US, Japan Sign Initial Trade Deal

Japan agreed to lower import tariffs on more than 90 percent of U.S. food and agriculture products, the Office of the U.S. Trade Representative announced. The White House said Japan will “eliminate or significantly lower tariffs” on beef, pork, poultry, wheat, cheese, wine, certain nuts and berries, cherries and ethanol. The U.S. said the deal replicates the agricultural access the U.S. would have received if it had joined the Trans-Pacific Partnership.

The White House’s announcement did not mention whether the deal guaranteed Japan exclusion from Section 232 tariffs on auto parts, which Japan was hoping for (see 1909170042). After the signing ceremony, USTR Robert Lighthizer told reporters that a Section 232 exclusion was not part of the initial deal but it could be discussed in future negotiations. “[C]ertainly it’s the Japanese ambition to have car tariffs be discussed,” Lighthizer said. “At this point, it’s not part of this agreement.”

When asked whether the threat of auto tariffs will be taken off the table in future meetings, Lighthizer said “at this point, it is certainly not our intention, the president’s intention, to do anything on autos, on 232s, on Japan.” He also said Japan’s legislature will pass the agreement in “extraordinary session” in October or November, and the tariff reductions will take effect Jan. 1.

On that day, tariffs will be eliminated on $1.3 billion worth of U.S. exports, including almonds, blueberries, cranberries, sweet corn, sorghum, broccoli, prunes and food supplements, the USTR said. There will be gradual tariff elimination on $3 billion worth of exports, including wine, cheese and whey, ethanol, frozen poultry, processed pork, fresh cherries, oranges, frozen potatoes, beef offal, tomato paste and egg products. There will also be a gradual reduced tariff on fresh and frozen beef and fresh and frozen pork. Japan will be able to apply safeguards if there are import surges of beef, pork, whey, oranges and race horses, but they will be phased out. The U.S. will also receive a tariff rate quota for wheat, malt, glucose, fructose, inulin, corn starch and potato starch.

The White House said the deal will “level the playing field” for U.S. farmers and manufacturers. “America’s agricultural community will now be able to compete more effectively in Japan against global competitors,” the White House said.

The deal will also reduce or eliminate U.S. tariffs on certain Japanese machine tools, bicycles, bicycle parts, fasteners, steam turbines and musical instruments. It also includes a $40 million digital trade agreement, Lighthizer said, that prohibits certain customs duties. Customs duties are banned on digital products sent electronically, including videos, music and software. The deal also includes language that ensures “non-discriminatory treatment of digital products” and “barrier-free cross-border data transfers in all sectors,” the USTR said.

During the signing ceremony, Abe called the negotiations “strenuous” and said U.S. negotiators were “very, very tough throughout the negotiation” process. But he also said Japan was pleased with the deal. “Under this agreement ... we’ll be able to bring benefit to everyone in Japan as well in the United States, namely consumers, producers, as well as workers,” Abe said through a translator. “So the outcome of this negotiation is actually a win-win solution for Japan and the United States.”

Several U.S. industry associations applauded the deal, including the National Pork Producers Council, which said the agreement will “allow U.S. pork producers to compete on a level playing field in Japan.” The Corn Refiners Association called the deal an example of the administration's "commitment to expanding global market access for American agricultural products" and called the deal "a win." The International Dairy Foods Association said it is “pleased” with the deal but that it hopes “the next step comes quickly.”

The Information Technology Industry Council said the agreement will reflect “state-of-the-art rules” for digital trade. “In addition to the benefits it provides for businesses and consumers in both markets, this first-stage agreement represents a positive step toward solidifying international norms that ensure that global markets remain fair, open, and competitive in the modern economy,” Sam Rizzo, director of policy at ITI, said in a statement.

The deal will “spur economic growth and boost sales” for both Japan and the U.S., the U.S. Chamber of Commerce said. But the Chamber also asked the Trump administration to follow through on a more comprehensive deal as the countries continue negotiations. “The Chamber strongly urges the administration to hold fast to its commitment to achieve a comprehensive, high-standard trade agreement with Japan that addresses the full range of our trade priorities, including services, intellectual property protection, and regulatory barriers to trade,” Executive Vice President Myron Brilliant said. “A comprehensive trade deal with Japan would provide some much-needed predictability -- not only for the U.S. and Japan but for all our trade allies.”

Speaking with reporters Sept. 25, Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said the trade negotiations should have had a broader scope. “I think negotiations ought to be more comprehensive than just for agriculture,” he said. “But coming from an agricultural state, like I am, and we're going to find our agricultural products with a much higher tariff on them coming into Japan than from Australia or other countries, it wouldn't be right for me to stand in the way.”

Rep. Kevin Brady, R-Texas, the top Republican on the House Ways and Means Committee, said the deal is “great news” and will open up export markets for U.S. farmers and ranchers. “I look forward to intensifying consultations with the administration and working toward the next step -- a comprehensive agreement between the United States and Japan that will benefit American workers across every sector of our economy,” Brady said in a statement.

Ron Wyden, D-Ore., ranking member on the Senate Finance Committee, praised the digital commitments in the agreement but stressed that the administration still needs to work toward a comprehensive deal on other trade issues. “[T]here is much more to do to level the playing field in Japan for American workers, businesses, farmers and ranchers,” Wyden said in a statement. “I look forward to this administration moving quickly to address the remaining trade issues our country faces in Japan.”