On April 26, 2019, before another friendly round of golf together, Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump will meet at the White House. The two leaders have met nine times since late 2016 and have had mostly amicable discussions. But this time the stakes are higher.
The U.S.-Japan trade talks are finally under way, just as the Trump administration is trying to finalize a comprehensive economic agreement with China. Friday’s summit is the first of what could be four meetings in four months between Abe and Trump. The U.S. president is scheduled to visit Japan in May and June (for the G20 summit), and both leaders are expected to go to France for the G7 summit in August.
U.S.-Japan relations are solid in terms of security cooperation and Japanese investment in the United States, so much so that the priority is to prevent backsliding. This new series of Trump-Abe interactions, therefore, will be spent trying to avoid fights over trade and military burden sharing or surprise developments in Washington’s relationships with Beijing or Pyongyang. The leaders must also navigate policy differences on Iran and climate change.
The allies also have an opportunity to coordinate their respective foreign policy goals in Asia—what the U.S. administration often refers to as the “free and open Indo-Pacific”—a topic on which Abe will try to get Trump to focus his attention.
What sets Abe’s latest trip to Washington apart?
An intense period of U.S.-Japan dialogue on trade kicked off in mid-April, seven months after Abe and Trump agreed to enter negotiations. U.S. Trade Representative Robert Lighthizer and Japan’s Economic Revitalization Minister Toshimitsu Motegi kicked off their talks cordially last week. Whether or not they can sustain this friendly atmosphere in the coming months remains to be seen.
Their objective is to tweak the U.S.-Japan economic relationship (their combined economies represent nearly one-third of the global total) to match newly introduced global trade arrangements, because Trump pulled out of their earlier trade agreement, the Trans-Pacific Partnership (TPP). Much will depend on Trump’s attitude. Abe gained leverage for this round of U.S.-Japan negotiations by rallying the remaining TPP countries to sign a revised version of the deal in March 2018 without the United States. Japan has also signed a new trade agreement with the EU.
Since Washington left TTP, U.S. farmers and companies have been complaining loudly to the Trump administration that they are at a growing disadvantage when trying to export to Japan. Unfortunately, rather than seeking to rejoin this broad coalition of countries that are trying to facilitate more trade, Trump is threatening to punish Japanese exporters unless Abe makes concessions. Trump is trying to exert leverage without giving up much, but his threat looks increasingly like a bluff. Abe would be smart to ignore it and insist politely that their new agreement be reciprocal and compliant with World Trade Organization (WTO) rules. Furthermore, the United States and Japan should present a united front with the EU to reform the WTO and set standards of economic behavior for all the major players, including China.
How likely is Trump to draw a hard line on trade?
Trump’s main weapon is a threat to slap tariffs on imported automobiles by invoking Section 232 of a 1962 U.S. trade law. This law gives the president power to impose restrictions on imports when he thinks they threaten national security. If Trump does this with cars, it could have a crushing impact on Japanese car makers and parts suppliers. Trump has already used Section 232 to level duties on certain steel and aluminum products, but there are many reasons why he would find it harder to do so with cars.
First, the steel and aluminum tariffs have been unpopular in the United States. This is because, except for the few companies that benefit, most Americans must now pay more for products made with imported steel or aluminum. Members of Congress have proposed new legislation to limit the president’s ability to use Section 232, and big companies like Ford and General Motors have blamed the tariffs for large profit losses and some factory closings.
Applying Section 232 tariffs to cars would be even more difficult and politically costly to Trump. Virtually all segments of the U.S. auto industry argue against such a move because—in the words of some industry associations—it would “pose a serious economic threat to the nation’s entire economy and the well-being of our manufacturers, dealers, employees and customers.” Many in Congress would aggressively oppose new auto tariffs, and financial markets would likely fall dramatically if they were enacted.
The hurdles to imposing such tariffs do not stop at the U.S. border. A recent WTO ruling found that national security arguments for trade restrictions can only be applied in situations of armed conflict or similar types of “heightened tension,” so the WTO would likely reject Trump’s vague and dubious economic justifications for the new tariffs. Despite Lighthizer’s pressure, Abe can likely insist that any agreement with the United States comply with WTO rules, resisting requests for quick unilateral concessions, voluntary export restraints, and other forms of managed trade. Besides, Abe faces an important legislative election in July, so there are limits to how pliant he can appear to be in response to Trump’s arm-twisting.
The best approach for Abe would be to try to build on the reciprocal negotiations carried out four years ago, before the first version of TPP was signed. Such a balanced approach can pay long-term dividends for both countries by increasing bilateral trade and investment and coordinating policies to encourage China to open its markets more. The question is how aggressively Trump will push his one-sided demands. From the look of things, Trump will press hard at first, perhaps publicly but certainly privately.
What else is on the U.S.-Japan agenda besides trade?
Abe’s immediate goal is to steer Trump into continued alignment on the two countries’ many shared interests. These include pressing North Korea to denuclearize, curbing China’s ability to intimidate neighbors militarily in the South and East China Seas, providing infrastructure and investment alternatives to respond to China’s Belt and Road Initiative and maintain an open, rules-based brand of economics, and sustaining a strong global economy. Abe also wants to make sure that the United States does not cut China a better deal than Japan on tariffs or exemptions from sanctions for buying Iranian oil as part of a broader U.S.-China trade deal.
Abe hopes to gain Trump’s support on infrastructure investment and other policies at the June 2019 G20 meeting hosted by Japan. Other items on the agenda include reducing plastic waste and designing new digital trade rules that protect privacy without giving authoritarian governments too much control over how digital data is stored and used. If Abe and Trump can sustain their rapport and avoid major policy clashes, their bilateral diplomacy will be a net win for both countries.