Averting trade war, Japan and US agree to seek pact

Japan agreed Wednesday to negotiate a trade pact with the United States, easing fears that President Donald Trump would zero in on the US ally for his next tariff
offensive.

Japanese Prime Minister Shinzo Abe and Trump, meeting on the sidelines of
the annual UN General Assembly session, said they would open talks on goods
with a view to building freer trade.

In a joint statement, Trump and Abe pledged to “refrain from taking
measures against the spirit” of their understanding for as long as
negotiations go on.

Abe, addressing reporters afterward, said Japan understood that the
agreement meant the United States would not take any action under so-called
Section 232 — a US legal clause, of which Trump has become fond, that allows
Washington to restrict imports due to concerns over national security.

“We must not set the hands of the clock backward,” Abe said, calling
instead for the two countries to “reinvigorate our mutual trade and
investment.”

Abe formed an early bond with Trump after the real estate tycoon’s
unexpected election victory, with the two leaders since chatting more than
two dozen times on the telephone, according to officials.

But Trump, who became a business celebrity in the 1980s when Japan’s
economic miracle looked unstoppable, has grumbled about the US trade deficit
with Japan.

He recently told The Wall Street Journal that while he had good relations
with Japan, “Of course, that will end as soon as I tell them how much they
have to pay.”

Speaking as he announced the trade negotiations with Abe, Trump said:
“Japan is very smart. Great negotiators. And, you know, up until now, they’ve
done very well, and they’ll continue to do very well.”

Trump this week slapped $200 billion of tariffs on China, which also has a
large trade surplus with the United States, and on Wednesday he bluntly said
that his onetime friendship with Chinese President Xi Jinping could be over.
He has also imposed sweeping tariffs on steel and aluminum even from
allies such as the European Union and Canada, citing Section 232.

– No US return to Pacific pact –

The United States and Japan, the world’s first and third largest
economies, together make up about 30 percent of global GDP and have long had
trade ties that are both fractious and interconnected.

Abe took political risks at home in 2013 by entering negotiations for the
Trans-Pacific Partnership, or TPP, conceived as a vast bloc across both sides
of the Pacific which would help build US influence in Asia in the face of
growing Chinese influence.

But Trump withdrew from the TPP days after taking office, fulfilling a
campaign promise aimed at blue-collar workers.

Abe had previously voiced hope that the United States would return but
agreed to the bilateral talks amid growing concern about Trump’s intentions.

“The president is not going to join the TPP. But this is a very important
step, in terms of expanding our relationship with Japan,” US Trade
Representative Robert Lighthizer told reporters on a conference call.

The proposed trade deal would only focus on goods and would not be a full-
fledged free trade agreement, a much more complex and time-consuming deal
that also looks at the service sector.

Atsuyuki Oike, Japan’s deputy chief negotiator for the TPP, said the
bilateral agreement could also clear the groundwork if the United States
eventually comes back to the broader pact.

“If it’s concluded, it’s not a minus. It’s actually a plus,” he said,
pointing out that much of TPP negotiations boiled down to individual
countries sorting out arrangements on goods.

– Trump presses on cars –

Trump has been especially perturbed over the imbalance in auto sales, with
Japanese cars a constant sight on US streets but few Japanese buying from the
Detroit Big Three, preferring smaller, more fuel-efficient vehicles.

Abe, however, stressed that Japanese automakers manufacture twice as many
cars inside the United States as they export to the country.

In another figure he hoped would raise Trump’s attention, Abe said that
Japan supported 856,000 jobs in the United States — more than any country
except Britain.

In the joint statement, the United States raised concerns about auto
access and Japan highlighted sensitivities over its tightly protected
agricultural sector.

But Oike said that the statement did not prejudge the course of
negotiations.