The U.S. Doesn’t Need a New Trade Deal With Japan
(Bloomberg Opinion) -- U.S. and Japanese officials will meet in Washington this week to begin negotiating one of those “best-ever” trade deals President Donald Trump keeps promising. This may not be possible and wouldn’t even have been necessary, if the president had not summarily withdrawn from the Trans-Pacific Partnership in his first week.
Even now, the U.S. would be better served by rejoining that deal, which came into effect at the end of last year after Japan and 10 other countries forged ahead without Washington. The renamed Comprehensive and Progressive Trans-Pacific Partnership, among other things, cracked open Japan’s once tightly guarded agricultural sector: Tariffs on chilled beef imports fell from 38.5 percent to 27.5 percent for members of the pact and will eventually come down to 9 percent A separate deal between Japan and the European Union has begun lowering tariffs for EU members as well.
The losers have been American farmers. U.S. pork exports to Japan have dropped 35 percent so far this year, even as Japan’s imports of beef from CPTPP countries have surged. Montana Senator Steve Daines complained last week that his state’s barley farmers have lost contracts with Japanese clients. This comes as bad news to a president beginning to campaign for re-election.
And it explains why at least some White House officials are angling to sign a quick deal with Japan focused on agriculture. U.S. Trade Representative Robert Lighthizer appears to be envisioning a two-stage process that would produce that quick agreement and, eventually, a broader bilateral free-trade pact. In order to avoid the need for congressional approval, the first deal would need to be based primarily on Japanese concessions. That won’t be easy.
Although Japan seems willing to offer the U.S. CPTPP terms on agricultural tariffs, it has already vowed not to make unilateral concessions, arguing that any such deal would not be allowed under World Trade Organization rules. The WTO might also look askance at an agreement that offers special terms to the U.S. but not Japan’s other trading partners. CPTPP members would be justifiably annoyed at having to compete with American farmers again without gaining access to the U.S. market.
Moreover, there’s no indication Trump himself would be satisfied with a narrow agreement. He’s complained for decades that Japan has an unfair advantage in autos, and he’s likely to insist on additional concessions — from voluntary quotas on Japanese car exports, which Japan is prepared to resist, to pledges against currency manipulation. Already Trump has threatened to impose 25 percent tariffs on Japanese and European cars.
It makes little sense to go to all this trouble to reach a bilateral deal with Japan when the CPTPP is designed to allow the U.S. to rejoin. Doing so would confer the same agricultural access the U.S. now seeks, and much more, including language on digital and intellectual property, patent protections, and labor and environmental standards that the White House adapted for its revised trade deal with Canada and Mexico. Being part of the larger pact would help U.S. companies that have complex supply chains in Asia, not to mention put competitive pressure on China to raise its own standards.
To instead rehash all these issues with Japan alone is costly. The longer negotiations drag on and the more acrimonious they become, the harder it will be for the U.S. and Japan to cooperate on other critical issues: reining in North Korea, reworking global trade rules to address China’s mercantilism, and rallying Asian nations to stand up to Chinese expansionism. There’s a “best-ever” trade pact already on the table. The U.S. should sign it.
Editorials are written by the Bloomberg Opinion editorial board.
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