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Trade war

US industries demand strong stance in Japan trade talks

Auto sector favors currency provision while farmers campaign to open market

The U.S. auto industry says nontariff barriers give Japanese vehicles an unfair advantage in the Japan market.   © Reuters

WASHINGTON -- Key U.S. business sectors are pushing the Trump administration to take a hard line against Japan when the two countries open bilateral trade talks next year.

Among the opinions collected by the Office of the U.S. Trade Representative ahead of a public hearing that opened on Monday, American automakers want the two sides to sign off on a provision to discourage currency manipulation. Meanwhile, the farm lobby expects Japan to open up its market wider than agreed to in the original Trans-Pacific Partnership multilateral trade pact, which the U.S. quit talks for last year.

The public comments and the hearing will inform the USTR when it draws up priorities and goals later this month to be discussed with Japanese negotiators. The two sides will start talks as early as next month toward a bilateral trade agreement on goods.

Many of the public comments came from the auto sector, the industry that President Donald Trump frequently cites as having suffered under unfair trade policies. Matt Blunt, president of the American Automotive Policy Council, a grouping of the Big Three automakers, said the White House should not give concessions that open the U.S. market further until Japan promises to free up its market.

Although Japan does not levy tariffs on U.S.-made vehicles, Blunt complained about nontariff barriers such as tougher safety and environmental standards required for American imports. He wants the administration to press Japan to accept vehicles that satisfy U.S. standards.

The U.S. auto industry strongly supports a currency provision. Not only does the trade group advocate the provision, but labor unions like the United Automobile Workers and the AFL-CIO have signed on as well.

Proposals for the currency provision include setting up a framework for settling disputes over foreign exchange rates and the authorization of punitive tariff hikes. The U.S. auto sector sought a similar arrangement in the TPP, but the wording did not end up in the final text.

The UAW says a restriction on import volumes is necessary to resolve the trade imbalance in autos. The union maintains that the ceiling on Japanese imports should correspond to the lower percentage of American autos the Japanese market takes in.

After Trump pulled the U.S. out of the TPP talks immediately upon his 2017 inauguration, Japan and the 10 other remaining countries went ahead and signed a revised version that is set to go into force at the end of the year. Tokyo also signed an economic partnership agreement with the European Union, set to go into effect in February.

In light of these developments, U.S. agriculture interests have expressed concern that they are being placed at a disadvantage once the revised TPP goes into effect without America. The North American Meat Institute recommends that the U.S. negotiate farm tariffs that at least set the same levels as those found in the 11-member TPP.

Japanese officials have affirmed with American counterparts that tariffs cannot be lowered past what was agreed to in previous trade agreements. But a growing rank of commentators in the U.S. say the White House should aim for lower tariffs that go beyond those approved in the TPP.  

For one, the U.S. Dairy Export Council advises against predetermined limits on trade talk outcomes, indicating hopes for low tariffs that would apply to an expanded volume of products, and for a speedier timeframe for cutting duties.

But not all hard-liners are in the U.S. The Association of Global Automakers, which represents international manufacturers with U.S. operations, has come out against a currency provision, saying that such a covenant could result in making U.S. monetary policy dominate.

The U.S. has said it would not impose additional tariffs on auto imports during trade negotiations. The Motor & Equipment Manufacturers Association, noting the concern over the impact on the supply chain, has asked the Trump administration to go even further and eliminate tariffs without any ceilings on volume.

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