Japan-US trade deal to enter into force on Wednesday, Jan. 1

Kyodo News

Posted at Dec 31 2019 01:17 PM

An industrial port in Tokyo, Japan. Kim Kyung-Hoon, Reuters file photo

TOKYO - A trade deal between Japan and the United States is set to enter into force on Wednesday granting greater market access to US agricultural products while giving Japanese automakers respite from the threat of additional tariffs.

The deal will eliminate or lower tariffs on $7.2 billion in US exports including beef and put American farmers on level ground with competitors from Australia and Canada, which along with Japan are part of the revised Trans-Pacific Partnership trade agreement.

Japan will immediately cut its 38.5 percent tariff on US beef to 26.6 percent and make gradual reductions each year until it reaches 9 percent in 2033.

The United States, in turn, will lower tariffs on Japanese industrial products such as some types of manufacturing equipment and components for air conditioning units under the pact.

Japanese Prime Minister Shinzo Abe and US President Donald Trump have also agreed to continue negotiations for a more comprehensive trade agreement between the world's first and third largest economies, which together account for roughly 30 percent of the world's gross domestic product, covering services and investment.

Japan is reluctant to continue talks with the United States on a bilateral deal, as it wants Washington to return to the Pacific free trade pact.

While dodging Trump's threat to impose a 25 percent tariff on automobiles and their parts based on national security concerns, Japan failed to secure the elimination of the existing 2.5 percent duty, something the United States had granted under the original TPP before abruptly pulling out in 2017 before its ratification.

The deal simply says auto tariffs are "subject to further negotiations."

Pork, cheese and wine are among the other US products that will enjoy greater market access, likely meaning lower prices for Japanese consumers but stiffer competition for farmers in the Asian country.

For its part, the United States will also welcome more "wagyu" beef into the country by removing Japan's low-tariff quota of 200 tons a year and including it in a group of other countries sharing a quota of 65,000 tons.

While Abe has hailed the deal as "win-win," opposition lawmakers have criticized it as one-sided, with Tokyo making far more concessions than Washington.

Eager to avoid trade friction with the United States, they say, Abe rushed to a deal that would allow Trump to mollify American farmers disadvantaged by his decision to withdraw from the TPP days after taking office in January 2017. The revised deal among the remaining 11 members took effect at the end of 2018.

Talks between Toshimitsu Motegi, now foreign minister, and U.S. Trade Representative Robert Lighthizer took just five months, from their start in April to the announcement of the deal in September. Japan's upper house, controlled by Abe's Liberal Democratic Party, completed ratification in early December.

As Tokyo and Washington are set to begin negotiations once the deal takes effect, preliminary consultations to set the scope of the negotiations are slated to conclude within the next four months, though no timeframe has been set beyond that.