April 12, 2017 5:57 am JST

Japan, US wrestle over agenda for economic dialogue

Two sides at odds over focusing on trade imbalances

TOKYO -- With less than a week before the launch of an economic dialogue between Japan and the U.S., Tokyo looks to take trade frictions and exchange rates off the agenda and focus on future partnerships instead.

Tokyo believes it already resolved the issue of the U.S. trade deficit with Japan, such as through talks on the Structural Impediments Initiative several decades ago and while negotiating the recent Trans-Pacific Partnership trade pact. Japan's government urged Washington to concentrate on infrastructure development and other areas where the two countries could cooperate.

But nearly a month after Japan relayed its position, Washington responded Thursday that it intends to make the trade deficit a key topic in the dialogue April 18. "The U.S. is extremely eager to address trade issues," a Japanese economic official said.

Reducing the American trade deficit is a major goal of President Donald Trump. At the end of March, he signed an executive order for a report on trade topics to be submitted within 90 days. Trump also reached an agreement with Chinese President Xi Jinping on a 100-day plan to reduce bilateral trade imbalances, urging concrete action.

Meanwhile, Japan wants the U.S. to get involved in creating common trade norms across the Asia-Pacific. Though Trump withdrew America from the TPP, Tokyo still considers a trade regime led by Japan and the U.S. crucial for the region, partly in order to keep China in check.

The U.S. government on Thursday apparently did not cite specific fields for talks, such as automotive or agricultural goods. Trump's pick for U.S. trade representative, Robert Lighthizer, has not been confirmed.

"Most senior-level posts at relevant agencies haven't been filled either, and they're not in a position to have detailed discussions," a Japanese Foreign Ministry official said. "It's unclear how the actual meeting will play out."

Japan assumes that Vice President Mike Pence, who will represent Washington in the dialogue, will say something about trade. The question is how detailed a comment Pence will make. Washington and Beijing already discussed Chinese restrictions on beef imports, as well as the service sector, as part of their 100-day plan.

Unlike China, which wants to import more food to support its growing population, Japan considers its agricultural sector a sacred cow. If the U.S. abruptly demands even greater deregulation than was agreed upon under the TPP, the entire dialogue could collapse.

Japan has been deregulating its industries for over three decades longer than China, and few tariffs remain in its automotive and industrial sectors. "It would be very unreasonable for the U.S. to group us together with China," a Japanese economic official said.

Tokyo also is concerned about exchange rates. Shortly after taking office in January, Trump spoke out several times against the strong dollar. The U.S. likely will argue that exchange rates and trade cannot be discussed separately, but Japan plans to push these topics aside in the economic dialogue, viewing the talks as a primarily political meeting.

Japanese and U.S. finance chiefs meet frequently, such as during Group of 20 meetings. Tokyo thinks the two officials will continue to communicate closely.

Observers await a foreign exchange report that the U.S. Treasury Department will submit to Congress as early as this month. If the report takes a tough line on Japan, it may be difficult for either party to ignore the topic at the dialogue next week.

(Nikkei)

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