By Junko Horiuchi,
TOKYO - Japan needs to brace for tough negotiations on autos and agriculture when the second stage of bilateral trade talks with Washington eventually resume, no matter who wins the Nov. 3 U.S. presidential election, analysts say.
The schedule and style of talks may differ substantially depending on who emerges the victor, but both President Donald Trump and Democratic challenger Joe Biden are likely to push for greater market access to Japan as they focus on protecting American industries and jobs to revive the U.S. economy hit by the coronavirus pandemic, they said.
Japan apparently has no cards to play in the talks, but will look to strengthen the multilateral trade frameworks it has forged with the European Union and 10 other members of the revised Trans-Pacific Partnership in trying to beef up leverage over Washington, they said.
Junichi Sugawara, a senior research officer at Mizuho Research Institute, says that if Trump is re-elected, Japan-U.S. trade negotiations could start next spring, while under Biden the talks would be launched next fall or later.
"Trump would most likely continue to fully deploy unilateral actions and punitive tariffs to correct trade deficits, which he sees as evil," Sugawara said.
"Biden, meanwhile, is expected to first focus on raising the competitiveness of domestic industries, making trade talks with Japan a substantially low priority on the policy agenda," he said.
"But as Biden shares the 'America First' mantra with Trump, even if he does not use Trump-like provocative and high-handed methods, he will urge Japan to further open up its market, and even go into making new demands on environment and labor standards, which are valued by the Democrats."
The Japan-U.S. trade deal came into force in January this year. Under the agreement, Washington won a reduction in tariffs on American farm products such as beef and pork, while Tokyo escaped higher duties on Japanese cars that Trump had threatened to impose on national security grounds.
The deal came as the Republican president vowed to ensure U.S. farmers would enjoy the same treatment in Japan as their competitors from Australia, Canada and New Zealand, farming countries that are members of what is formally known as the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.
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While Japan touted the deal as "balanced" and "win-win" because the United States agreed to continue talks over Tokyo's demand that it scrap tariffs on Japanese cars, critics say it has only benefitted the United States and left Japan with little room for maneuver.
Japan and the United States, the world's third-largest and biggest economies, are set to continue negotiations for a more comprehensive trade agreement covering services and investment.
Preliminary consultations to set the scope of the next stage of negotiations were supposed to have concluded within four months of the enforcement of the first-stage deal, meaning by April 30 this year, but talks have stalled, partly due to the pandemic.
Japan stresses that the second-stage talks will not cover farm products, but many scholars say there is no guarantee that the United States will not make demands in the agriculture sector.
The agreement specifically reads, "In future negotiations, the United States will be seeking preferential treatment with respect to agricultural goods."
"If Trump is re-elected, there is no doubt that Japan will need to promise further liberalization in farm products when the second stage of bilateral trade talks starts," said Takashi Terada, a professor of international relations at Doshisha University.
If Biden wins, he may consider the possibility of rejoing the TPP -- from which Trump withdrew the United States in 2017 -- but it would likely not be a smooth comeback, necessitating renegotiations of some of the rules, including in agriculture, according to Terada.
Biden served as vice president under Trump's predecessor Barack Obama, who pushed for the then 12-member TPP as a way to reduce China's influence in the Asia-Pacific region.
But the Democratic nominee has said during campaigning that he would not let the United States rejoin the regional free trade agreement as it currently stands.
"If Biden opts for the TPP, that would mean Japan and the United States would no longer need to conclude trade talks bilaterally," Terada said. "But even in the TPP framework, Japan would probably still need to make concessions in the agricultural sector."
Either way, he said, Prime Minister Yoshihide Suga will need to think carefully about whether domestic politics can withstand any giveaways in the farm sector, especially as a lower house election will need to be called by October 2021.
"How to proceed with trade talks with the United States links directly to his strategy of when to dissolve the House of Representatives" for an election, Terada said.
"Undoubtedly, some ruling Liberal Democratic Party lawmakers supported by the agricultural sector will be reluctant to go into an election after or in the middle of the Japan-U.S. trade talks," he said.
Given that Tokyo has already given Washington what it wanted the most -- cutting tariffs on pork and beef -- Mizuho's Sugawara said Suga, who only took office in September, will be left with little to bargain with in the forthcoming trade negotiations.
"Japan is set to urge the United States to scrap 2.5 percent auto tariffs, but be it Trump or Biden I think it is absolutely impossible because they both see the revival of domestic industries, including automobiles, as a top priority in the policy agenda," Sugawara said.
"The upcoming trade talks could turn disastrous, with Japan having no cards to play but seeking to win what the United States wants to protect the most," he said, referring to the auto sector.
Toshiki Takahashi, chief economist at the Institute for International Trade and Investment in Tokyo, said that with U.S. pressure on Japan expected to be strong, Japan has no options but to boost trade ties with the 10 other CPTPP members, with the 15 other Asia-Pacific members negotiating a sprawling free trade agreement called the Regional Comprehensive Economic Partnership and with the European Union.
"Japan needs to show off its reputation as a country leading free trade negotiations and raise its stock as a reliable partner who can act as a bridge with countries that the United States wants to cooperate with," Takahashi said.
