Japan and US agree limited trade agreement

By Thomas Cullen

Japan and the United States signed a trade agreement last night (September 25). From initial reports it appears that it is not a full agreement as it focuses on specific areas such as agriculture and digital products. Much press comment has focussed on the failure to eliminate tariffs on car exports, although there appears to be significant progress in this area.

Details of the agreement seem not to be available as yet, so it is difficult to be certain about its real impact. However, the two governments have released fact sheets that highlight the main areas of attention for the protocol, namely agriculture and some digital products. The White House cites the following agreements:

• Reduce tariffs on products such as fresh and frozen beef and pork.
• Provide a country-specific quota for wheat and wheat products.
• Reduce the mark-up on imported US wheat and barley.
• Immediately eliminate tariffs for almonds, walnuts, blueberries, cranberries, sweet corn, grain sorghum, broccoli, and more.
• Provide staged tariff elimination for products such as cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products, and tomato paste.

In addition tariffs will be eliminated on “machine tools, fasteners, steam turbines, bicycles, bicycle parts, and musical instruments”.

The White House fact sheet also states that the accompanying digital agreement will focus on the following areas:

• Prohibitions on imposing customs duties on digital products transmitted electronically such as videos, music, e-books, software, and games.
• Ensuring non-discriminatory treatment of digital products, including coverage of tax measures.
• Ensuring barrier-free cross-border data transfers in all sectors.
• Prohibiting data localization requirements, including for financial service suppliers.
• Prohibiting arbitrary access to computer source code and algorithms.
• Ensuring firms’ flexibility to use innovative encryption technology in their products.

The “digital trade agreement” is probably the most important aspect of the meeting, although the direct impact of greater imports of foodstuffs into Japan on the shipping market cannot be discounted. As Shinzo Abe pointed out the “first- and third-largest economies coming to the table and announcing this new agreement means that we will have…. a positive impact on the global economy as a whole” and this certainly applies to demand in the logistics sector.

Essentially this agreement moves towards replicating much of the Trans-Pacific Partnership agreement that Donald Trump refused to sign several years ago. Although it certainly does not eradicate many of the real issues around the viability of global trade that still exists, it does establish an important element in a new, freer trading environment that ought to counter some of the pessimism that is currently fashionable. 

Source: Transport Intelligence, September 26, 2019

Author: Thomas Cullen