Phase Two With Japan Unlikely, Former TPP Negotiator Says
The U.S.-Japan mini-trade deal covers just 5 percent of trade between the partners, according to Bruce Hirsh, a principal at Tailwind, but he said the likelihood of further progress is small. Hirsh spoke while at the National Association of Foreign-Trade Zones legislative summit on Feb. 11. “Japan wasn’t interested in doing a bilateral deal at all, but they recognized there was only so long they could keep the U.S. at bay,” he said. He said that what Japan gave to the U.S. “fell a little bit short of TPP,” or the Trans-Pacific Partnership. He said beef and pork got TPP parity, but rice got nothing and “dairy got a lot, but not everything.”
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A lot was already duty free, he noted. Japan wanted to get in writing that it would not be subject to Section 232 tariffs on auto exports, Hirsh said, and didn't get it, but does have the option to withdraw from this agreement with 60 days' notice.
Negotiations for a second phase could begin in April, but, Hirsh said, “it's certainly looking like there’s no great enthusiasm on either side to rush into phase two.” He said that Japan still hopes that the U.S. will return to TPP, and he said that the U.S. is busy.
Currency and autos are some of the thorniest issues for U.S.-Japan trade, he said, and if auto rules of origin were tackled in phase two, Hirsh said, he doesn't think the U.S.-Mexico-Canada Agreement would be the precedent. He noted that in the renegotiation of the U.S.-Korea Free Trade Agreement, auto rules of origin were not changed. “One of the reasons likely was at some point that somebody pointed out to the senior political leadership of the administration: if we increase the rules of origin for autos, we won’t be able to export any autos to Korea. That’s going to be true with anything with Japan as well.”
And, he said, even though a high percentage of Japanese cars' value is Japanese, when he was negotiating about auto rules of origin during TPP negotiations, “they were trying to preserve their ability to source elsewhere in Asia for their auto parts.”