Scoring the Trump-Abe Trade Deal

By Matthew P. Goodman —

Photo: KAZUHIRO NOGI/AFP/Getty Images.

U.S. president Donald Trump and Japanese prime minister Shinzo Abe initialed a bilateral trade agreement on September 25 on the margins of the UN General Assembly meeting in New York. The consensus view in Washington is that the “mini-deal” gave President Trump most of what he wanted, while Prime Minister Abe got almost nothing. This gives Trump too much credit and Abe not enough.

The core deal involves greater market access in Japan for U.S. beef, pork, and wheat exporters in exchange for U.S. tariff reductions on a range of industrial products of interest to Japan—though pointedly not on automotive goods. The two leaders also signed an executive agreement on digital commerce that revived a set of liberal rules they had already essentially agreed on before President Trump walked away from the Trans-Pacific Partnership (TPP) on his third day in office.

With typical hyperbole, President Trump declared the deal “phenomenal.” He had some cause to celebrate. The agreement will relieve political pressure on the president from key U.S. agriculture producers that have been hit hard twice over: losing market share in Japan to competitors from TPP countries like Australia and Canada, and being the main target of China’s retaliation for President Trump’s escalating tariffs against that country. The Japan agreement also finally gives the president his first new bilateral trade deal, nearly three years after he promised to negotiate a string of them.

But once again, President Trump has settled for a minimalist deal. On agriculture, the agreement is “TPP-minus,” since Tokyo withheld its earlier commitment to expand rice quotas for U.S. exporters, offered a smaller wheat quota, and apparently gave no new market access for soybeans. Meanwhile, other U.S. sectors such as pharmaceuticals and financial services got little or nothing from the deal. Despite a commitment in the two leaders’ joint statement to a second more comprehensive pact, it is unlikely this will materialize before the 2020 election. Overall, the deal is a poignant reminder of how much President Trump gave away when he turned his back on the TPP.

For his part, Prime Minister Abe would appear to have every reason to feel short-changed by the deal. He was unable to win back the phase-out of tariffs achieved in the TPP on Japan’s top exports to the United States: automobiles and auto parts. Moreover, the prime minister failed to get an explicit promise from President Trump not to impose new tariffs under the Section 232 national security provision. An elliptical reference in the joint statement to this highly charged issue—“While faithfully implementing these agreements, both nations will refrain from taking measures against the spirit of these agreements”—was cold comfort for Japanese automotive executives.

Yet Prime Minister Abe looked visibly relieved in the joint signing ceremony with President Trump in New York. Perhaps, as Japanese official spin would have it, this was because the president privately assured Abe that he would not play the Section 232 card. Japanese government briefers also pointed out that the “while faithfully implementing” language allows Japan to suspend its agriculture concessions if President Trump reneges on his 232 promise.

Abe will certainly use that argument in making a case for approval of the deal in Japan’s legislature and is likely to succeed in that effort. The prime minister brilliantly managed expectations in the Diet by insisting that he would hold the line against U.S. demands for better-than-TPP access to the Japanese agriculture market — demands that were never seriously pressed by Washington. The TPP-minus result has produced audible sighs of relief in Tokyo, just as Abe hoped.

More importantly, the criticism leveled at Prime Minister Abe for taking a bad deal is off the mark because it misses his strategic objectives in agreeing to the pact. These were twofold. First, Abe wanted to get the United States back on the path of global and regional rulemaking from which it had strayed since pulling out of the TPP. The digital agreement was especially important in this regard, marking a tangible step toward realizing Abe’s concept of “data free flow with trust,” which he persuaded G20 leaders to endorse at the Osaka Summit in June.

Second, by moving contentious trade issues onto the back burner, the prime minister hoped to shift Trump’s attention toward more critical issues facing the U.S.-Japan alliance, notably curbing North Korea’s missile program and managing an increasingly assertive China. It remains to be seen whether this gambit will pay off, with an always-distractible Trump facing the prospect of a roiling impeachment process over the remainder of his presidency.

With the baseball playoffs getting underway in both countries, it seems apt to score the Trump-Abe deal using a metaphor from the game that has linked the United States and Japan for nearly 150 years. Having achieved his strategic objectives in the negotiations, Prime Minister Abe can be fairly credited with a single and a run batted in. Trump got on base, too, but “hit by pitch” is arguably the appropriate entry in the scorecard.

Mr. Matthew P. Goodman is senior vice president and holds the William E. Simon Chair in Political Economy at CSIS. Follow him on twitter @MPGoodman88. This piece first appeared as CSIS Commentary here

Matthew P. Goodman

Matthew P. Goodman

Matthew P. Goodman is senior vice president and William E. Simon Chair in Political Economy at CSIS, with particular emphasis on Northeast Asia.

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