Trump, Abe Pledge to Deepen Trade, Investment Relationship

16 February 2017

Japanese Prime Minister Shinzo Abe completed a two-day visit to the United States last weekend, holding talks with US President Donald Trump on how to deepen their countries’ economic relationship under the new leadership in Washington.

Trade was widely expected to be high on the agenda during the 10-11 February meetings, after Trump confirmed in January that he would be withdrawing the US from the Trans-Pacific Partnership (TPP) Agreement and having duly instructed the Office of the US Trade Representative to take the necessary steps. (See Bridges Weekly, 26 January 2017)

Japan is one of the 11 other signatories to the TPP and was the last economy to join those negotiations, becoming a participant in the Pacific Rim trade accord after holding preliminary bilateral talks with the United States. (See Bridges Weekly, 18 April 2013)

The Japanese leader had already met with Trump in November, shortly after the latter was elected but before he was inaugurated. (See Bridges Weekly, 17 November 2016)

Cross-sectoral dialogue, TPP

Speaking to reporters, Trump and Abe said that their meeting was just the beginning of a broader effort to address bilateral trade issues, with the two officials announcing that they would be enlisting deputy leaders to spearhead this effort.

More specifically, the US and Japan will be holding a “cross-sectoral dialogue” led by Japanese Deputy Prime Minister Tarō Asō and US Vice President Mike Pence.

The two leaders did not elaborate in greater detail what this dialogue would entail or who else would participate, beyond the fact that it would be focusing on the bilateral economic relationship. Media reports suggest, however, that the discussions will address trade and monetary policy, along with other areas for cooperation.

“On the economy, we will seek a trading relationship that is free, fair, and reciprocal, benefitting both of our countries,” said Trump during a joint press conference with Abe at the White House on Friday.

Abe confirmed to reporters that both leaders share a deep interest on boosting their cooperation on trade and investment issues, while also suggesting that the two economic giants have a regional role to play in leading the creation of a “free and fair market based upon rules.”

Responding to questions about the TPP, Abe noted that Japan is “fully aware” of the new US administration’s move to pull out of the agreement, and reiterated that the bilateral economic relationship will be an essential component of the discussions under this new cross-sectoral dialogue “framework.”

“Now, for the free and fair common set of rules to be created for the free trade regime in the region… that was the purpose of TPP, and that importance [has] not changed,” said the Japanese leader.

Abe did suggest that trade priorities for Japan would include tackling the issues of state-owned enterprises and the protection of intellectual property rights, and that liberalising regional trade must be done “in a fair manner.”

Neither leader confirmed whether a bilateral trade pact had been discussed, which had initially appeared to be on the agenda for the Washington meet, though was later treated as unlikely by Japanese officials. They also did not confirm whether any progress had been made on TPP-related discussions, which were widely expected to be held. (See Bridges Weekly, 9 February 2017)

A joint statement issued separately did refer to the shared “importance of both deepening their trade and investment relations and of their continued efforts in promoting trade, economic growth, and high standards” in the region. It also said that Abe and Trump would look at how to do so in light of the US’ TPP withdrawal.

“This will include discussions between the United States and Japan on a bilateral framework as well as Japan continuing to advance regional progress on the basis of existing initiatives,” said the joint statement.

Meanwhile, TPP leaders have been invited to a summit next month in Viña del Mar, Chile, to discuss next steps for the deal in the wake of the US’ withdrawal. While Australian Trade Minister Steven Ciobo said on 9 February that the US has been invited, whether Washington will indeed send any officials has not yet been confirmed.

However, senior administration officials did tell reporters prior to the Trump-Abe meet that the US president’s stance on bilateral trade deals still stands.

“The President I think has made pretty clear that he believes that bilateral agreements are really the way to go for the United States, that in a bilateral agreement you can negotiate terms that are more favourable to the United States than you can negotiate in a multilateral agreement, where sometimes you’re held to the standard of the weakest link in the compact,” said one senior official on a call regarding Abe’s visit, according to a transcript provided by the White House.

Automobiles, infrastructure investment

Prior to the meetings in Washington, the topic of how to improve automobile trade between the two countries had been raised domestically in both the United States and Japan, and was expected to be a key area of discussion between the two leaders. (See Bridges Weekly, 2 February 2017)

During their joint press conference, Abe referred extensively to the role of the Japanese automotive sector and other industries in the American market, noting that many companies have set up plants there in order to produce their goods within the United States.

“Automotive industries and other Japanese businesses have built factories all over the United States, to engage in local production here. Last year, from Japan to the United States, there have been more than US$$150 billion of new investment being made,” said the Japanese leader, adding that these companies have been responsible for significant job creation in the North American economy.

Trump has repeatedly pledged to take measures to prioritise domestic manufacturing, including telling US companies that they could be subject to increased costs or other difficulties at the border should they move their production abroad.

“I’ve been telling companies, car companies and other companies – many companies: Come back into the United States. And they’ve been coming back in,” said the US president, claiming that factory and manufacturing jobs that have been lost will soon be “coming back.”

He has also publicly criticised the current state of US-Japan automobile trade on prior occasions, arguing that the North American economy has far more difficulty selling its cars to the Asian country than the other way around.

During last week’s press conference, Abe also touted the potential of undertaking large infrastructure investments in the United States under the Trump administration, referring specifically to the possibility of developing a high-speed train comparable to the Japanese “shinkansen” system, which is already being considered in Texas.

“Japan, with our high level of technical capability, we will be able to contribute to President Trump’s growth strategy. There will be even more new jobs being born in the United States,” said the Japanese prime minister, suggesting that the shinkansen technology could also do well on the East Coast in connecting the major hubs of Washington and New York City.

ICTSD reporting; “While Trump and Abe Bond, Their Deputies Talk Trade,” BLOOMBERG, 12 February 2017; “Abe and Trump take baby steps on trade,” KYODO, 11 February 2017; “Trump and Abe Agree to Start New Trade and Investment Talks,” BLOOMBERG, 10 February 2017; “Abe to pitch job-boosting steps at Trump summit, including in rail, shale,” THE JAPAN TIMES, 1 February 2017; “A Trump train between Houston and Dallas” HOUSTON CHRONICLE, 5 February 2017.

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