{ "id": "R46140", "type": "CRS Report", "typeId": "REPORTS", "number": "R46140", "active": true, "source": "EveryCRSReport.com", "versions": [ { "source": "EveryCRSReport.com", "id": 611972, "date": "2019-12-20", "retrieved": "2020-01-24T23:07:37.040969", "title": "\u201cStage One\u201d U.S.-Japan Trade Agreements", "summary": "On October 7, 2019, after six months of formal negotiations, the United States and Japan signed two agreements intended to liberalize bilateral trade. One, the U.S.-Japan Trade Agreement (USJTA), provides for limited tariff reductions and quota expansions to improve market access. The other, the U.S.-Japan Digital Trade Agreement, includes commitments pertaining to digital aspects of international commerce, such as cross-border data flows. These agreements constitute what the Trump and Abe Administrations envision as \u201cstage one\u201d of a broader trade liberalization negotiation, which the two leaders first announced in September 2018. The two sides have stated their intent to continue negotiations on a more comprehensive deal after these agreements enter into force. Congress has an interest in U.S.-Japan trade agreement negotiations given congressional authority to regulate foreign commerce and the agreements\u2019 potential effects on the U.S. economy and constituents.\nUSJTA is to reduce or eliminate tariffs on agriculture and some industrial goods, covering approximately $14.4 billion ($7.2 billion each of U.S. imports and exports) or 5% of bilateral trade. The United States is to reduce or eliminate tariffs on a small number (241) of mostly industrial goods, while Japan is to reduce or eliminate tariffs on roughly 600 agricultural tariff lines and expand preferential tariff-rate quotas for a limited number of U.S. products. The United States framed the digital trade commitments as \u201cgold standard,\u201d with commitments on nondiscriminatory treatment of digital products, and prohibition of data localization barriers and restrictions on cross-border data flows, among other provisions. The stage one agreement excludes most other goods from tariff liberalization and does not cover market access for services, rules beyond digital trade, or nontariff barriers. Notably, the agreement does not cover trade in autos, an industry accounting for one-third of U.S. imports from Japan. Japan\u2019s decision to participate in bilateral talks came after President Donald Trump threatened to impose additional auto tariffs on Japan, based on national security concerns. \nPrior to the Trump Administration, the United States negotiated free trade agreements (FTAs) that removed virtually all tariffs between the parties and covered a broad range of trade-related rules and disciplines in one comprehensive negotiation, driven in significant part by congressionally mandated U.S. negotiating objectives. Nontariff issues often require implementing legislation by Congress to take effect, and Congress has typically considered implementing legislation for past U.S. FTAs through expedited procedures under Trade Promotion Authority (TPA). The Trump Administration, however, plans to put the stage one agreements with Japan into effect without action by Congress. The Administration plans to use delegated tariff authorities in TPA to proclaim the USJTA market access provisions, while the U.S.-Japan Digital Trade Agreement does not appear to require changes to U.S. law and is being treated as an Executive Agreement. Japan\u2019s Diet (the national legislature) ratified the pact in December 2019. The Administration expects the agreements to take effect in early 2020, with negotiations on the second stage of commitments to begin within four months.\nThe Trump Administration\u2019s interest in bilateral trade negotiations is tied to its withdrawal from the Trans-Pacific Partnership (TPP) agreement in 2017, which included the United States and Japan, along with 10 other Asia-Pacific countries. In general, TPP was far more comprehensive than the stage one U.S.-Japan agreements, as it would have eliminated most tariffs among the parties and created rules and disciplines on a number of trade-related issues, such as intellectual property rights and services. Japan\u2019s FTAs with other countries, including the TPP-11, which entered into force among the remaining TPP members in 2018, and an FTA with the European Union (EU), which took effect in 2019, have led to growing concerns among U.S. industry and many in Congress that U.S. exporters face certain disadvantages in the Japanese market. The USJTA will largely place U.S. agricultural exporters on par with Japan\u2019s other FTA partners with regard to tariffs, but unlike the TPP and its successor, the agreement excludes some agricultural products, such as rice and barley. It also does not include rules, such as on technical barriers to trade (TBT) and sanitary and phytosanitary measures, and therefore will not address various nontariff barriers U.S. agriculture and other industries face in Japan. Thus, U.S. agricultural exporters may continue to be at some disadvantage in the Japanese market compared to those from TPP countries or the EU.\nIn general, Congress and U.S. stakeholders support the agreements due to the expected benefits to U.S. agriculture and cross-border digital trade. At the same time, the overall economic effects of the agreement are likely to be modest due to the limited scope of the agreement. Many observers contend the deal should not be a substitute for a comprehensive trade agreement and view the second stage of talks as critical to U.S. interests. If more comprehensive negotiations begin in 2020, they may become intertwined with other bilateral issues, such as concerns among many Japanese officials that the United States has a waning interest in maintaining its current influence in East Asia, and upcoming negotiations over the renewal of the U.S.-Japan agreement on how to share the costs of basing U.S. military troops in Japan. Some Members of Congress have also raised questions over whether the staged approach to the U.S.-Japan negotiations is in the best interest of the United States, and what it may mean for future U.S. trade agreement negotiations. There are also questions about whether the agreements adhere to multilateral trade rules under the World Trade Organization (WTO), given their limited scope, and whether the Administration has adequately consulted with Congress in its negotiation and implementation of the new agreements.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R46140", "sha1": "0f67bf9c936298fdd8f81ed5e3582f1dc00d6e77", "filename": "files/20191220_R46140_0f67bf9c936298fdd8f81ed5e3582f1dc00d6e77.html", "images": { "/products/Getimages/?directory=R/html/R46140_files&id=/2.png": "files/20191220_R46140_images_9585001195cc31b5c154dae7415ef60108fa7d17.png", "/products/Getimages/?directory=R/html/R46140_files&id=/0.png": "files/20191220_R46140_images_dc590adb0840b87d4a686e128ffdbc52b6c53005.png", "/products/Getimages/?directory=R/html/R46140_files&id=/1.png": "files/20191220_R46140_images_cdc03f406e3c5fd9208b5d982811433a28280a2c.png" } }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R46140", "sha1": "88e3004e34051d72bc5cb37450f521f3295ef78a", "filename": "files/20191220_R46140_88e3004e34051d72bc5cb37450f521f3295ef78a.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4829, "name": "Agricultural Trade & Food Aid" } ] } ], "topics": [ "Agricultural Policy", "Economic Policy", "Foreign Affairs", "Industry and Trade" ] }