No easy route to U.S.-Japan deal with car complications, beef battle ahead

Vice President Mike Pence has indicated that a “bilateral trade agreement” between the U.S. and Japan with “terms on goods” is possible following a meeting with Prime Minister Shinzo Abe. That’s consistent with prior U.S. negotiating policy but is likely to take more than a year to complete. Details including areas of focus have yet to be agreed.

In theory the U.S. will want to focus on autos given the sector accounted for 80.5% of America’s $67.7 billion trade deficit with Japan in the 12 months to Sept. 30. Yet, Japan applies zero duties to auto imports and the U.S. is in the midst of conducting a national security review of the sector.

That may leave the agricultural sector as a fruitful area for cutting Japan’s $1.6 billion of tariffs on American exports. Specific targets could include dairy, where tariff rates of 22.2% apply, and beef which accounts for 40.7% of all duties paid. The central challenge is that agriculture has typically been the most difficult topic area to reach agreements in in trade negotiations.