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Nikkei Editorial

US-Japan deal should serve as launch pad for free trade drive

Partial pact marks promising start but falls short of TPP's example

Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump shake hands after signing a joint statement on trade in New York on Sept. 25.    © Reuters

Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump reached a final accord in late September on a trade agreement that should go some way toward reducing barriers on agricultural and industrial products. This move by two of the world's three largest economies to further expand trade and fill the gap left by Washington's withdrawal from the Trans-Pacific Partnership is a welcome development.

But it is not something that can serve as an example for other advanced economies to follow. Washington and Tokyo should continue negotiating toward a wider-ranging pact that does more to open up trade.

The deal will lower Japan's tariffs on American beef and pork to levels accepted in the TPP, as well as reduce or eliminate U.S. duties on products such as machine tools and fuel cells. But Washington put off addressing tariffs on vehicles and auto parts, and Tokyo avoided establishing a tariff-free quota for rice imports.

Though both sides kept their respective third rails untouched, the benefit to consumers from cheaper imports is significant.

Washington confirmed that it will not impose steep additional tariffs on Japanese autos, as previously threatened by Trump. The accord reportedly also averts other conditions that would be a disadvantage for Tokyo, such as restrictions on auto exports to the U.S. or a provision that ties Japan's hands on currency policy.

The hurdles to be overcome seem lower than those facing the U.S.-South Korea free trade deal and the reworked North American Free Trade Agreement.

But the new agreement deals only with goods and digital trade, and the impact will be smaller than that of the broader TPP, which covers areas such as services and investment. This is because Trump prioritized making American agricultural products more competitive in Japan to win support ahead of the November 2020 presidential election, and Abe went along with his push for a speedy deal.

Japan and the U.S. will enact the agreement as early as January and move on to the next phase of negotiations. The two sides should work quickly to resolve the remaining issues while also getting the most out of the already agreed-upon tariff cuts. For Tokyo in particular, parlaying this into a more comprehensive future pact will be essential for its efforts to stem the global tide of protectionism.

Addressing the U.S. duties on autos and auto parts is the most important task. Without doing so, the deal could violate World Trade Organization rules requiring that free trade agreements cover "substantially all" trade -- typically taken to mean at least 90% -- among the countries involved. Japan should continue trying to persuade Washington to return to the tariff phaseouts it agreed to in the TPP.

Trump must not break his pledge to Abe by imposing high auto tariffs or restrictions on Japan's exports or currency policy. The removal of additional U.S. duties on steel and aluminum already in place should be discussed as well.

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