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Japan’s about-face on trade talks with U.S. raises questions at home

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The Japan-U.S. agreement to enter negotiations for a bilateral trade deal raises one question: will this lead to the kind of "win-win" situation that Japan has envisaged?

Tokyo appears to have acquiesced to Washington and moved away from exploring a multilateral approach to trade issues as U.S. President Donald Trump is demanding a bilateral deal to fix imbalanced trade.

Even as Japanese officials dismiss the view, a future Japan-U.S. trade agreement on goods will, in effect, be a free trade agreement that Tokyo has been reluctant to negotiate.

Concerns are growing in such sectors as autos and agriculture about Japan being forced into making more concessions.

"It's no different from an FTA," said Junichi Sugawara, senior research officer at the Mizuho Research Institute.

Prime Minister Shinzo Abe and Trump agreed during their summit Wednesday that their countries will start negotiations for a trade agreement on goods. Washington will hold off on imposing higher auto tariffs so long as negotiations are under way.

"Both Japan and the United States appear to have gotten what they wanted. Is that a win-win situation? All the United States did was to threaten to impose auto tariffs," Sugawara said.

At the United Nations, Abe chose trade as his first topic in his address, taking time to explain the contributions of Japanese automakers to the United States, a major auto market.

The number of cars manufactured by Japanese companies in the United States is roughly double that of those exported to the major auto market in 2017, Abe told the international body.

Japanese officials were worried about the sweeping impact of tariff hikes on auto imports into the United States and the possibility that Washington will demand export curbs.

Abe's personal rapport with Trump apparently served as a plus in persuading the president to exempt Japan, its longtime ally, from the additional auto duties, officials and analysts said.

"If the U.S. trade deficit is the problem, buying more liquefied natural gas or defense equipment will be a viable option for that matter," said Junichi Makino, chief economist at SMBC Nikko Securities Inc.

"Japan still has a variety of negotiating cards because it may be a big exporter but it is also a big importer."

Expected demands from Washington include tariff cuts on beef, on which Japan imposes a 38.5 percent tariff except for imports from countries already having a bilateral accord with Japan, according to experts. Japan has repeatedly said it cannot accept more than what has already been agreed to under the Trans-Pacific Partnership, a multilateral framework from which the United States has withdrawn.

Under the TPP, Japan will incrementally lower its beef tariff to 9 percent over 16 years after the accord takes effect.

The U.S. goods trade deficit with Japan came to nearly $69 billion last year, according to U.S. government data.

New trade negotiations may take years despite U.S. Trade Representative Robert Lighthizer hoping for an "early harvest." Abe, who has secured another term as head of the ruling Liberal Democratic Party, has three more years to lead the party under current rules and the country.

His diplomatic and negotiating skills will be put to the test as Japan needs support from the United States in dealing with key diplomatic challenges, notably North Korea.

Government officials have dismissed the idea of trade-offs between security and trade issues.

"As he (Abe) is close to Trump, the alliance is stronger (than at other times)," said Takashi Kawakami, a professor well-versed in Japan-U.S. relations, at Takushoku University. "From an economic viewpoint, he made a big decision and concession."

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