Japan approves trade deal with US to avoid car tariffs

With the pact, Japan is set to lower or abolish tariffs on US beef, pork, wheat and wine

TOKYO/NEW YORK • Japan's Parliament approved a trade pact with the United States that opens the country's markets to American beef and other agricultural products, as Tokyo tries to thwart a threat from US President Donald Trump to impose new tariffs on its lucrative car exports.

The deal cleared a last hurdle with approval from Japan's Upper House yesterday.

The US has been pressing for the agreement to come into force by Jan 1, which could help Mr Trump land votes for his re-election campaign next year in agricultural areas that may benefit from the deal.

Japanese Prime Minister Shinzo Abe's ruling Liberal Democratic Party coalition holds majorities in both houses of Parliament and was able to win passage easily.

The deal has nevertheless been criticised by opposition lawmakers, who say it gives away bargaining chips without a written guarantee that Mr Trump will not impose so-called national security tariffs as high as 25 per cent on the country's motor vehicle sector.

Mr Trump was eager to make a deal with Japan to appease US farmers - a core component of his political base - whose access to the Chinese market has been constrained as a result of his trade war with Beijing.

The threat of punitive tariffs on the exports of cars and car parts, a US$50 billion (S$68 billion) a year sector that is a cornerstone of the Japanese economy, pushed Mr Abe to accept two-way trade talks with the US after he failed to persuade Mr Trump to return to a Pacific pact he had rejected.

Mr Abe has said Mr Trump assured him when they met in New York in September that he would not impose fresh tariffs.

Under the current deal, Japan is set to lower or abolish tariffs on US beef, pork, wheat and wine, while maintaining protection for its rice farmers.

The US will remove duties on Japanese exports of some industrial parts.

A second pact that was approved simultaneously aims to provide a legal foundation for smooth digital trade between the two countries by banning them from imposing tariffs on products distributed electronically, such as games.

The two sides are set to enter preliminary talks on a second round of trade negotiations, with Japan saying it still hopes to get existing car tariffs removed.

In New York, US Commerce Secretary Wilbur Ross told Reuters on Tuesday that the Trump administration has not ruled out imposing tariffs on imported cars, after letting a review period end last month with no action.

"We've been having negotiations with the individual companies. We've had some very good benefits from that," he said.

"It may or may not turn out that there is any need for the tariff."

Mr Trump did not announce any new tariffs after a six-month, self-imposed review period expired in mid-November following a Commerce Department investigation into whether imported cars pose a national security threat.

Asked if there was a new deadline, Mr Ross referred to a White House statement last month that did not include a new deadline.

Auto experts have said the US administration may have to find other means if Mr Trump wants to tax European or Japanese car imports, a key part of Mr Trump's pledge to make America's trade relationships more fair.

Mr Ross said it was theoretically possible that Washington could use tariffs authorised by the World Trade Organisation under a separate case over aircraft subsidies to impose tariffs on European car imports. But he declined to say if the administration was examining that possibility.

He noted on Tuesday that the EU imposes a 10 per cent tariff on US cars, while the US imposes a 2.5 per cent tariff on EU cars.

"There has already been a tariff war. The only thing is we haven't been defending ourselves. We've been accepting the lopsidedness of things," Mr Ross said.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on December 05, 2019, with the headline 'Japan approves trade deal with US to avoid car tariffs'. Print Edition | Subscribe