From Tariffs To Trade: Japan Agrees To Enter Bilateral Trade Talks With The U.S.

This Wednesday at the United Nations General Assembly, Japan’s Prime Minister Shinzo Abe agreed to engage in bilateral trade talks with the United States. To many, this represents a significant step forward for U.S-Japan trade. While no deals were settled, Wednesday’s conversations mark a stark shift in Abe’s historically hard stance against any bilateral trade negotiations with the United States.

Several have perceived Abe’s agreement as recapitulation, in response to the crippling tariffs levied by the U.S. on the Japanese auto industry. Taketsugu Sato, national security correspondent for the Asahi Shinbun, said that: “[Japan was] chased into a corner.”

Nikkan Gendai, a popular publication in Japan, expressed an even stronger sentiment, calling Abe a “traitor” for his decision to enter trade talks.

Others, however, see Abe as engaging in a kind of strategic delay. Economist Takuji Okubo reflected, “I think the Japanese government’s attitude is not to be confrontational and to appear to get along, but just basically bide its time. Just by agreeing to negotiate, I don’t think the Japanese government conceded anything.”

News of bilateral trade talks between the U.S. and Japan comes when the United States is already in a massive trade war with China, with Trump’s recent announcement of a 10% tariff on $200 billion worth of Chinese goods.

While Abe has yet to make any concrete decisions on any bilateral trade agreements, his announcement that Japan will enter negotiations has already prompted the U.S. to relieve tariffs on the Japanese auto industry.

Many have criticized U.S. officials for relenting too soon at Wednesday’s General Assembly. Japan agreed to maintain only existing trade deals as in the Trans-Pacific Partnership, in which Japan agreed to accept agricultural and forestry products from the United States. No new deals, however, were secured.

Others, however, see Wednesday’s conversation as an entry into future negotiations. In the words of Motoko Rich, The New York Times’ Tokyo Bureau Chief, “American officials might wish to use the talks with Japan to score a small but quick win.”

Regardless of what trade agreements the two countries settle on, increased auto tariffs would significantly harm the Japanese economy. Industry reports indicate that a 20% tariff on Japanese auto exports would increase manufacturing costs by more than 8 billion dollars. Presumably, the increased manufacturing costs would cause Japanese auto companies to sell cars at higher prices, and cause Japanese car exports to tank by over 200,000 units, reducing profits by at least 2 percent.

Some have conjectured that Trump is using bilateral trade talks with Abe to threaten other countries into submitting to the trade demands of the United States. This may well be through a kind of political hyperbole: as Keio University Professor Yorizumi Watanabe explains, Trump could exaggerate the scope of his deals with Abe and claim that Japan has fully opened up its markets.

Earlier this week Trump announced his plans to further pressure Japan into opening up its markets by encouraging the country to purchase more military goods from America. He claimed that Japan would buy “massive amounts of military equipment” and would also “double the amount” of liquid natural gas purchased from the U.S. The President however did not explain why Japan would suddenly increase its imports of American goods, specifically, military goods, as Japan has no offensive military.

Trade negotiations between the U.S. and Japan mark a step in the right direction. However,  coercing Japan to open its market by levying massive tariffs on the auto industry is not an effective way of encouraging Japan to engage in bilateral trade. Unless trade agreements are truly mutual—not hinged on crippling tariffs forcing Japan to relent—it will be difficult for the U.S. to establish longstanding, successful trade agreements with Japan.

It is of particular importance that the U.S. not coerce Japan through excessive tariffs, as the United States-Japan relationship is already politically precarious given the effects of Article 9 of the Japanese Constitution which stipulates that Japan is not to maintain an offensive military. Because of this, Japan grants the United States military bases in Okinawa in exchange for military protection.

In recent years, however, a large proportion of the Japanese population has come to see this agreement as unequal, with the United States causing significant harm to Okinawa, where the U.S. military bases are located. Instances of rape of Okinawan girls by U.S. servicemen and environmental harm associated with America’s military presence have strained the U.S.-Japan relationship.

For this reason, it is increasingly important for the U.S. to protect its relationship with Japan and encourage Abe’s administration to engage in bilateral trade without levying massive tariffs on the island nation. It is also critical that talks of trade amount to more than just talk; engaging in talks of bilateral trade is a first step, and in no way has Japan already agreed to fully open up its markets.

Meera Santhanam