Todd Bishop
Japanese Prime Minister Shinzo Abe held talks with US President Donald Trump during the UN General Assembly meeting on September 25, and the two sides reached a definitive agreement on the conclusion of a trade agreement. The US Trade Representative Office said that Japan will revoke or reduce tariffs on US agricultural products worth about $7.2 billion to open up the market. The completion of the legal review of the agreement documents will be later than the signature, and will be effective as soon as possible after approval by the National Assembly.
In this regard, Abe stressed: “If the agreement comes into effect, the economic relationship between the two countries will develop. It is a win-win relationship for the two countries.” Trump said that this is an “important step” for fair and mutually beneficial trade.
Judging from the content of the agreement, the tariffs on beef, wheat, some dairy products and wines in the United States will gradually decrease. The rice that is of concern to the outside world is not intended to set a tax allowance. It can be said that the demand for “Japan’s more imports of American agricultural products” requested by the Trump administration has been basically met, but the issue of automobile tariffs that Japan is concerned about has not been promised by the United States to exempt tariffs. US Trade Representative Robert Lighthizer simply said: “At this stage, we do not intend to impose tariffs on Japanese cars.” Japan is still uncertain about whether the United States will be embarrassed on the issue of automobiles in the future.
On September 26, 2018, the United States and Japan issued a joint statement saying that the two countries will start negotiations on a trade agreement on goods. On April 17, 2019, the United States and Japan officially launched the first round of consultations on trade negotiations. Compared with the China-US and US-European trade wars that have not been seen for a year and a half, the United States and Japan have reached a trade agreement in the past six months, which is very rapid.
Why is Japan willing to sign an agreement with the United States in such a short period of time? In the war between the United States and Japan in the 1980s, Japan compromised with the United States and reached a “square agreement.” Since then, Japan has experienced “lost 20 years.” Today, Japan has quickly reached an agreement with the United States, and in the key issue of the car, the United States has not let go of Japan. These are doubtful: Has Japan signed an “unequal agreement” with the United States?
For the bilateral trade negotiations with the United States, the Abe government refused at first, but sought to continue the promotion of the Trans-Pacific Partnership Agreement with the Trump administration (TPP, Trump exited the agreement after taking office, and 11 countries such as Japan reached an agreement. For the “Comprehensive and Progressive Trans-Pacific Partnership Agreement, CPTPP.” Abe met with Trump before he took office, and he visited the United States in April 2018. An important topic was to urge Trump to return to the TPP. In August 2018, when the Minister of Economic Recycling of Japan, Momo Minto, met with Wright Heze, Japan was still asking the United States to return to the TPP.
Why did it take only one year for Japan to refuse to talk to the United States about bilateral trade negotiations and become a party to a trade agreement with the United States? What happened during this period?
Stretch yourself while procrastinating
September 2018 is the node of the US-Japan trade negotiations. This is the meeting between Trump and Abe. The two sides agreed to start trade negotiations. At this time, Abe had some chips in his hand.
CPTPP came into effect on December 30, 2018. The agreement does not have the United States, but it contains 11 countries. It is a new economic circle with a global GDP of 13% and a population of over 500 million. At the same time, Japan and Europe signed an economic partnership agreement in July 2018. This agreement covers more than 600 million people, accounting for 28% of the total global GDP. The total trade volume accounts for nearly 40% of the total global trade, which is called It is the largest free trade zone in the world.
With the support of multilateral mechanisms such as the CPTPP and the Japan-Europe Economic Partnership Agreement, Japan clearly has a sigh of relief when it comes to responding to the United States, and even has a chip. According to the CPTPP and the Japan-Europe Economic Cooperation Agreement, the tariffs between the Japanese and the member states of the agreement are gradually reduced, and the US exports of agricultural products to Japan are not competitive. Taking beef as an example, according to CPTPP, the import tariff on Japanese beef will be initially reduced from 38.5% to 27.5%, and will eventually be lowered to 9% in 2033. The US beef that was excluded from the agreement maintained a 38.5% tax rate on Japanese exports.
Trump has repeatedly stated that he wants to talk to Japan about agricultural products. This is his “soft underbelly”. Abe knows this well, and then negotiates with the United States after holding the chips, so that he will not fall into a completely passive situation.
Narrowing the content of the negotiations
According to the joint statement issued by the United States and Japan in September 2018, the two sides mentioned that they should “complete the Japan-US trade agreement as soon as possible and enter the service trade negotiations.” In February 2019, when Letter Heze first mentioned the negotiation of a Japan-US trade agreement with Japan, he mentioned that the exchange rate clause was put into negotiation.
However, Japan does not advocate putting the exchange rate clause in this negotiation, but only the goods such as cars and agricultural products as the content of negotiations to reduce tariffs. Later in April, Japanese Finance Minister Taro Aso and US Treasury Secretary Steven Mnuchin met. The two sides discussed exchange rate policy issues but failed to reach a consensus.
Since then, Japan and the United States have focused on trade negotiations. From the perspective of bilateral trade, Japan has an advantage in trade in goods, while the United States has an advantage in service trade. In the trade of goods, Japan and the United States each
The United States is eager to push for an agreement with Japan on agricultural products. Although Japan has promised, there is still Japan’s “thinking”, and the tariff on US agricultural products imported by Japan will not be lowered to the CPTPP level. For example, according to the agreement, the 38.5% tariff on Japanese imports of US beef will be reduced to 9% in stages, maintaining the same tax rate as CPTPP partners. For another example, after the agreement came into effect, Japan’s tariffs on American wines were lifted within five to seven years, and the timetable for the abolition of wine tariffs was almost the same before the United States did not withdraw from the TPP.have advantages in cars and agricultural products, and both sides have checks and balances each other’s chips in the negotiations.
In other words, Japan gave the US CPTPP terms and did not really make greater concessions.
Japan suffered heavy losses in the trade war with the United States in the 1980s. After more than 30 years, the United States and Japan experienced another contest. Japan must consider how to repeat the same mistakes. What’s more, under the circumstances that globalization has become the general trend, the US-Japan relationship has also undergone adjustments, which have given Japan the space to move forward.
In addition to Trump’s personal election appeal, emphasis on short-term effects, etc., Abe has learned to “manage” Trump, and he will try to maintain his own interests while maximizing his interests. In his own words, “the gentleman leopard changes”, Abe seems to be weak, but in fact has his own set of coping strategies.
