New deal signed on sidelines of UN General Assembly . . .
U.S. President Trump and Japan’s Prime Minister Abe signed a trade deal Wednesday on the sidelines of the United Nations General Assembly. The new deal is limited in scope. It includes tariff cuts on the following: over 90 per cent of U.S. food and agricultural products going to Japan; Japanese machine tools and other products exported to the U.S.; and, digital products (e.g. videos, music, and e-books). However, the agreement does not contain any changes in auto trade policies — the most controversial issue during negotiations. The 2.5 per cent U.S. tariff on Japanese cars remains in place, but new tariffs have not been applied.
Autos will feature again in next round of negotiations . . .
For the U.S. in particular, the agreement is likely to provide relief to American farmers who have been battered by the trade war with China. For Japan, the main win is that the agreement does not include the threatened 25 per cent tariff on Japanese autos and auto parts, and that Trump personally assured Abe that the U.S. would not impose such sanctions on Japan. The Trump administration has demanded, however, that Japan further open up its car market to U.S. automakers. According to U.S. Trade Representative Robert Lighthizer, the two countries will tackle the thorny issue of autos in the next round of negotiations, expected to start in April. This limited agreement primarily serves Trump’s political goal of galvanizing support from farmers ahead of the 2020 elections.
Implications for China, Canada . . .
The new deal will provide greater access to U.S. agri-food exports in Japan, which will pose competition to Canadian farmers. Canadian agri-products, especially pork, increased their share in the Japanese market with the exclusion of the U.S. from the CPTPP. In the case of China, Chinese experts had raised concerns about a potential provision in the new U.S.-Japan trade agreement requiring Japan to obtain U.S. approval before concluding trade deals with ‘non-market economies’ (i.e. China). The new deal does not include such a provision, which might leave space for China and Japan to negotiate their own regional trade agreements.