Nations tackle issues, court Pacific partners, Congress, as Abe gets set to visit Washington

The U.S. and Japan, nearing an accord designed to transform ties between the economic rivals and open the way for a trade pact among 12 Pacific nations, still face differences and the challenge of bringing other countries and Congress on board.

With Prime Minister Shinzo Abe headed to Washington this week for talks with President Barack Obama, U.S. officials in recent days have tamped down expectations of a deal this week, saying much work remained to resolve differences on concessions that would affect sensitive sectors in both economies.

“There are still some very, very tough issues that need to be involved in those negotiations, and the Japanese are going to have to be more flexible in autos and agriculture,” Agriculture Secretary Tom Vilsacksaid in an interview.

“We still have some work to do,” said Caroline Atkinson, the White House deputy national security adviser for international economics.

U.S. and Japanese negotiators have been working for 21 months on lowering or eliminating barriers to trade. Those include concrete barriers such as duties protecting Japanese farms and Detroit auto makers, as well as the regulatory red tape blamed for keeping Detroit’s cars out of Japan, among other complications.

Washington and Tokyo are looking for a market-access agreement that would allow the other 10 countries in the Trans-Pacific Partnership to reach a similar series of deals with the two giant economies in the group. Besides details on market access, an overall TPP agreement would include a complicated set of commercial rules of the road, governing labor rights, intellectual-property protection for Hollywood movies and drug patents, and other issues.

“It would be good if I could reach an agreement during my meeting with the president, but when you climb a mountain, the last step is always the hardest,” Mr. Abe told The Wall Street Journal as talks got under way last week. “Ultimately, what needs to happen is for both countries to make a political decision” to address sensitive areas, he said.

With the U.S. and Japan inching closer to a two-way deal, officials say the focus has shifted toward bringing the other 10 economies on board, including Canada, which hasn’t resolved issues around its sensitive dairy industry.

Another obstacle is Congress, which harbors differences with Mr. Obama on foreign policy and wields broad authority on trade. None of the big TPP countries,—which include Australia, New Zealand, Vietnam, Chile and Mexico,—wants to make the painful concessions necessary to a final deal if the Senate and House haven’t passed fast-track legislation, which would guarantee a final vote on trade deals without the opportunity for amendments.

Last week, committees in both chambers approved the legislation, also known as trade-promotion authority, but the bill’s fate on the floor remains unclear.

Before the two countries even sat down to talk formally in the TPP, officials agreed that Japan would lower barriers to U.S. beef and insurance, while the U.S. agreed it would cut its 2.5% tariff on cars and a big tariff on trucks—but only over an unspecified length of time.

While Japanese auto giants, including their U.S. units, have hailed the emerging deal, Detroit auto makers, Michigan lawmakers and unions are among the most prominent critics of the TPP. Besides cutting U.S. duties on Japanese cars and trucks over time, a deal with Japan could slice U.S. auto-part tariffs even sooner.

Mr. Obama dismissed these concerns last week. “I spent a lot of time and a lot of political capital to save the auto industry. Why would I pass a trade deal that was bad for U.S. auto workers?”

As part of the deal, U.S. officials are seeking to remove regulatory barriers that hurt Detroit’s ability to make inroads there.

But the Big Three, stung by the yen’s weakness against the dollar in recent years, are asking for something else: binding rules to prevent Japan or other currencies from engaging in currency manipulation in the future.

Ford Motor Co. lobbyists were working the halls on Capitol Hill last week, pressing congressional committees to adopt as part of fast-track legislation an amendment introduced by Sen. Rob Portman(R., Ohio) that would have pushed the administration to negotiate enforceable currency rules in the Pacific agreement.

The amendment was defeated after a fierce debate in the Senate finance committee, but Ford said the battle isn’t over. The Obama administration rejected the language and prefers to handle currency disputes outside of trade rules.

The U.S. sent about $2 billion in autos and parts to Japan last year, compared with nearly $50 billion going the other way, according to the U.S. Census Bureau.

The agriculture trade is more lucrative for the U.S., which shipped Japan more than $9 billion in corn, dairy, eggs, meat, poultry, rice and wheat, despite complicated and expensive barriers in the industry.

Japanese traditional agriculture is protected by quotas and rules that tax imports heavily if they are sold at low prices or in high volumes.

U.S. pork producers may be some of the biggest beneficiaries of a deal between the countries, and most farm groups are already backing fast-track legislation as a path to the TPP.

Source: WSJ

• Is Vietnam a Market Economy? U.S. Considers Status Upgrade
• Vietnam should seize opportunity to join global semiconductor supply chain
• Green economy, digital economy breakthrough of Vietnam-China ties: PM
• ASEAN steel industry needs support for decarbonization
• The fruit and vegetable industry has plenty of room for export in the five largest markets