US wants trade to dominate economic talks with Japan

April 13, 2017 09:55 AM

The United States is pushing for trade to be a key issue in top-level economic talks with Japan, a person directly involved in the talks told Reuters on Thursday, an unwelcome development for Tokyo, which seeks to fend off U.S. pressure to reduce the bilateral trade imbalance.

Japan wants to keep the bilateral dialogue, to be led by Vice President Mike Pence and Deputy Prime Minister Taro Aso and starting next Tuesday, focused on economic policy, energy, infrastructure investment, and the rules of trade.

But Washington requested last week that the United States wanted to talk about bilateral trade issues including farm products at the economic dialogue, the source said. Japan rejected the idea but also told Washington that Tokyo could accept such talks outside of the dialogue, he said.

U.S. Commerce Secretary Wilbur Ross will also visit Tokyo next week but it has not been decided whether he will join the dialogue, the source said.

U.S. President Donald Trump has said he favors bilateral free trade agreements (FTA) over multilateral frameworks, and has vowed to take action to narrow the country's big trade deficits with nations like China, Germany and Japan.

Japan wants to avoid kicking off bilateral FTA talks for fear of being pressured into opening up highly-protected areas like agriculture.

Should Japan come under fire for its trade gap, it is prepared to argue that its share of the U.S. trade deficit is much smaller than the 1980s and 1990s, when it was harshly criticized by Washington, Japanese government officials say.

"Unlike bilateral trade talks in the past, this won't be a venue for the United States to make demands unilaterally. This time we will say what we have to say to fix their problems too," said one of the officials with direct knowledge of preparations.

Another government official said rising geo-political tensions over North Korea may mean Washington will avoid being too confrontational with Japan on trade issues.

"With the situation over North Korea unstable, it's not a good idea for any Japan-U.S. tensions (on trade) to surface," said the official. "For the United States, defense is probably a higher priority than trade now."

Tokyo has been wary of Trump's complaints that Japan and other countries block market access to U.S. companies and artificially weaken their currencies to boost exports.

Japan is resisting America's "strong demand" for trade to be included in the economic dialogue, but the trade imbalance will become a key theme of the talks, the Asahi newspaper said on Thursday, citing unnamed sources for its information.

Washington's demand, made last week, did not specify any trade areas for discussion, but a U.S. government source said the Trump administration mainly wants to discuss cars and agriculture, the paper said.

Japanese government officials concede that such thorny trade issues may eventually be discussed in the dialogue, but stress that next week's first round of talks would be mostly spent agreeing on a broad list of agendas.

"We need to agree on a viable agenda for the dialogue and to some extent, a reasonable timeframe for follow-up. That is the starting point of dialogue. Tangible results should come later," said one government source, at the same time acknowledging that Trump could be in more of a hurry for tangible results.

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