The Japanese-American Trade Agreement and Car Tariffs: A Forced Reconciliation

The Diet has begun deliberations on the Japan-U.S. trade agreement. Because approval by the U.S. Congress is unnecessary, if the Diet approves the agreement, it will take effect at the beginning of next year. It is currently one of the Diet’s focuses.

A major point of contention is whether the trade agreement conforms with international rules. It is an issue that will determine the agreement’s legitimacy.

According to the rules of the World Trade Organization, a trade agreement reached between two countries must repeal tariffs on 90% of products being traded. The Japanese government says the deal complies with the rule because Japan will repeal tariffs on 92% of U.S. goods imported to Japan, and the U.S. will repeal tariffs on 84% of Japanese products imported to the U.S.

What defies understanding is the fact that elimination of tariffs on Japanese cars and parts, which was an ongoing topic of debate in the negotiations, is included in the American figures. Since car and car part exports make up more than a third of Japan’s total exports to America, if these are excluded, the U.S. will repeal tariffs on only 60% of Japanese products imported to the U.S.

The agreement stipulates that there will be further negotiations on repealing tariffs. Prime Minister Shinzo Abe is relying on additional negotiations as the basis for saying he has no problem with the rates at which tariffs are being repealed.

But it’s unclear when the next negotiations will take place. The Trump administration has threatened additional tariffs on Japanese cars, and it’s hard to imagine that Trump will comply with the agreement to repeal tariffs. Experts in commercial issues also point out that there is no definite promise to repeal tariffs in the agreement’s text.

It is also questionable that the Japanese government has even included the repeal of car tariffs in calculating the agreement’s economic impact. It is hard to dispel suspicion that claiming the gross domestic product will increase by 4 trillion yen (about $40 billion) is meant to exaggerate the economic impact the agreement will have.

Aren’t these kinds of problems created by the prime minister’s emphasis that the deal is a “win-win?”

In reality, although America passed up the repeal of Japanese car tariffs in the Trans-Pacific Partnership, Japan agreed to reduce tariffs on American beef and pork imports in accordance with the TPP. Japan’s concessions are notable.

If the Japanese government regards the repeal of car tariffs as a fait accompli, we cannot help but see that as a forced attempt to conform to the prime minister’s statements.

Free trade has supported Japan’s economic development. Following the international rules on which it is based is a top priority.

In a general policy speech, the prime minister said that “as the standard-bearers of free trade, we will extend the rules-based economic order around the world.” He ought to make it clear that the agreement does not violate these rules.