Japan lower house passes US trade deal but auto tariffs still in limbo

Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years. (AFP)
Updated 19 November 2019

Japan lower house passes US trade deal but auto tariffs still in limbo

  • There is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts
  • Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years

TOKYO: Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including US farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with US President Donald Trump was “win-win.”
Japan and the United States last month formally signed the limited trade deal to cut tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
The deal will give Trump a success he can trumpet to voters but Abe has said it will bring as much benefit to Japan as to the United States.
Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years, when the benefits fully kick in. It also estimated ¥212.8 billion of overall tariffs on Japan’s exports to the United States will be reduced.
But the figures were based on the assumption the United States would eliminate its tariffs on Japanese autos and auto parts — a major sticking point.
Without those tariff cuts, the reduction in overall US tariffs on Japanese goods would be a little over 10 percent of the government’s projection, according to an estimate by Japan’s Asahi newspaper and Mitsubishi UFJ Research and Consulting.
After the deal is ratified, Japan and the United States have four months to consult on further talks, and Trump has said he wants more trade talks with Japan after the initial deal.
But Japanese government sources familiar with the talks say the momentum to negotiate a deeper deal appears to have waned for now with Washington preoccupied with talks with Beijing.
“It’s unclear whether Washington seriously wants to continue trade talks,” one of the sources said.
“The question is how much time the United States can allocate for talks with Japan, even if we start negotiations. There’s limited time to conclude talks before the presidential elections.”
Japan and the United States already appear to have different interpretations of what was agreed on car tariffs.
Japan has said it has received US assurance that it would scrap tariffs on Japanese cars and car parts, and that the only remaining issue was the timing.
But Washington has not confirmed that.
US Trade Representative Robert Lighthizer has said cars were not included in the agreement, and that it was only Japan’s ambition to discuss car tariffs in the future.
A US document only said customs duties on autos and auto parts “will be subject to further negotiations with respect to the elimination of customs duties.”
“The deal was left vague on the issue of tariff cuts on Japanese auto and auto parts. Otherwise, we couldn’t have reached the agreement,” another source said.
There is also uncertainty on whether Trump will drop threats to impose steep tariffs on Japanese car imports under “Section 232” that gives him authority to do so on national security grounds.
Abe said he had got an assurance from Trump that he would not do that, though analysts say the president could always change his mind, or at least keep Japan guessing.
Opposition parties have attacked Abe for a deal they say is unfair. Critics say Trump could drag his feet on further negotiations unless he is sure he can win more concessions.
“There’s a chance Trump will put pressure on Japan on trade to appeal to his voters,” said Junichi Sugawara, senior research officer at Mizuho Research Institute. “There’s a possibility he could renew his threat over auto tariffs.”


China's aviation regulator raised concerns with Boeing on 737 MAX design changes

Updated 12 December 2019

China's aviation regulator raised concerns with Boeing on 737 MAX design changes

  • China is reviewing the airworthiness of the plane
  • China was first country to ground plane in March

BEIJING: China’s aviation regulator raised “important concerns” with Boeing Co. on the reliability and security of design changes to the grounded 737 MAX, it said on Thursday, but declined to comment on when the plane might fly again in China.
China is reviewing the airworthiness of the plane based on proposed changes to software and flight control systems according to a bilateral agreement with the United States, Civil Aviation Administration of China (CAAC) spokesman Liu Luxu told reporters at a monthly briefing.
He reiterated that for the plane to resume flights in China, it needed to be re-certified, pilots needed comprehensive and effective training to restore confidence in the model and the causes of two crashes that killed 346 people needed to be investigated with effective measures put in place to prevent another one.
China was the first country to ground the 737 MAX after the second crash in Ethiopia in March and had set up a task force to review design changes to the aircraft that Boeing had submitted.
The US Federal Aviation Administration (FAA) will not allow the 737 MAX to resume flying before the end of 2019, its chief, Steve Dickson, said on Wednesday.
Once the FAA approves the reintroduction into service, the 737 MAX can operate in the United States, but individual regulators could keep the planes grounded in other countries until they complete their own reviews.
“Due to the trade war, the jury is still out on when China would reintroduce the aircraft,” said Rob Morris, Global Head of Consultancy at Ascend by Cirium.
Chinese airlines had 97 737 MAX jets in operation before the global grounding, the most of any country, according to Cirium Fleets Analyzer.