THE TTALK QUOTES 

On Global Trade & Investment
Published By:
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-463-5074
 
No. 69 of 2019
FRIDAY, NOVEMBER 1, 20219

Click HERE for the October 23 ITI
Quote on Japan and Digital Trade


ASSESSING THE U.S.-JAPAN AGREEMENT

 "We're delighted with liberalization wherever it can be found. ... [But] you know, we do need a broader, comprehensive agreement."

Charles Freeman
September 26, 2019
wCONTEXT
Charles Freeman , the Senior Vice President for Asia at the U.S. Chamber of Commerce, was the final speaker at GBD’s September 26 event on the new trade agreement between the United States and Japan. As noted in earlier entries, the agreement was announced by President Trump and Prime Minister Abe at their meeting in New York on September 25, and the relevant documents were signed by USTR Robert Lighthizer and Japan’s ambassador to the United States, Ambassador Shinsuke Sugiyama on October 7. Formally, there are two agreements: i) a market access agreement, and ii) an agreement on digital trade. Both agreements and the various side letters are expected to enter into force in January 1, 2020.

We will be surprised if they do not, but there is still one major political hurdle. Japan’s House of Representatives, the lower House of the Japanese Diet, needs to approve the agreements. They began their consideration of them on October 24, and if they vote to approve them this month, the January 1 implementation date should hold. 

As today’s featured quote makes clear, Mr. Freeman’s concern is that the agreement announced on September 25 is too narrow. Ultimately, he said, the U.S. Chamber of Commerce would like to see a U.S.-Japan agreement that goes “through the full comprehensive process of approval by the Congress.” And indeed a broader agreement is contemplated. To quote from the statement issued jointly by President Trump and Prime Minister Abe on September 25:

[T]he United States and Japan intend to conclude consultations within 4 months after the date of entry into force of the United States Japan Trade Agreement and enter into negotiations thereafter in the areas of customs duties and other restrictions on trade, barriers to trade in services and investment, and other issues in order to promote mutually beneficial, fair, and reciprocal trade.

In his discussion of need for just such a negotiation and the broader agreement it promises, Mr. Freeman said:

While we are very pleased with this initial round, it’s a departure from the way … the United States has been engaging in trade discussions for some time. And not necessarily a welcome departure. You know, the reason that we’ve engaged in efforts to negotiate fully comprehensive agreements in the past is that, you know, [otherwise] the hardest things tend to get left out. And they are the things that are frequently the challenges that you get to at the end of the day, and, candidly, those, for the most part, have been in agriculture. So, while it’s great that we’re doing some ag. stuff up front, we think that if we had done a broader, comprehensive agreement up front and concluded that we might have even gotten a better deal.
COMMENT
As the saying goes, “A bird in the hand is worth two in the bush.” We don’t doubt the sincerity of the promise of further negotiations, but we do not expect to see an early conclusion to the proposed new U.S.-Japan trade negotiations, which, if we are reading the above statements correctly, should begin sometime next spring.

A Final Agreement. First, there are repeated references to the September 25 agreement being “final.” Prime Minister Abe talked about the agreement or agreements as final in his remarks that day. And the same characterization appears in the joint statement, which begins:

We, President Donald J. Trump and Prime Minister Abe Shinzo, confirm and welcome final agreement on the United States-Japan Trade Agreement and the United States-Japan Digital Trade Agreement.

Again, there is no real inconsistency between the use of the world “final” in that context and the promise of a broader agreement. But it is disconcerting.

Personalities and Priorities . Then too there is the question of who the negotiators will be for the larger deal.  Presumably, were negotiations to begin next April or May, USTR Robert Lighthizer would lead the American effort. But who would lead for Japan? Somewhat unusually, it was Japan’s foreign minister, Toshimitsu Motegi , who led the effort to secure the current agreement. Would he also head the talks for a more comprehensive agreement? 

Or might such a responsibility fall to the new Minister for Economy Trade and Industry, Hiroshi Kajiyama ? Though he has only been in office now for a few days, Mr. Kajiyama has indicated his top trade priority is RCEP , the 16 country negotiation for a Regional Comprehensive Economic Partnership. He said he would like to see that agreement – an agreement that would include Japan, China, India, South Korea, and 12 others – wrapped up by the end of this year. If that timetable slips, which seems likely, we could well see RCEP dominating Japan’s trade agenda well into next year.

As Others See Us . Finally, there is the question of how the world sees trade and the U.S. Congress. Those perceptions will depend to a large extent on whether Congress ultimately approves implementing legislation for USMCA, the United States-Mexico-Canada Agreement. (Boiling that down, the question is, will Speaker Pelosi allow a vote?) If she does, if the House gives its okay, and if the Senate follows suit, the world may reassess the potential for larger, more comprehensive trade agreements with the United States. At the moment, however, agreements like the ones announced with Japan on September 25 may represent for many the outer limit of what America can do or, rephrased, of what the President can do with the authority granted to him under the Comprehensive Trade Priorities and Accountability Act of 2015. And that authority has a shelf-life. It expires in 2021.  

Editor’s Note.   We had meant to publish this entry a week ago and apologize for the delay. 

SOURCES & LINKS
Remarks of Charles Freeman takes you to the GBD transcript of Charles Freeman’s remarks at the GBD colloquium on U.S.-Japan trade that was held at the National Press Club on October 26.

The Diet Takes Up the Deal is a link to a Nippon.Com story on the current session of the Diet, including the issue of the trade agreement with Japan. 

The Joint Statement is the text of the joint statement issued by President Trump and Prime Minister Abe following their meeting in New York on September 25, 2019.

On U.S. Tariff Policy is a report on this topic, which was published last November by the Congressional Research Service of the Library of Congress. This includes a reference to the President’s tariff cutting authority under the fast-track or trade promotion authority act of 2015. 

METI’S Focus on RCEP is a Japan Times story about METI’s new minister and his priorities.


September 26 Event is the page of the GBD website with material from our recent event on U.S.-Japan trade. These include audio recordings of all of the presentations and selected transcripts. 

Agreement Texts is a page on the USTR website with links to the texts of the two agreements and to the related annexes and side letters.   Market Access takes you to the text of the first agreement and Digital Trade to the other. 

TO GET THE TTALK QUOTES IN YOUR INBOX
Or Other GBD Notices, click below.