US, Japan Agree to Start Negotiations on Bilateral Free-Trade Pact

September 26, 2018 Updated: September 27, 2018

President Donald Trump and Japanese Prime Minister Shinzo Abe on Sept. 26 agreed to begin negotiations for a bilateral free-trade agreement, stressing the need for a “strong, stable, and mutually beneficial trade and economic relationship.”

“We’ve agreed today to start trade negotiations between the United States and Japan,” Trump said at a summit with Abe in New York, on the sidelines of the U.N. General Assembly session.

“This was something that, for various reasons over the years, Japan was unwilling to do, and now they are willing to do so.”

Abe had resisted bilateral talks, preferring a multilateral trade relationship with the United States under the Trans-Pacific Partnership (TPP).

However, Tokyo is now said to be willing to depart from its earlier stance and make concessions to the United States in hopes of avoiding additional U.S. tariffs. Japanese officials have been worried about Trump’s threat to impose steep import tariffs on autos and auto parts on national-security grounds.

Trump earlier raised concerns about the trade deficit with Japan and demanded a bilateral agreement to address the situation. The U.S. trade deficit in goods with Japan was almost $69 billion last year, with about two-thirds of that from the automotive sector.

Tokyo is willing to enter negotiations on a bilateral deal if the Trump administration promises to exempt Japanese carmakers from additional tariffs, according to the Kyodo news agency, which cited unidentified people close to the matter.

It isn’t clear whether Japan will be exempt from potential tariffs, but in a joint statement, the two countries said they “will make efforts for the early solution of other tariff-related issues.”

“We will probably come to a conclusion. I think it’ll be something very exciting,” Trump said during the meeting.

Trade relations with Japan regressed last year after Trump pulled the United States out of TPP, a multilateral trade pact that involves 11 Pacific Rim countries.

In addition, Trump directed the U.S. commerce secretary in May to launch a Section 232 investigation into whether imports of automobiles and auto parts threaten to harm national security. The investigation may result in tariffs as high as 25 percent on auto imports, which would hurt foreign carmakers, including Japan’s.

According to the joint statement, the United States and Japan will respect the positions of the other government, drawing lines on the U.S. automotive sector and Japan’s agriculture market.

“For the United States, market-access outcomes in the motor vehicle sector will be designed to increase production and jobs in the United States in the motor vehicle industries,” the statement said.

“For Japan, with regard to agricultural, forestry, and fishery products, outcomes related to market access as reflected in Japan’s previous economic partnership agreements constitute the maximum level,” it stated, referring to the TPP.

Trade experts speculate that Tokyo could make concessions to the United States by offering greater access to American exporters on agricultural goods to avoid tariffs on cars.

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