Posted by on September 29, 2019 8:34 am
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The U.S. and Japan signed a new trade deal on September 25, which certainly counts as good news in today’s fraught trade and diplomatic environment, more often characterized by tariffs and spurious reasoning. However the first phase of the U.S.-Japan deal is at best a good starting point, and really just resets trade to previous (defunct) agreements, argues Jeffrey Schott in a commentary for the Peterson Institute for International Economics. A second phase of negotiations, set to begin in 2020, may deliver more substantive gains, but then again maybe not.

 

 

  • The first phase is indeed limited, with Japan agreeing to gradually lower tariffs on agricultural goods such as walnuts, almonds, blueberries, wine, cheese, beef, and pork, while the U.S. will lower some tariffs on industrial goods.

 

 

  • These provisions mirror those included in the previous Trans-Pacific Partnership trade deal, which President Trump withdrew the U.S. from at the beginning of his administration. Furthermore, they aren’t nearly as advantageous for American dairy or rice exports, two of the main categories which were included in TPP; on dairy Japan may impose limits based on “geographic designations” of which French cheesemakers are especially fond (e.g., cheese can’t be called “Roquefort” unless it is in fact made in Roquefort, etc.)  Two steps back, one step forward!

 

 

  • There’s also the likelihood that U.S. agricultural producers will face an uphill battle regaining market share lost to competitors from Canada, Australia and New Zealand after Trump withdrew from the TPP.

 

 

  • Most notable by its absence from the U.S.-Japan deal is the all-important automotive sector, which makes up 38% of Japan’s exports to the U.S. The deal makes no changes in existing American important restrictions on Japanese autos, and doesn’t include any commitment from the U.S. not to impose tariffs on them in future (say, on bogus national security grounds).