United States And Japan Hit Bumps On The Road To TPP Agreement

by King & Spalding

Progress on the Trans-Pacific Partnership (TPP) currently is at a standstill while the United States and Japan engage in bilateral trade negotiations. Talks in April were not as fruitful as many had hoped, with issues surrounding automobiles and agriculture leaving the two countries at an impasse. Many in the United States are encouraging the Obama administration to hold firm to its negotiating position, suggesting that the TPP negotiations should not be concluded without serious concessions from Japan.

One of the main concerns for the United States is Japan's agricultural tariffs. Japan is fighting to maintain tariffs on five key farm product categories: rice, wheat, beef and pork, dairy products, and sugar. Japan currently imposes a 778 percent tariff on imported rice, a 252 percent tariff on imported wheat, and a 360 percent tariff on imported butter. The United States would like to see substantial cuts in these tariff rates at the very least, but ideally would prefer full market access for U.S. agricultural products as part of the TPP. Japan and Australia recently engaged in similar discussions over agriculture as part of bilateral economic partnership agreement negotiations. In early April, Japan agreed to cut the tariff on frozen beef in half over 18 years and to increase Australia's duty-free quota for cheese. These concessions eventually may have wider implications for Japan's negotiations with the United States and the TPP negotiations generally.

The automotive industry is another key point of contention between the United States and Japan. Some sources estimate that auto-related trade accounts for nearly 75 percent of the U.S. trade deficit with Japan. The Japanese auto market maintains high barriers to imports, and the United States currently has tariffs in place on Japanese cars and light trucks. One U.S. proposal reportedly would have the United States phasing out these tariffs over a period of 30 years, provided that Japan agrees to maintain a minimum level of automotive imports from the United States. Japan reportedly feels that the proposed phase-out period for U.S. tariffs is unusually long, particularly because the United States agreed to phase out tariffs against South Korean automobiles over a period of ten years under the U.S.-Korea Free Trade Agreement.

Several members of Congress reportedly are using a letter to U.S. Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack to urge the Obama Administration not to support a TPP deal with Japan if barriers to the Japanese market are not removed for U.S. agricultural products. Similarly, U.S. agricultural groups previously threatened to oppose TPP's eventual ratification if Japan is an involved party and does not lower its tariffs and other barriers to agricultural imports. On April 16, U.S. meat and poultry groups wrote a letter to President Obama praising his "strong stance" in TPP talks with Japan.

Ambassador Froman and Japanese Minister of State for Economic and Fiscal Policy Akira Amari held several meetings in April to attempt to close the gaps between the two countries' negotiating positions. On April 24 and 25, President Obama and Japanese Prime Minister Shinzo Abe met in Japan, hoping that bilateral talks on the highest level could lead to a breakthrough in negotiations. However, the two leaders failed to reach an agreement. While the official joint statement issued by the White House indicates that Japan and the United States made unspecified progress, it tellingly goes on to state that "there is still much work to be done to conclude TPP."

- Shannon Doyle Barna


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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