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By Kaori Kaneko and Doug Palmer
TOKYO/WASHINGTON (Reuters) - Japan and the United States on Friday agreed on a deal paving the way for Tokyo to join talks on an Asia-Pacific free trade agreement, swelling the economic heft of the proposed pact and triggering protests from U.S. automakers.
The deal brings Japan closer to entering talks on the Trans-Pacific Partnership (TPP), which the United States, Canada, Mexico, Peru, Chile, Vietnam, Malaysia, Singapore, Brunei, Australia and New Zealand hope to finish this year.
"I think Japan's national interests are protected under this U.S.-Japan agreement," Japanese Prime Minister Shinzo Abe told reporters on Friday after a meeting with cabinet ministers.
The TPP talks have already been under way for three years and Japan hopes to participate in the negotiations beginning in July. But that requires a formal decision by all 11 countries currently taking part in the talks.
Abe, who took office in December, is making the regional free trade pact a keystone of his strategy to open Japan's economy and spur long-sought growth.
He is pursuing the agreement, despite fierce opposition from Japan's politically powerful farm lobby, as part of a "third arrow" in his "Abenomics" policy triad, after fiscal spending and drastic monetary policy easing.
President Barack Obama's administration sees the TPP as part of its economic rebalancing toward Asia.
"Having Japan in TPP and contributing to the high standards of TPP is good for the U.S., it's good for the Trans-Pacific Partnership as a whole and its very good for the multi-lateral trading system itself," Mike Froman, White House international economic affairs advisor, told reporters in Washington.
With the entry of Japan, the world's third largest economy and fourth-largest U.S. trading partner, the final TPP pact is expected to cover nearly 40 percent of global economic output and one-third of all world trade, Froman said.
AUTO INDUSTRY CONCERNS
Ford Motor Co <F.N> has fought hard to keep Japan out of the pact, arguing the U.S. ally has repeatedly failed to follow through on promises to import more foreign cars, and that the Japanese government has been driving down the value of the yen to help its automakers export more cars.
"It is stunning that the U.S. government would endorse a trade policy that puts the industry at a competitive disadvantage and comes at the cost of American auto jobs," Matt Blunt, president of the American Automotive Policy Council, said in a statement on the U.S-Japan deal. "We urge the administration to reconsider its position."
Powerful U.S. lawmakers from Michigan, the traditional heart of the U.S. auto sector, also expressed concern.
Representative Dave Camp, the Republican chairman of the House of Representatives Ways and Means Committee, said he would not support Japan's entry into TPP without "airtight assurances" it will address longstanding barriers to U.S. auto, insurance and agricultural exports.
Representative Sandy Levin, the top Democrat on Ways and Means, who is also from Michigan, said the deal announced on Friday "does not provide an adequate basis for Japan's entry into the Trans-Pacific Partnership."
U.S. trade officials said Tokyo agreed to a separate set of negotiations, in a parallel with the TPP talks, focused on a number of regulatory and non-tariff barriers believed to keep U.S. autos out of the Japanese market.
"For the first time ever, we have the opportunity to negotiate a resolution of these issues in a way that is subject to binding and enforceable dispute settlement," Acting U.S. Trade Representative Demetrios Marantis said.
Japan also agreed the United States could phase out its auto tariffs, which are 2.5 percent on cars and 25 percent on trucks, over the longest period possible under the future TPP deal.
Tokyo will also expand its "preferential handling procedure" for imports, a simpler and faster certification method used by U.S. auto manufacturers to export to Japan.
That will allow U.S. companies to export up to 5,000 vehicles of each type of vehicle under the program, compared with the current annual ceiling of 2,000 for each vehicle type.
The White House still needs to give Congress 90-days notice before formally beginning talks with Japan. Marantis said it was premature to say when that would happen since some other TPP countries still have outstanding issues with Japan.
New Zealand Trade Minister Tim Groser said last month the TPP member nations could formally decide whether to allow Japan into the talks when the 21-member trade officials meet in Indonesia on April 20-21 for the annual meeting of the Asia-Pacific Economic Cooperation forum.
(Reporting by Kaori Kaneko; Editing by Linda Sieg, Edmund Klamann and Nick Zieminski)