This is from the Nikkei Asian Review:
Japan and the U.S. reached a broad trade deal Saturday, with Tokyo agreeing to lower its tariffs on American beef and pork to levels set by the Trans-Pacific Partnership while letting Washington maintain its 2.5% levy on Japanese autos for now, Nikkei has learned.
Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump will confirm plans to conclude the talks in late September when the two leader meet Sunday in Biarritz, France, on the sidelines of the Group of Seven summit. The bilateral pact could take effect this year.
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If Abe and Trump sign an agreement in late September, the pact will be put forward for a vote in Japan's parliament in the fall, which will conclude the Japanese side of the ratification process.
In the U.S., congressional approval is not always required for a trade pact. The U.S.-Japan trade agreement thus could take effect within one to two months of Japanese parliamentary approval.
Trump had been asking Japan to cut tariffs on agricultural products. Under the agreement, the 38.5% tariff on imported U.S. beef will be lowered to 9% in phases, according to sources close to the negotiations. Tariffs on low-grade pork are currently at 482 yen ($4.58) per kilogram but will be reduced to 50 yen per kilo. The 4.3% tariff on high-grade pork will eventually be brought to zero.
Japan has already slashed tariffs on pork and beef under the TPP, which took effect in December. If the U.S. and Japan sign a trade pact, the Japanese tariffs on American pork and beef will be immediately lowered to the rates enjoyed by TPP partners. After that the tariffs on U.S. products will be lowered at the same pace as the rates for the TPP trade group. In April, the TPP's tariff rate for beef settled at 26.6%.
For its part, the U.S. will set up a tariff-exempt import quota for up to 3,000 tons of Japanese beef, likely fueling the "wagyu" boom spreading in America.
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Japan also agreed to ease the criteria it uses to invoke emergency import curbs on U.S beef as it does not expect overall import quantities to significantly change; it intends to offset any rise in imports of U.S. beef by adjusting the same criteria it uses for beef from TPP countries like Australia. It expects to enter talks with these countries in the near future.
The U.S. had agreed to abolish tariffs on automobiles in 25 years under the TPP agreed to by then-President Barack Obama. Trump backed out of the pact in his first week of the presidency, after having promised to do so on the campaign trail.
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... Washington did agree to abolish tariffs on some of 400 auto parts and is set to abolish tariffs on a broad range of manufactured goods, other than autos. Exports of Japanese auto parts to the U.S. reached 929.4 billion yen ($8.8 billion) in 2018, roughly 6% of total exports.
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But there is one more hurdle: Japan will close the deal on condition that the U.S. promises not to use section 232 of its Trade Expansion Act to limit or impose further tariffs on imports of Japanese autos.
I have a few questions about all of this. The first is, how can Japan and the United States offer this liberalization consistently with WTO rules? (Let's assume for the moment this is something they care about). Usually a bilateral deal involves preferential tariff treatment, which would violate GATT Article I (MFN). The amount of goods covered here seems far too low to fall within GATT Article XXIV's "substantially all trade" requirement, so that makes an Article XXIV defense a bit difficult. My initial thought was that the Japanese tariff cuts on beef and pork and the U.S. auto parts tariff cuts could be offered on an MFN basis. Then Rob Howse suggested on Twitter that perhaps this deal would be an "interim agreement" under GATT Article XXIV. Is one of these the explanation? Something else?
The second, and related, issue is, what will other governments think of all this? For both sets of products, there are likely to be producers in other countries who will be adversely affected. Will they be aggressive about enforcing WTO rules against both Japan and the United States?
Also, with regard to a "promise not to use section 232 of its Trade Expansion Act to limit or impose further tariffs on imports of Japanese autos," isn't the GATT already a promise not to do this? What is the significance of another promise? Is it that this promise would be more specific and apply explicitly to the product at issue? Is it that it came from the current president, rather than a past president? Political scientists should try to come up with an explanation!
Finally, as described in the article, what we have here seems to be a bilateral agreement to reduce tariffs, without all the usual governance chapters that make up the bulk of the legal text of modern trade agreements. So will there be a dispute settlement chapter here? If so, what will it look like? Or is this more of a short-term, political agreement that isn't intended to be in force permanently? As the article notes, this agreement would not be approved by Congress. Presumably, if the president can enter into it without Congress having a say, the president can also withdraw from it without Congress having a say.
Perhaps these questions will be answered if and when an agreement is signed and we see some legal texts.
