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Limited U.S.-Japan Trade Agreement

10/01/2019

The signing of a limited trade agreement between the U.S. and Japan provided only partial compensation for the damage caused by the U.S. unilateral withdrawal from the Trans-Pacific Partnership in 2017. In a less than complimentary editorial in the September 26th edition of The Wall Street Journal, the editor refers to self-inflicted damage on trade and the loss of opportunities to export agricultural commodities. Between April and July this year, compared to the corresponding periods in 2016 and 2017, U.S. farm exports to Japan increased by less than 5.8 percent. In contrast, agricultural imports from Europe were higher by 15.9 percent, from Mexico 27.6 percent and from New Zealand 16.9 percent. Exports of U.S. pork to Japan declined by one percent in contrast to exports from Europe that increased by 17 percent.

In terms of the Agreement signed during the United Nations General Assembly, U.S. farmers have comparable access to markets in Japan as for the E.U. and nations belonging to the Comprehensive and Progressive Trans-Pacific Agreement. Approximately 90 percent of U.S. agricultural and food products will be duty-free. In return, the U.S. will reduce or eliminate tariffs on machine tools, musical instruments and bicycles.

The agreement did however exclude motor vehicles although in a joint statement the President and the Prime Minister noted that the agreement will be based on mutual trust. Both parties will refrain from taking measures against the spirit of the deal. Clearly Japan expects the U.S. not to impose punitive tariffs on vehicles and parts.

The Wall Street Journal editorial notes that the slimmed-down agreement that does not have to be ratified by Congress will place the U.S. in an inferior position on trade compared to participation in the TPP. An added detriment to the unilateral withdrawal of the U.S. in 2017 is the fact that the TPP was weakened and could have served as a stronger competitor to China in the efforts of that Nation to dominate trade in Asia.