Kristian Rouz — The Trump administration is bracing for negotiations with the Japanese cabinet of Prime Minister Shinzo Abe, as the sides are eyeing what they hope will be a mutually beneficial trade agreement. The White House said Friday there are several specific issues the US would like to address in its trade relations with Japan.
According to a White House statement, the Japan trade talks will seek to reduce America's $69-billion trade deficit with the island nation. The US, officials said, is seeking to ensure free access for American goods and services to Japan's domestic market.
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The trade agreement, US officials say, would have to eliminate Japan's customs duties, tariffs, and non-tariff restrictions for the majority of American products, particularly, agricultural goods. Trump administration officials believe this would allow the US to dramatically increase its agricultural exports, which would be good news for farmers and food manufacturers.
But the US, particularly, in the wake of the Federal Reserve's rate hikes and the White House's "strong dollar" policy, is unhappy.
The administration will "ensure that Japan avoids manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage," the White House statement reads.
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Indeed, the weaker yen has boosted the international competitiveness of Japanese exports for decades. Japan's foreign trade, in turn, has been a major driver of GDP growth for that country — although its strong domestic consumer market is now playing an ever-increasing role, according to the Japanese government.
The third topic of the upcoming US-Japanese trade talks will revolve around bilateral trade in cars. The US imports a lot of Japanese-made cars, which meet rife demand in the American market due to their fuel efficiency, low price, and durability — especially, in warmer states.
This also comes after one of the largest US trade unions, the United Auto Workers, urged Trump to impose quotas on the imports of Japanese cars.
Such restrictions, however, could hurt American consumers. American manufacturers aren't expected to bring down prices on their vehicles, as elevated levels of union payrolls and worker protections have had a negative effect on the productive efficiency of American carmakers, which they have to make up for by raising prices.
For their part, the Japanese cabinet has repeatedly shown goodwill in trade discussions with the US. According to Trump, he has developed a solid relationship with Abe, and the sides are expected to reach mutual concessions, which could eventually level the playing field for American companies in Japan and vice versa.
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Most recently, Japan passed a $47-billion defence budget for the next year — a 1.3-percent increase from 2018 — and ramped up its purchases of American-made weapons and military equipment. These include missile defence systems Aegis Ashore, F-35A military jets and other multi-billion purchases.
In light of this, the US-Japan trade talks are expected to progress more quickly, and some economists expect a new agreement to resemble the KORUS deal with South Korea, which was successfully updated earlier this year.
The White House said trade talks with Japan will commence on 20 January.