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International relations

US and Japan ink quick trade deal on farm and digital

Trump and Abe affirm no additional tariffs on autos, for now

Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump signed a joint statement on their trade deal on the sidelines of the United Nations General Assembly on Sept. 25.   © Reuters

NEW YORK -- U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe signed the first stage of a new trade deal Wednesday, focusing on farm goods and digital products, while confirming that the U.S. will not impose additional tariffs on Japanese cars at this time.

Under a market access agreement, Japan will open new markets to approximately $7 billion in American agricultural products. "Japanese tariffs will now be significantly lower, or eliminated entirely, for U.S. beef, pork, wheat, cheese, corn, wine, and so much more," Trump told reporters at a signing ceremony in New York, on the sidelines of the United Nations General Assembly.

The president called it "a huge victory for America’s farmers, ranchers, and growers." The pact is a rare trade success for the president who has struggled to secure pacts with other trade partners, including China.

A separate agreement spelled out commitments for $40 billion worth of digital trade between the two sides. "This will greatly expand commerce across cutting-edge products and services," Trump said.

The two leaders signed a document outlining the steps ahead. The final trade document could not be produced in time for the two leaders' meeting and will be signed at a later date. U.S. Trade Representative Robert Lighthizer signaled that Wednesday's agreements will go into effect in January next year.

The agreement loses effectiveness four months after one side informs the other of the intent.

The White House said that in the months ahead, the two sides will engage in further negotiations in the interest of achieving "a final, comprehensive trade deal."

"I am happy that we have reached a final agreement," Abe said. "The deal benefits both of our countries." 

Foreign Minister Toshimitsu Motegi, who led the trade talks as Japan's top negotiator, told reporters in the afternoon that Trump gave Abe assurances that he would not impose additional tariffs on Japanese automobiles, a threat Trump made in May.

Motegi pointed to wording in a joint statement issued Wednesday stipulating that both sides will "refrain from taking measures against the spirit of these agreements," saying it is essentially a provision barring additional auto tariffs.

Lighthizer also said Washington is not considering subjecting the Japanese auto sector to additional levies at this time.

"At this point, it is certainly not our intention, the president's intention, to do anything on autos on Japan," Lighthizer said regarding the possibility of additional tariffs on Japanese cars.

Washington is currently weighing an additional 20% to 25% tariff on imported cars, citing national security concerns, and plans to make a final decision as early as November. 

Regarding industrial products, the U.S. will eliminate the existing 2.5% tariff on Japanese automobiles and auto parts, though it did not provide any timeline for the move. It will also cut tariffs on steam turbines and bicycles, among other products.

The Office of the U.S. Trade Representative said Wednesday that Japan will eliminate or reduce tariffs on an additional $7.2 billion of U.S. food and agricultural products, which represents about half of all current shipments. Japan has already eliminated tariffs on $5.2 billion of U.S. farm goods.

Under the agreement, Japan will lower its tariff on American beef to 9% from the current 38.5% in several stages. The tariff on cheaper cuts of pork, used in sausages and similar products, will ultimately be lowered to 50 yen (46 cents) a kilogram from 482 yen.

Japanese tariffs on almonds and blueberries will be eliminated altogether.

Japan will not set a quota of rice exempt from tariffs, as it did under the Trans-Pacific Partnership, which Trump pulled the U.S. out of in his third day in office in 2017.

The Trump administration is considering skipping congressional approval and fast-tracking the deal, to lift agricultural exports before the presidential election in 2020. The agreement is on track to take effect sooner than the revised version of the North American Free Trade Agreement with Canada and Mexico, and could be one of Trump's first concrete accomplishments on trade.

The U.S. trade war with China has squeezed American farmers. Beijing has imposed retaliatory tariffs on American soybeans, for example, which have weighed down shipments. U.S. agricultural exports to China plunged 53% in 2018 and 20% in the January-June half of this year.

Trump's decision to leave the TPP has affected shipments to Japan as well. Australia, which remained part of the framework, accounted for 51% of imported beef in Japan last year, while the U.S. accounted for 41%. The U.S. share in pork fell to 28%.

Following the signing of the joint statement, the two leaders held talks to discuss the recent drone strike on Saudi Arabian oil facilities. They condemned the attack and said that the U.S. and Japan would work together to ease tension in the region.

Abe had also met Iranian President Hassan Rouhani on Tuesday to discuss the nuclear deal from 2015. Rouhani outlined his strategy for national security, which Abe will relay to Trump.

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