An Urban's Rural View

Finally, the U.S. and Japan Are Talking

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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Amid all the hoopla about the new NAFTA -- er, USMCA -- little notice has been paid to an interesting development on another trade-war front.

For the better part of two years, Japan artfully dodged having bilateral trade talks with the United States. President Donald Trump had pulled out of the 12-nation Trans-Pacific Partnership on his first day in office, promising he could get a better deal with the TPP country that mattered most -- Japan -- in a bilateral free-trade agreement. The Japanese politely declined, saying they were only interested in multilateral deals and wanted the U.S. back in the TPP.

Now the dodging is over; the Japanese have agreed to talks with the U.S. Now we'll see whether Trump can really deliver a better deal with Japan than we got in TPP. To say this will be difficult is to put the matter politely. By one obvious measure, it will be impossible.

Yet even if what he gets falls far short of TPP, the eventual deal could be good for U.S. agriculture. The Japanese conditioned their agreement to talk on a U.S. understanding that Japan would make no concessions in agriculture trade beyond those laid out in the TPP deal. Having stated that limit so explicitly, they'll be hard pressed to avoid giving U.S. negotiators anything less.

Prime Minister Shinzo Abe knew he would take a political hit with Japanese voters by agreeing to the talks. But he saw how the European Union had sidestepped, at least temporarily, U.S. threats to impose heavy tariffs on autos by agreeing to talk. He needed to get the same deal for Japan's automakers.

Trump, for his part, needed to make progress on trade with Japan, especially for American farmers, who voted for him and were repaid by being made collateral damage in his trade wars. By agreeing to talks on a limited range of issues, he effectively conceded that he won't be able to deliver a deal as broad as TPP, meaning it won't be the "better deal" he promised in at least one important respect.

Will voters fault Trump for failing to deliver on this promise? It depends. It's hard to believe any deal he reaches will achieve what he seems to care about most -- a significantly lower U.S. trade deficit with Japan. But this may not matter to the electorate, which cares more about jobs than abstract numbers. Moreover, the impact on the trade balance won't likely become clear until after the 2020 election anyway.

If he gets the TPP terms for farmers and does slightly better than TPP for the U.S. auto industry, many voters will probably forgive him for not delivering for the other U.S. industries that would have benefited from TPP.

Abe will be under tremendous political pressure not to give the U.S. too much. He's already gotten a tongue-lashing in an editorial in the Asahi Shimbun, a newspaper that is to Japan what the New York Times is to the U.S. The Asahi said he "knuckled under" to Trump by agreeing to the talks and urged him to avoid compromising Japan's commitment to free trade and multilateralism (http://www.asahi.com/…).

Getting Japan to come to the table is a significant win for the president. I'd argue we would have been better off to stay in TPP in the first place. But having gone down the road of insisting on bilateral talks, Trump has finally got them.

Urban Lehner can be reached at urbanize@gmail.com

(CZ)

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