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Japan and US Agree on Auto Exemptions in Free Trade Pact

Tokyo and Washington agreed on exemptions for the auto industry in a Pacific-wide free trade pact.
First Publish: 3/6/2013, 10:29 AM

Japan and the US agreed on auto exemptions for its free trade pact
Japan and the US agreed on auto exemptions for its free trade pact
Reuters

Tokyo and Washington have agreed on exemptions for the auto industry in a mooted Pacific-wide free trade pact, as Japan readies to announce its entry into negotiations, reports said on Wednesday.

The two Pacific powers agreed in principle that the United States will be able to keep tariffs on car imports -- 2.5 percent for passenger cars and 25 percent on trucks -- for at least five to 10 years under the Trans-Pacific Partnership (TPP), the Mainichi Shimbun and other media reported.

US President Barack Obama has cast the TPP as a vital plank in his so-called "pivot" to Asia, saying the emerging pact could boost growth and set rules to govern trade in the dynamic but unwieldy region, which includes much of East Asia, as well as some American countries, AFP reported.

The participation of both Japan and the United States, the world's two largest developed economies, would mean the pact covering nearly 40 percent of the world's economy.

But the US auto sector is opposed to Japan's entry, claiming Tokyo maintains non-tariff barriers on autos, and says a deal would give Japanese automakers unfettered access to their market, without allowing them the same chances.

Japan's agriculture lobby is also firmly opposed, fearing unprecedented foreign competition would devastate Japan's small-scale farming sector and rural communities.

Tokyo and Washington agreed in preparatory talks that there would be at least a five- to ten-year delay in the removal of import tariffs on autos -- the moratorium agreed in a recently-enacted US-South Korea free trade agreement -- reports said.

Japanese Prime Minister Shinzo Abe is expected to announce Japan's entry into negotiations on the TPP as soon as March 13, several media have said.

At the end of a summit in Washington last month, Japan and the US issued a joint statement on the TPP recognising "bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States".

The US has been keen not to be seen giving ground ahead of any formal talks, while Abe, who faces crucial upper house elections in July, needs to be able to show he has extracted concessions if he is to convince -- or obviate -- the powerful farming lobby.

The Washington statement was praised for treading a fine line, allowing both sides room to be able to spin it as a low-key victory.

"As the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations," said the statement.

Tokyo and Washington will "continue their bilateral consultations with respect to Japan's possible interest in joining the TPP," including work on "addressing outstanding concerns with respect to the automotive and insurance sectors", it said.