U.S., Japan Sign Limited Deal on Farm Goods and Digital Trade

Justin Sink, Jennifer A. Dlouhy and Brendan Murray
U.S., Japan Sign Limited Deal on Farm Goods and Digital Trade

(Bloomberg) -- The U.S. and Japan signed a limited trade deal that opens markets for American farmers and brings Tokyo a degree of assurance that President Donald Trump won’t impose new tariffs on auto imports for now.

The accords on agriculture and digital trade cover about $55 billion worth of commerce between the world’s largest- and third-biggest economies, U.S. Trade Representative Robert Lighthizer said at a ceremony in the Oval Office alongside Trump. The accord is a “game changer for our farmers” and ranchers, Trump said at the event.

The finalization of the agreement increases the chances Japan will pass it in the current session of parliament, which ends Dec. 9, and meet the goal of bringing it into effect Jan. 1. In Tokyo, Finance Minister Taro Aso said Tuesday that the deal was a “win-win” for both countries and that he expected quick ratification.

Trump, who faces re-election next year, was eager to make a deal with Japan to appease U.S. farmers who have been largely shut out of the Chinese market as a result of his trade war with Beijing. American agricultural producers -- also reeling from bad weather and low commodity prices -- are a core component of Trump’s political base.

Under the deal, Japan will lower or reduce tariffs on some $7.2 billion of American-grown farming products, including beef and pork, which currently face higher levies than competitors from countries including Australia.

Prime Minister Shinzo Abe’s priority was to win a pledge that the U.S. won’t slap tariffs on Japanese automobile exports, a sector valued at about $50 billion a year and a cornerstone of the country’s economy. The written text of the deal doesn’t explicitly cover auto tariffs, but Abe has said that he received assurances that Japan would be spared from them.

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The proposed pact won’t lower the barriers protecting Japan’s rice farmers -- a powerful group supporting Abe’s ruling Liberal Democratic Party. The Central Union of Agricultural Cooperatives issued a statement last month saying farmers would be relieved at the result.

By touting his defense of Japan’s most iconic farm product and providing subsidies for farmers who might be hurt by the deal, Abe is likely to win ratification in parliament despite opposition criticism, given that his ruling coalition has a majority in both houses.

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The U.S. has said this agreement -- which was signed in principle on the sidelines of the United Nations General Assembly last month -- is just the first phase of a broader pact.

“The parliamentary debate starts now,” said Foreign Minister Toshimitsu Motegi, who headed Japan’s negotiating team. “The most important thing is to bring it into effect quickly and I want to tackle this process with all my strength.”

(Updates with reaction from Japan throughout)

--With assistance from Isabel Reynolds and Emi Urabe.

To contact the reporters on this story: Justin Sink in Washington at jsink1@bloomberg.net;Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net;Brendan Murray in London at brmurray@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Sarah McGregor, Robert Jameson

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