U.S. – Japan Trade Agreement
|Japan Ratifies Free Trade Deal with United States
Asia Times, December 4, 2019
In October of 2018, the U.S. and Japan announced negotiations towards a potential U.S.-Japan FTA. Japan is the third largest economy in the world. Japan is the fourth largest importer of U.S. goods, and the fourth largest source of imports into the U.S.
The first round of U.S.-Japan trade talks began in April 2019 and by September a limited free trade agreement was reached. In early December, Japan’s upper house of parliament approved the limited trade deal. Since no ratification is needed by the U.S. Congress, the deal is now set to go into effect on January 1, 2020.
The limited agreement opened market access for certain U.S. agricultural and industrial goods in Japan. Once it has been implemented, over 90% of U.S. food and agricultural products imported into Japan will either be duty free or receive preferential tariff access. The agreement will give American farmers and ranchers the same advantages as CP-TPP countries selling into the Japanese market. In return, the U.S. will reduce or eliminate tariffs on agricultural and industrial imports from Japan.
There was also a separate agreement between the U.S. and Japan reached on high-standard digital trade. The agreement contained prohibitions on imposing customs duties on digital products sent electronically, as well as ensure barrier-free cross-border data transfers in all sectors, among other things. The U.S.-Japan Digital Trade agreement was approved by Japan’s Diet concurrently and will also go into effect on January 1, 2020.
At the beginning of Trump’s Administration, the President withdrew the U.S. from the Trans-Pacific Partnership in which the U.S. and Japan were leaders. Japan took the lead in passing TPP in the remaining eleven countries, rebranding it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11) and the TPP-11. The agreement is effective this as of 2019 and may eventually include other nations.
The TPP-11 will reduce tariffs in countries that together amount to more than 13 percent of the global economy, a total of $10 trillion in GDP, with the United States, it would have represented 40 percent. Even without the United States, the deal spans a market of nearly 500 million people, making it one of the world’s largest trade agreements.
Ambassador Lighthizer Lauds Japan’s Approval of the U.S.-Japan Trade Agreement and the U.S.-Japan Digital Trade Agreement
U.S. Trade Representative, December 4, 2019
Statement from USTR on Meetings to Discuss the United States-Japan Trade Agreement
U.S. Trade Representative, April 16, 2019
Trump Administration Announces Intent to Negotiate Trade Agreements with Japan, the European Union and the United Kingdom
U.S. Trade Representative, October 16, 2018
Joint Statement of the United States and Japan
White House, September 26, 2018
The United States is a large supplier of chemicals, transportation equipment, and computer and electronic products to Japan. Japan is also one of the largest U.S. foreign markets for agricultural products. U.S. exports to Japan were $64.09 billion in 2020, making it the fourth largest export destination for the U.S. Imports from Japan to the United States were $119.51 billion, with transportation equipment accounting for 38.7 percent.
According to the most recent figures, U.S. direct investment to Japan totaled $131.79 billion in 2019, largely in financial, software and Internet services (BEA). Foreign direct investment from Japan into the United States was $644.7 billion in 2019, making it the number one largest source of FDI in the US that year. In 2018, Japanese FDI in the US supported 948,100 jobs and contributed $10.9 billion to research and development, as well as another $84.5 billion to expanding US exports. The top industry sectors for Japanese FDI are: auto components, industrial equipment, automotive OEM, plastics, software and IT services, and metals. (Select USA)
California continues to be the top exporting state to Japan, accounting for over 16.6% of total US exports. Japan has remained California’s fourth largest export market since 2010, after Mexico, Canada and China. California exports to Japan, the world’s third largest economy, totaled $10.65 billion in 2020. Computers and electronic products accounted for 18.9 percent of total exports. Imports into California from Japan were $20.36 billion in 2020, with transportation equipment accounting for over a quarter of total imports. California is currently the top importing state in the US for products from Japan.
The limited trade deal with Japan has moved very quickly with the understanding that there would be a more comprehensive deal signed with Japan in the near future in a second stage of negotiations. Now that the deal has passed, the White House announced that both governments will begin consultations early in 2020 to further negotiations on a broader trade agreement.
The goals for negotiations continuing into 2020 will remain the same; expanding bilateral trade in a mutually beneficial way to achieve freer and more balanced trade, as well as encourage economic development. It is hoped that the U.S. and Japan will continue to expand areas of cooperation and deepen their understanding of each other’s respective views and positions.
The California Chamber of Commerce, in keeping with long-standing policy, enthusiastically supports free trade worldwide, expansion of international trade and investment, fair and equitable market access for California products abroad and elimination of disincentives that impede the international competitiveness of California business.
Strengthening economic ties and enhancing regulatory cooperation through agreements with our top trading partners that include both goods and services, including financial services, is essential to eliminating unnecessary regulatory divergences that may act as a drag on economic growth and job creation.
Agreements like this have the capability of ensuring that the United States may continue to gain access to world markets, which will result in an improved economy and additional employment of Americans.