[CTC] US plans fresh push for talks on bilateral trade deal with Japan

[Arthur Stamoulis]

https://www.ft.com/content/052cf600-e95b-11e6-893c-082c54a7f539 <https://www.ft.com/content/052cf600-e95b-11e6-893c-082c54a7f539>
US plans fresh push for talks on bilateral trade deal with Japan

Shinzo Abe will meet Donald Trump in Washington next week

5 minutes ago 
by: Shawn Donnan in Washington and Robin Harding in Tokyo

The Trump administration is putting a bilateral trade deal with Japan high on its economic agenda with a visit to the US next week by Shinzo Abe <https://www.ft.com/topics/people/Shinzo_Abe>, the Japanese prime minister, set to include discussions about how best to pursue such a pact. 

The move would come after similar talks with the UK <https://www.ft.com/content/2c509c50-e4ba-11e6-9645-c9357a75844a> during a recent visit by Prime Minister Theresa May, although chances of a quick trade deal with Japan are both significantly higher and potentially more consequential for the US. It would also mark a rapid step by Donald Trump to establish how he plans to engage with the Asia-Pacific region <https://www.ft.com/content/eeaa19f0-e1fb-11e6-8405-9e5580d6e5fb> after pulling the US out of the Trans-Pacific Partnership, which the Obama administration spent years hashing out with Japan and 10 other economies. 

The new administration has told business leaders that striking a deal with Japan is high on its list of priorities and has made clear it is aware of the domestic political capital that Mr Abe invested in the TPP. The TPP, which was held up for more than a year by bilateral negotiations between Japan and the US, its two biggest member economies, also provides a clear framework for the new administration to work from. 

But any deal is likely to have to face significant hurdles. 

Mr Trump’s focus on currency swings and his accusation this week that Japan had played the “devaluation market” to gain a trading advantage over the US prompted an angry rebuttal from Mr Abe and other Japanese officials. The new president and his advisers have also nominated the US trade deficit with Japan and weak rules for the origin of car parts negotiated in the TPP as areas for concern. 

Australia open to trade pact going ahead with China instead of US but Tokyo doubtful

Wendy Cutler, who oversaw the US negotiations with Japan during the TPP, said the idea of bilateral deal “really puts Japan in a bind”, particularly as it would mean revisiting sensitive issues such as currency, agriculture and cars that were the subject of painful negotiations in the TPP. 

"Abe spent a lot of political capital on TPP. The bilateral issue is new for [Japan],” she said. “If the US were to go forward and make requests in areas like currency . . . I think this could present real challenges for Japan and frankly for the bilateral relationship." 

During a call last weekend the two leaders agreed to pursue deeper trade ties. But Mr Abe, who is due to visit Washington on February 10, has so far offered only lukewarm support for the idea of a bilateral deal, insisting that he wanted to continue making the case for the TPP. 

“It's certainly not impossible,” Mr Abe said of a bilateral deal last week. “We need to debate this focusing on what kind of economic relationship is best for the US and Japan.”

The currency issue is likely to be especially difficult for Japan. During the TPP negotiations it reluctantly agreed to a side agreement on currency manipulation that was largely symbolic. Japan regards foreign exchange intervention as a legitimate part of its policy toolkit, not least to stay competitive with neighbours such as South Korea and China.

Tokyo fought for weak language on currency in the TPP, and Yoshihide Suga, Japan's chief cabinet secretary, promised to “make the same arguments” in any bilateral talks. 

For Mr Trump and his advisers a bilateral deal with Japan would be a major prize. 

Japan is also a major economy with which the Trump trade team has significant experience. Billionaire investor Wilbur Ross, who as commerce secretary is expected to lead trade efforts <https://www.ft.com/content/29973b68-be68-11e6-8b45-b8b81dd5d080>, has done business in Japan and previously served as chairman of the Japan Society, which brought together US businessmen and executives from the likes of Toyota, Toshiba and Sony. Mr Trump’s pick for US trade representative, Robert Lighthizer, also led trade negotiations with Japan in the 1980s as a senior trade official in the Reagan administration. 

To veteran Japanese negotiators, the idea of bilateral talks brings back painful memories of the 1990s. One senior official said the whole reason Japan joined TPP in the first place was because it despaired of a bilateral deal. 

Fundamentally, however, the US is such an important ally that Mr Abe is ready to engage with Mr Trump on whatever terms the new president wants. 
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