Japan Minideal Benefits for Importers Coming Into View

By far the largest is machine tools, such as lathes. The U.S. imported nearly $910 million in computer numeric controlled lathes from all countries, according to calendar year 2018 data from Flexport. The lathes are machines that are used to shape metal parts for all sorts of industries, from aircraft engines to medical devices to automobile parts. Japan accounted for $436 million of those imports, and is the top exporter for this kind of machine, despite the fact that importers pay 4.4 percent tariffs on Japanese CNC lathes, when there is no tariff on South Korean lathes. South Korea is the second-largest exporter. In the second year of the new agreement, Japanese CNC lathe imports would be tariff free.

Machine tools that stamp metal, now taxed at 4.4 percent, would go to zero in the second year. The U.S. imported $283 million of this sort of machine from Japan, according to Flexport, and Japan is the top country for these imports.

Rubber and plastic processing machinery, now taxed at 3.1 percent, would also go to zero in the second year. Iron screws and bolts would go to zero in the first year for some products, to zero in the second year for some products, and for those with higher tariffs, such as 8.6 percent, the tariff would be halved in the first year, and then have a further reduction the second year.

While auto parts and autos are the largest Japanese export to the U.S. -- about $51 billion in 2018, according to the Office of the U.S. Trade Representative -- machinery is No. 2 at $32 billion.

Japan also won reductions in tariffs that affect Japanese companies manufacturing in the United States, such as railway parts, a regulator used in carbon fiber production, 3D printer, and air conditioner parts. The highest tariff rate in this category is 6 percent to 6.5 percent, and it will be halved immediately, and then have a further reduction in the second year.

Japanese fuel cells will be duty free immediately (they are currently taxed at 2.7 percent).

Consumer goods from Japan that will have immediate elimination or reduction include music instruments, glasses or sunglasses, and bicycles and parts. People for Bikes said, "Japan is a significant source for many bicycle parts. We are still investigating the potential benefits and cost savings of this agreement, but we see significant potential for the agreement to reduce or eliminate tariffs on key bicycle components such as brakes, pedals, and complete wheels."

Japan noted that in exchange for all these tariff reductions and eliminations, it made no concessions of its own on tariffs on U.S. industrial goods.

U.S. Trade Representative Robert Lighthizer has emphasized the benefit to agricultural exporters, who will get tariff reductions and eliminations once the agreement comes into effect Jan. 1, and will get another round of reductions on April 1, 2020, in lockstep with European and Trans-Pacific Partnership competitors.

On Sept. 25 in New York, Lighthizer defended the areas where the agricultural access is not as good as what the U.S. would have received if it had stayed in the TPP. "You have to look at it two ways," he told reporters. "One, what did we pay for it? And we paid substantially less than has been paid in TPP."

One of those areas where the U.S. "paid" less is that it did not eliminate the tariffs on Japanese auto parts, or set into motion a gradual reduction on auto tariffs for Japanese imports.

"It certainly is the Japanese ambition to have cars -- car tariffs be discussed" in the second stage of negotiations, Lighthizer said. According to the joint statement, those are expected to start next April.

"We're delighted with liberalization wherever it can be found," said Charles Freeman, senior vice president for Asia at the U.S. Chamber of Commerce. Freeman was a panelist at a Sept. 26 panel hosted by the Global Business Dialogue on the next steps for U.S.-Japan trade. But the Chamber is hopeful there will be more negotiations next year to reach a comprehensive free trade agreement. He said he is pleased by how President Donald Trump talked about that prospect in New York on Sept. 26, and a little nervous about Japan's Prime Minister Shinzo Abe's remark that the deal is "the final agreement of the Japan-U.S. trade negotiations that we have had so far."

Freeman said not only will this minideal not require congressional ratification, there also have not been consultations with Congress during negotiations, as is typical for trade deals. "I have been struck by how little they know about this agreement," he said. "And how little they know about the conversations with Japan in general."

He thinks USTR needs to start talking more to Congress, to lay the groundwork for a vote on a more comprehensive agreement.

The joint statement from the White House says nothing about removing Japan from the target list for Section 232 tariffs on autos and auto parts. Lighthizer said if the deal is implemented in good faith by Japan, "it certainly is not our intention or the President's intention to do anything on either side, on 232, on Japan."

Freeman said the Chamber thinks the imposition of tariffs on foreign autos doesn't "pass ... a straight-face test," and said, "We would very much like to have seen some kind of definitive statement on [Section] 232" in the release.

Lobbyists for wheat growers, pork producers, and the Information Technology Industry Council all said they are very happy with what the U.S. has negotiated. Wheat and pork from the U.S. will face the same tariffs and tariff rate quotas as European and TPP countries' once the agreement is implemented. The executive agreement on digital trade mirrors the digital chapter in the U.S.-Mexico-Canada Agreement.