USTR has released its negotiating objectives for the US-Japan Trade Agreement (USJTA) negotiations. Here are a few thoughts.
First, the Trump administration seems determined to come up with names for their trade agreements that are hard to remember and not at all catchy. USMCA and USJTA? They don't exactly roll of the tongue. Perhaps this is designed to make it difficult for critics to generate opposition to these agreements? It's not a bad idea, but it's a bit of a pain for people in the field who use these terms.
Second, not surprisingly, there is some America First language in there:
Rules of Origin:
...
- Ensure that the rules of origin incentivize production in the Parties, specifically in the United States.
As we learned from the new NAFTA, rules of origin can be used in a way that tries to limit the amount of trade that qualifies for the lower tariffs negotiated in trade agreements. If that approach is taken in the USJTA, the amount of liberalization could be less than some may be hoping for.
Third, the investment language is kind of vague:
Investment:
- Secure for U.S. investors in Japan important rights consistent with U.S. legal principles and practice, while ensuring that Japanese investors in the United States are not accorded greater substantive rights than domestic investors.
- Establish rules that reduce or eliminate barriers to U.S. investment in all sectors in Japan.
Given what we saw in the new NAFTA, what direction will the Trump administration go with investment protection/ISDS in the Japan negotiations?
Fourth, the Trump administrations seems ready to keep pushing its agenda on dispute settlement:
Dispute Settlement:
...- Establish a dispute settlement mechanism that is effective and timely, and in which panel determinations are based on the provisions of the Agreement and the submissions of the
parties and are provided in a reasoned manner....
- Provide mechanisms for ensuring that the parties retain control of disputes and can address situations when a panel has clearly erred in its assessment of the facts or the obligations that apply.
I'm not exactly sure what they have in mind, but I can imagine we will see some of the same fights we are seeing now at the WTO and that took place in the new NAFTA negotiations. One obvious "mechanism" to address panel errors would be an appellate body, but presumably they don't mean that. Maybe a more limited "annulment" procedure"? Or perhaps they are thinking of some sort of adoption procedure, where a party can block all or some of the report? What will Japan think of this? (And how much does it matter given the rarity of FTA disputes?)
Fifth, some of the innovations that I liked least in the new NAFTA show up here as well:
General Provisions:
...
- Provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis.- Provide mechanisms for terminating the Agreement under appropriate circumstances.
- Provide a mechanism to ensure transparency and take appropriate action if Japan negotiates a free trade agreement with a non-market country.
The first and second one, looked at together, sound sunset clause-ish, although if they do not tie the reviews to termination, there is no problem. And the third one is the same China-constraining clause we saw in the new NAFTA.
More generally, here are some questions I have about these negotiations:
-- There's a lot to cover in these talks. Can they really get all this done before the end of Trump's first term? Or is this going to be left for a future administration, which might have different objectives?
-- On the other hand, with all the negotiating work done by Japan and the U.S. in the context of the TPP, has a lot of progress already been made and this negotiation will go more quickly than might be expected?
-- With the TPP now in effect, and the EU-Japan FTA going into effect soon, will U.S. interests feel pressure to get this done, weakening the U.S. bargaining position?
-- The Trump administration is still talking about Section 232 auto tariffs. Will that get in the way of a U.S.-Japan trade deal?
-- How eager will Japan be to engage? It has shown some reluctance so far.