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International relations

US and Japan to include digital products in trade talks

Lead negotiators wrap up first round of negotiations on cars and farm goods

U.S. Trade Representative Robert Lighthizer and Japanese Economic and Fiscal Policy Minister Toshimitsu Motegi attend the first round of bilateral trade talks in Washington on April 15. (Photo by Rintaro Tobita)

WASHINGTON -- The U.S. and Japan concluded their first round of high-level negotiations on a bilateral trade deal on Tuesday, with the two sides pushing to finalize the scope of an agreement, including e-commerce and trade in digital products.

Japanese Economic and Fiscal Policy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer attended the second day of talks, which lasted three hours. They discussed which products to include in a deal to cut tariffs on goods, among other topics.

"We are ready to start negotiations on trade in goods, including farm products and automobiles," Motegi told reporters after the meeting. "We both agree that we want to produce good results quickly." With regard to services, other than data, "the U.S. side made no reference to areas of specific interest," Motegi said.

During the talks, Japan reiterated that it cannot cut tariffs on agricultural products below levels set in such trade deals as the Trans-Pacific Partnership agreement, which the U.S. withdrew from soon after Donald Trump became president.

With the TPP taking effect, American farmers are at a competitive disadvantage in Japan because their products face higher tariffs. Washington has called for a prompt resolution, Motegi said. Under the terms of the TPP, Japan will cut tariffs on beef imports, for example, to 9% from 38.5% over 16 years.

The U.S. again complained about its $67.6 billion trade deficit with Japan, most of which comes from autos. In future talks Washington may make tough demands, such as reducing exports of Japanese cars to the U.S. and importing more U.S.-made cars to Japan. Tokyo opposes export quotas on cars.

Motegi and Lighthizer confirmed that they will negotiate in line with the countries' joint statement in September last year, which said that the U.S. will not raise tariffs on Japanese cars while the talks are underway. "Japan has clearly confirmed it," Motegi said.

The topics to be covered were a key issue in the first round of talks. Motegi did not say whether the two sides had reached an agreement on that point, but said they had agreed to take up the question of a bilateral Trade Agreement on Goods before discussing digital trade.

The idea of putting digital trade on the table came from the U.S. side. The talks are expected to result in rules to foster such trade, which has grown over the past few years. New rules may call for exempting digital products from tariffs. A Japanese official said an agreement will be limited to "areas that both countries can address quickly," without requiring drastic changes in existing regulations.

Motegi told Lighthizer that the issue of banning currency manipulation was outside the scope of the talks. He said that Prime Minister Shinzo Abe and Trump agreed at their February 2017 summit that the issue of exchange rates would be negotiated between their respective finance ministers. Ahead of the current talks, U.S. Treasury Secretary Steven Mnuchin had said language banning currency manipulation would be on the agenda.

Motegi and Lighthizer agreed to try to reach an accord quickly. They are scheduled to meet again in the U.S. before another Japan-U.S. summit set for April 26 and 27.

"A negotiation with a more limited scope seems the most appropriate path forward, in light of the serious losses U.S. exporters are facing with the CPTPP [as the TPP is now known], and the Japan-EU agreements in effect," said Wendy Cutler, a former senior U.S. trade diplomat.

"If the two sides are serious about a quick and meaningful deal, they should look to the TPP, where important groundwork has been laid on agriculture, autos, and digital trade, among other issues," said Cutler, who helped draw up the multilateral trade agreement that Washington later pulled out of.

Nikkei staff writer Taisei Hoyama in Washington contributed to this report.

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