On October 7, 2019, after six months of formal negotiations, the United States and Japan signed two agreements intended to liberalize bilateral trade. The U.S.- Japan Trade Agreement (USJTA) provides for limited tariff reductions and quota expansions to improve market access. The U.S.-Japan Digital Trade Agreement covers rules on digital aspects of international commerce.
The agreements, which took effect on January 1, 2020, without formal action by Congress, constitute what the Trump and Abe Administrations envision as “stage one” of a broader U.S.- Japan trade agreement, with future negotiations expected in coming months. The Administration used delegated tariff authorities in Trade Promotion Authority (TPA) to proclaim the USJTA provisions, while the digital trade agreement, which did not require changes to U.S. law, was treated as an Executive Agreement.
As the fourth-largest U.S. trade partner, Japan is a high priority for U.S. trade negotiations, especially as recent Japanese free trade agreements (FTAs), including with the European Union (EU) and the TPP-11 (successor to the Trans-Pacific Partnership (TPP) following U.S. withdrawal), lower Japan’s tariffs on imports from several countries, placing U.S. exporters at a disadvantage.
The USJTA does not include trade commitments on motor vehicles, a long-standing area of bilateral tension. In May 2019, following an investigation by the Department of Commerce under Section 232 of the Trade Expansion Act of 1962, President Trump proclaimed motor vehicle and parts imports, particularly from Japan and the EU, a threat to U.S. national security.
Such action grants the President the authority to impose import restrictions, but some analysts question whether that authority has now expired. USJTA does not address potential Section 232 tariffs, but USTR Lighthizer stated that the Administration has no intent, “at this point,” to pursue additional Section 232 restrictions on autos.
Japan strongly opposed U.S. Section 232 tariffs on imports of steel and aluminum in place since March 2018, but did not retaliate, unlike other U.S. trade partners. Alleviating the auto tariff threat was a key objective of Japan in the trade talks.IF11120
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