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Economy

Japan's farm sector in US crosshairs

Bilateral trade negotiations put Japan at disadvantage

U.S. Vice President Mike Pence, middle left, sits directly across from Japan's Deputy Prime Minister Taro Aso during the first round of bilateral economic talks in Tokyo on Tuesday.

WASHINGTON -- Opening up the Japanese market to U.S. agricultural exports will likely be a subject of heated discussion as talks progress from bilateral economic discussions that opened Tuesday.

The White House under President Donald Trump has favored bilateral trade deals, which provide an opportunity for the U.S. to leverage its economic and military might. This strategy is part and parcel of Trump's "America First" doctrine. On Tuesday, Vice President Mike Pence expressed a desire for a bilateral trade pact with Japan.

During the talks to implement the Trans-Pacific Partnership agreement, Japan managed to parry America's clout by banding together with the 10 other member nations. But in a one-on-one setting, Tokyo would find itself at a disadvantage.

Because of Trump's withdrawal from the TPP, Washington immediately loses out on eased tariffs and other favorable provisions. Under an economic partnership agreement signed by Japan and Australia, tariffs on frozen Australian beef will gradually drop to 19.5%. Meanwhile, the U.S. has to compete with a 38.5% rate. American beef exports to Japan fell more than 10% by volume in 2015.

The U.S. livestock industry provides a powerful base of support for the Republican Party, which in addition to holding the presidency controls both houses of Congress. The sector is also lobbying the administration to cut a free trade deal with Japan.

With his presidency less than 100 days old, Trump has suffered a number of setbacks, the biggest being his abortive attempt to repeal and replace the Affordable Care Act, also known as Obamacare. His approval ratings have frequently dipped below 40%, and a power struggle within the White House has surfaced. Looking to drum up support, Trump has applied pressure on the foreign policy front, a turn highlighted by the missile strikes in Syria.

Robert Lighthizer, Trump's pick for U.S. trade representative, named Japan as "a primary target" for improving access for American farm products. Erasing the $700 billion-plus annual trade deficit is one of Trump's biggest priorities going into the 2018 midterm elections. Work to shrink trade imbalances with China and Japan is running hand-in-hand with renegotiating the North American Free Trade Agreement, said a Republican insider close to Trump.

At the end of March, Trump signed an executive order calling for a comprehensive study detailing trade deficits and how to tackle them. The report is to be delivered to his desk within 90 days. U.S. Commerce Secretary Wilbur Ross and Japanese counterpart Hiroshige Seko, the minister of economy, trade and industry, will meet for the next round of economic talks in June. That timing would coincide with the report's 90-day deadline. 

Lighthizer, a hard-liner, is expected to be confirmed as the USTR. If the Trump administration ultimately decides that Japan has an unfair advantage in trade, these bilateral talks are likely to become strained.

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