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U.S. Japan Trade Agreement Announced

08/27/2019

During mid-August, U.S. Trade Representative, Amb. Robert Lighthizer met with his counterpart Toshimitsu Motegi, the Minister of the Economy of Japan, to arrange terms of reference for a scheduled meeting between Prime Minister Abe and President Trump at the Group of Seven (G7) Summit. It is considered necessary to establish a trade agreement with Japan since U.S. exporters are at a disadvantage following the unilateral withdrawal by the U.S. from the Trans Pacific Partnership in January 2017, three days into the new Administration.

What has actually been agreed to in France last week has yet to be disclosed in detail. The U.S. will apparently still impose a 2.5 percent duty on autos and parts and has retained the right to escalate at will. Japan has agreed to purchase corn and some rice. Prime Minister Abe cannot afford to make too many concessions to the U.S. as he will have difficulty in obtaining ratification from the Diet that includes many members with strong nationalistic and protectionist leanings especially with respect to domestic agricultural products.

U.S. chicken producers may benefit from an agreement since Japan has experienced difficulty in sourcing processed chicken from joint ventures in China and from Thailand. This is due to increased demand in Southeast Asia and specifically in China as a result of African swine fever. It is noted that Japan purchases specific cuts and presentations that are far more sophisticated than U.S. leg quarters that represent a commodity. The U.S. egg-processing sector will continue to export to Japan, our largest customer. Perhaps the adulatory response by U.S. industry groups was premature given that the provisions of the agreement have yet to been released.