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Trump ups ante on Japan trade, using cars as bargaining chip

Nikkei | 25 January 2017

Trump ups ante on Japan trade, using cars as bargaining chip


WASHINGTON — Japanese political and corporate circles are moving to respond to U.S. President Donald Trump’s attempts to rehash the auto trade wars from the 1980s — a likely preview of the high-pressure tactics he will employ in bilateral trade talks with Tokyo.

The art of the trade deal

When Trump signed an executive agreement Monday pulling the U.S. from the Trans-Pacific Partnership, he also indicated that his administration will not renegotiate the trade deal. This signals a pivot toward bilateral free-trade agreements, which he says will put America first.

He sharply rebuked Japan’s trade practices with automobiles, calling them unfair. "We sell a car into Japan and they do things to us that make it impossible to sell cars in Japan, and yet they sell cars into us," Trump told a group of corporate chiefs Monday. He argues that Japan has nontariff barriers to the domestic market, such as strict environmental standards.

In light of these developments, the Japanese government will reorganize the headquarters for TPP affairs. The intent is to form a cross-agency body dedicated to all trade negotiations, including the Pacific deal as well as bilateral agreements with the U.S. and the European Union. "Negotiations [with the U.S.] on vehicles are going to be especially tough," admitted a senior Japanese government official Tuesday.

The Japanese side plans to approach discussions over autos separately from the bilateral trade talks sought by Trump. Japan will tread carefully on a bilateral agreement, since it will likely face pressure to make significant concessions in such areas as agricultural products. By addressing Trump’s demands on cars, Japan will then seek his understanding on agreements reached under the TPP.

Trump also seeks to shrink the U.S. trade deficit, including the roughly $70 billion annual shortfall to Japan. Products in the automobile category account for about 70% of the red ink. This issue may come up when Trump meets Japanese Prime Minister Shinzo Abe in a summit that could take place next month.

80s redux

"Mr. Trump’s policy toward Japan echoes the intensified trade frictions of the 1980s," said a Japanese official who works on trade policy. About 6.6 million Japanese-brand vehicles are sold in North America today, but unlike the Ronald Reagan era, only about 1.6 million units are shipped from Japan.

Of vehicles sold in the U.S., Toyota Motor produces some 70% in North America, while the ratios for Nissan Motor and Honda Motor are around 80% and 90%, respectively. Japanese manufacturers employ roughly 400,000 people in the U.S., exceeding peers from Germany and Britain and putting Japan at the top in that metric.

 source: Nikkei