I mentioned a possible U.S.-Japan trade deal here, described a couple weeks ago as an "agreement in principle". Things seem to have progressed a bit, with the Trump administration just issuing the following "Presidential Message to Congress Regarding the Notification of Initiation of United States–Japan Trade Agreement":
On October 16, 2018, my Administration notified the Congress that I intended to initiate trade negotiations with Japan on a United States-Japan Trade Agreement. As stated in that notification and subsequent consultations with the Congress, my Administration proposed pursuing negotiations with Japan in stages. I am pleased to report that my Administration has reached an initial trade agreement regarding tariff barriers (the “agreement”) with Japan and I intend to enter into the agreement in the coming weeks.
Accordingly, pursuant to section 103(a)(2) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (Public Law 114-26, Title I) (the “Act”), I hereby notify the Congress that I intend to enter into a trade agreement regarding tariff barriers with Japan under section 103(a) of the Act.
In addition, I also will be entering into an Executive Agreement with Japan regarding digital trade.
My Administration looks forward to continued collaboration with the Congress on further negotiations with Japan to achieve a comprehensive trade agreement that results in more fair and reciprocal trade between the United States and Japan.
I still have the same questions I had a couple weeks ago:
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?
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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.
I also have a question about the digital trade part. Will this agreement have any impact on actual behavior? My sense is that it will not, as people I have spoken to about this say that Japan and the United States agree on the policies here and are not in violation of any aspects of the text (which will look like the USMCA digital trade chapter). So perhaps this "Executive Agreement" is more about spreading soft law than disciplining the behavior of the parties.
