan values its economic relations with China, its biggest trading partner.

    Takashi Terada, a professor of international relations at Doshisha University, said even if Biden opts to return to the TPP, it will not be a smooth comeback and Japan will probably still need to make concessions in the agricultural sector.

    Either way, he said, Prime Minister Yoshihide Suga will need to think carefully about whether his administration can survive if the United States pressures Japan to make more concessions in agricultural trade, especially as a lower house election will need to be called by October 2021.

    "How to proceed with trade talks with the United States links directly to his strategy of when to dissolve the House of Representatives," Terada said.

    "Undoubtedly, some ruling Liberal Democratic Party lawmakers supported by the agricultural sector will be reluctant to go into an election after or in the middle of the Japan-U.S. trade talks," he said.

    Given that Tokyo has already given Washington what it most wanted -- cutting tariffs on pork and beef -- Sugawara said Suga, who took office in September last year, will be left with little to bargain with in the forthcoming trade negotiations.

    "Japan is set to urge the United States to scrap 2.5 percent auto tariffs, but I think it is absolutely impossible because they both see the revival of domestic industries, including automobiles, as a top priority in the policy agenda," Sugawara said.

    "The upcoming trade talks could turn disastrous, with Japan having no cards to play but seeking to win what the United States wants to protect the most," he said, referring to the auto sector.

    Toshiki Takahashi, chief economist at the Institute for International Trade and Investment in Tokyo, said as U.S. pressure on Japan is expected to be strong, Japan needs to raise its leverage by boosting ties with countries it has forged trade deals with, namely the members of the TPP and the Regional Comprehensive Economic Partnership.

    The RCEP free trade deal, grouping 15 Asia-Pacific nations including China and South Korea and covering half of world trade, was signed in November after eight years of negotiations.

    A senior Foreign Ministry diplomat said the China-backed RCEP agreement will make Washington feel pressured into joining a multilateral trade framework, such as the TPP, as it will become concerned that China is taking the lead in regional partnerships in Asia.

    While Biden was preparing for the U.S. presidential transition in November, Chinese President Xi Jinping surprised trade negotiators and experts by showing an eagerness to join the TPP at the Asia-Pacific Economic Cooperation forum held the same month.

    The move was largely seen as Beijing's attempt to increase its clout in the Asia-Pacific region during a power vacuum in Asia created by the transition.

    "Japan needs to show off its reputation as a country leading free trade negotiations and increase its value as a reliable partner that can act as a bridge to countries that the United States wants to cooperate with," Takahashi said.

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