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U.S. Expresses Strong Interest in Negotiating Trade Deal with Japan

According to press reports, the United States expressed “strong interest” in a potential bi-lateral free trade agreement with Japan during the second round of the U.S.-Japan Economic Dialogue held on 16 October. The United States runs a substantial trade deficit with Japan, and President Trump has voiced support for pursuing bi-lateral trade agreements to ease such shortfalls. However, there was some resistance to the idea from Tokyo, which maintains a preference for the Trans-Pacific Partnership Trump withdrew the United States from in January. Further discussions on trade relations are expected to take place when Trump visits Japan in November.

A joint statement issued at the conclusion of the latest talks reports the following additional developments.

  • Japan will streamline noise and emissions testing procedures for U.S. automobile exports certified under Japan’s Preferential Handling Procedure.
  • Technical-level work currently underway is intended to (i) result in more effective enforcement activities against unfair trade practices by third countries and (ii) identify new areas of common interest for promoting high trade and investment standards.
  • The two sides concluded a memorandum of co-operation in the transportation sector, including infrastructure development, financing and maintenance as well as intelligent transportation systems.
  • Earlier this year the United States lifted import restrictions on Japanese persimmons and Japan reciprocated on U.S. potatoes from Idaho.

Meanwhile, Japan and the other members of the TPP – Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – are considering a number of changes to the agreement as part of their on-going efforts to implement the agreement following the U.S. withdrawal. This process, which is being carried out on the basis of instructions adopted at the May meeting of APEC trade ministers, is seeking to preserve the high-standard market access commitments included in the agreement. The parties hope to present a set of outcomes at the November 2017 APEC leaders’ summit in Vietnam and it is very feasible that a broad compromise could be reached by then.

A number of TPP members, most notably Vietnam, would like to remove several provisions from the agreement that were included mainly or exclusively at the behest of the United States, including in the areas of labour rights and intellectual property. Then again, if those provisions are ultimately removed, it could make it difficult or even impossible for the United States to re-join the deal at some point in the future. In this regard, a senior Japanese official recently indicated that implementation of certain parts of the current agreement could be frozen until the United States decides to come on-board, assuming the current or a new U.S. administration makes such a move at some point in the future.

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