U.S., Japan focus on trade to boost both economies
WASHINGTON — For the last two decades, Japan’s stagnant economy has taken a back seat to China’s explosive growth. But the economic agenda for Washington and Tokyo is heating up, presenting new opportunities for the U.S. and trade frictions reminiscent of the 1980s.
In White House discussions Friday, President Obama and Japanese Prime Minister Shinzo Abe took up a range of security concerns, pledging solidarity in responding strongly to nuclear provocations from North Korea. Abe also assured Obama that Japan would “act calmly” in its standoff with China over islands in the East China Sea, even as he made strong public remarks later about Japan’s claims to the Senkaku islets.
But their minds were largely focused on one thing: getting their economies growing more rapidly.
Obama would like to see Japan join the U.S., Canada, Mexico, Australia and seven other countries in negotiations for an Asia-Pacific free-trade agreement. The administration sees the pact as an important part of its “pivot to Asia” to secure American strength in an increasingly wealthy region of the world, where China’s influence has grown.
But the American auto sector and Japanese farmers, important constituents for Obama and Abe, have balked at Japan entering negotiations that could expose their industries to greater foreign competition.
On Friday, the U.S. and Japan issued a carefully worded statement suggesting that although all goods would be on the table in the trade talks should Japan join, there could still be a deal in which each side protected its most sensitive sectors.
“The two governments confirm that, as the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations,” the statement said, referring to the Trans-Pacific Partnership.
For Abe, who took office in December for a second time as prime minister, his meetings in Washington were aimed at promoting his own economic program. The Japanese have dubbed his plan “Abenomics” — an effort to break out of a devastating deflationary period with fiscal and monetary stimulus and other efforts.
“I am back, and so shall Japan be,” Abe said Friday afternoon in remarks at the Center for Strategic and International Studies, a Washington think tank.
Abe, 58, who studied political science briefly at USC and delivered his speech in English, said in a news conference afterward that he hoped Japan could decide quickly about entering the talks.
Obama welcomed Abe’s overall message of strengthening bilateral relations, saying after their private meeting in the Oval Office that they agreed their No. 1 priority had to be “making sure that we are increasing growth and making sure that people have the opportunity to prosper if they’re willing to work hard, in both countries.”
Trade wasn’t a top priority in Obama’s first term, but in his State of the Union address, he pledged to pursue free-trade talks with both Europe and the Asia-Pacific region.
Neither is likely to be completed this year, but given Washington’s budget constraints and partisan gridlock, one of Obama’s best options to boost growth and jobs may be by expanding trade.
“Asia is an economic dynamo, and the administration very much wants to be in the region,” said Mireya Solis, a senior fellow at the Brookings Center for Northeast Asian Policy Studies. “At a time of limited resources, it’s difficult to fund the rebalancing [to Asia], so the value of alliances increases.”
That’s where Japan comes in.
Promoters of the Trans-Pacific Partnership see it as more than a pact that removes tariffs: It’s a comprehensive deal that also addresses regionwide issues involving regulations, supply chains and state-owned enterprises.
As the world’s third-largest economy, Japan’s participation would give the trade alliance greater significance and also could draw South Korea, another Asian economic power, into the talks.
Japan also stands to benefit by joining the trade partnership, analysts said, as it probably would push along deregulation and other much-needed structural changes in the Japanese economy to improve productivity in the face of a rapidly shrinking and aging population. That would help sustain the country’s growth when the effects of fiscal and monetary stimulus fade.
Many Japanese experts said Abe personally would like to take part in the trade talks, but the prime minister would be loath to make any public moves until at least July, when his rural-based Liberal Democratic Party faces an election for the upper house of parliament.
Abe’s overarching goal is to win the summer election so he can carry out his agenda.
The Obama administration faces pressures of its own, especially from the auto industry, which has long complained about Japan’s difficult market for foreign cars.
The domestic car industry has come roaring back after the deep recession, but automakers and their supporters in Congress will be particularly wary about loosening the import tariffs on foreign trucks, a highly profitable line of vehicles for American automakers, said Richard Katz, chief editor of the Oriental Economist Report, a monthly newsletter that specializes in Japan and U.S.-Japan relations.
Abe’s new economic policies, while welcomed in Japan, have generated concern elsewhere as they have driven the Japanese yen down in value. A cheaper yen should help boost Japanese exports of cars and some other goods.
Though Obama administration officials have been largely quiet on the currency issue, some American manufacturing groups and other critics said a devalued yen would hurt the American economy and cost it jobs.
“I’m flabbergasted.... Why give Japan a pass on the currency this time around?” said Clyde Prestowitz, a former trade negotiator in the Reagan administration.
Yet in many ways, the climate for trade talks involving Japan is far better today than in the 1980s when Prestowitz and other U.S. officials were battling to open up Japan’s markets for semiconductors and other products.
The American public’s feelings toward the Japanese are much more favorable today, surveys show, and apart from cars, the two countries’ exports are largely complementary.
Japan’s biggest imports from the U.S. are airplanes and corn, while America’s largest imports from Japan are cars, aircraft parts and printing machinery.
The U.S. trade deficit in goods with Japan was $76 billion last year. In contrast, the U.S. deficit with China topped $300 billion last year.
Times staff writer Kathleen Hennessey in Washington contributed to this report.
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