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U.S.-Japan TPP-Related Talks at Impasse; Gaps Remain on Major Issues, Minister Says

Wednesday, April 23, 2014

By Len Bracken, Toshio Aritake  

April 18 — Japanese Minister for Economic and Fiscal Policy Akira Amari said late April 17 that bilateral negotiations between the U.S. and Japan relating to the Trans-Pacific Partnership (TPP) are stuck with no immediate means in sight to narrow differences.

“Unfortunately the talks remain deadlocked,” Amari told reporters April 17 following talks with U.S. Trade Representative Michael Froman in Washington, D.C. “We could not bring it to conclusion.”

He said that there was no progress on core positions and that the differences were considerable, and when asked how he envisioned the two sides narrowing their differences, the minister said, “Please tell me.”

With regard to the April 24-25 visit by President Barack Obama to Tokyo, Amari said that there was still time to reach an agreement before the trip. Obama and Japanese Prime Minister Shinzo Abe agreed in a March 26 meeting in the Netherlands to accelerate the bilateral TPP-related negotiations and this acceleration has been taking place.

A senior U.S. official told reporters April 18 that the focus of the talks was on the Japanese agriculture market access offer and nontariff measures that represent barriers to U.S. auto exports to Japan. In response to a question regarding the possibility of a U.S.-specific quota for rice and wheat, the official said that different solutions to achieve market access were being explored for different tariff lines but that the overall goal was tariff elimination.

Japanese negotiators have resisted tariff elimination for sensitive items such as rice, wheat, dairy, sugar, pork and beef. The U.S. official emphasized the complexity of the confidential negotiations that are being conducted on a single-undertaking basis whereby nothing is decided until everything is decided.

‘Focused But Difficult.'

The Office of the U.S. Trade Representative (USTR) said in a readout of the meetings that the two sides have spent the past several weeks working to narrow gaps and that the round that ended April 18 was “focused but difficult.”

“After more than 20 hours of negotiations, we continue to make progress, and we are now faced with a reasonable number of outstanding issues,” the USTR said. “These issues are important to both sides and considerable differences remain. “

Acting Deputy U.S. Trade Representative Wendy Cutler is leading the U.S. side in the talks. Japanese TPP Ambassador Hiroshi Oe leads the market access talks for Japan, and TPP Ambassador Takeo Mori leads the U.S.-Japan bilateral talks on autos and nontariff measures.

The 12 TPP partners are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the U.S. The senior U.S. official said that the TPP chief negotiators would meet in Vietnam in mid-May and that this meeting would be followed by an Asia-Pacifc Economic Cooperation meeting in China of the ministers responsible for trade, which would provide an opportunity for the TPP ministers to meet.

Agriculture Market Access

A Japanese source who is following the talks said that the U.S. is suggesting they can tolerate Japan keeping current tariff levels for rice, wheat and barley, sugar and key dairy products (butter, milk) in response to Japan's offer to increase tariff-exempt quotas for U.S. rice, wheat, barley and those key dairy products. But the U.S. is demanding very low tariffs on beef and pork, the source said.

The U.S. official would not verify this and said only that the two sides are seeking ways to maximize market access on a tariff line-by-line basis.

“We have worked to be as creative as possible to address Japan's political sensitivities, while pursuing the overall objective of achieving meaningful access to its market—a goal that all TPP partners share. We look to Japan to make similar efforts,” the USTR readout said.

According to Japanese government documents viewed by Bloomberg BNA, most of Japan's rice and wheat imports are subject to a state-trading program whereby only the government can import these commodities, but some rice and wheat is imported privately through a “simultaneous buy and sell” (SBS) system.

The source said U.S. negotiators are seeking a U.S.-specific quota for rice under the SBS system that would not face competition from Australia and Canada.

Japan allows 770,000 tons of tariff-free rice imports under the World Trade Organization's minimum market access program—imports above this face tariffs of 778 percent.

Wheat imports under the state trading program are subject to an import margin fee, which acts as a tariff, of 45.2 yen per kilo, the documents showed.

Auto Issues Under Discussion

The source said that the U.S. also is demanding that Japan accept U.S. safety and environmental standards and certification procedures for U.S. motor vehicles, but that Japan resisted doing so on grounds that the issue is a domestic matter and does not fit within trade talks.

The U.S. official said that all of the nontariff measures involving autos were under discussion in the talks—these include preferential handling limits, safety certifications and standards.

The parallel bilateral auto talks are based on a 2013 Terms of Reference document. The American Automotive Policy Council, which represents Ford, General Motors and Chrysler on trade policy issues, has been skeptical of Japan's willingness to open its auto market. The council has also pressed for inclusion of currency provisions in the TPP agreement. Such provisions have not been proposed, according to congressional sources.

The U.S. official said that the upcoming meetings between Obama and Abe should provide impetus for the TPP talks.

“The economic and strategic importance of TPP is greater now than it has ever been,” the USTR readout said. “We stand stronger when we stand together on global issues, regional issues, and economic issues.”

 

To contact the reporter on this story: Len Bracken in Washington at lbracken@bna.com

To contact the editor responsible for this story: Toshio Aritake in Tokyo at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

The 2013 Terms of Reference document issued by the USTR in April 2013 is available at http://www.ustr.gov/sites/default/files/Motor%20Vehicle%20TOR%20-%20Attachment%20to%20Amb%20Sasae%20Letter%204-12-13.pdf. The USTR readout is available at http://www.ustr.gov/about-us/press-office/press-releases/2014/April/Readout-Meeting-USTR-Froman-and-Japanese-Minister-Economic-Fiscal-Policy-Amari.

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