Japan has fired a warning shot at the Trump administration ahead of the first round of trade talks next week, insisting the US will have to offer better access for Japanese goods if it wants to secure a free trade deal.

An agreement that does not include concessions to Japan would be illegal under World Trade Organization rules and stands no chance of ratification by Japan’s Diet, according to a senior trade official directly involved in preparations for the talks.

The comments highlight how hard it would be to reach a deal that is acceptable to Japan and also satisfies US president Donald Trump’s demands for gains on both agriculture and automobiles. 

The official said an agreement without significant concessions from the US would violate the WTO’s Article 24, which requires free trade deals to cover “substantially all” trade between two countries and it would be “impossible to bring it to the Diet”.

“Clearly there are some arguments about [Japan making] unilateral concessions which I couldn’t understand,” said the official.

However, Japanese negotiators know they have to tread carefully because of the risk that Mr Trump could slap tariffs on Japanese car exports, a crucial sector of the economy. 

Last September, Mr Trump and Shinzo Abe, Japan’s prime minister, agreed to discuss a “trade agreement on goods and other key areas including services, that can produce early achievements”.

But the two sides diverge on what that means. US officials have signalled they expect a broad agreement, including on issues such as currency manipulation and pharmaceutical pricing. This would be on top of agricultural concessions that go beyond what Japan agreed in the Trans-Pacific Partnership, a regional free trade deal from which Mr Trump withdrew.

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Japan wants the talks with Robert Lighthizer, the US trade representative, to be narrowly focused on goods and some services, and expects to grant the same agricultural concessions it gave in the TPP in return for getting better access for its industrial exports.

The TPP cut Japanese tariffs on imports of chilled beef from the standard rate of 38.5 per cent to an initial level of 27.5 per cent. That has put US farmers at an 11 percentage point disadvantage on price, prompting farmers to pressure the US to launch trade talks quickly as they rapidly lose market share in Japan.

Under the TPP, Japan was set to enjoy big cuts in US tariffs on industrial goods, including a reduction of the levy on automobiles from 2 per cent to zero. It hopes to replicate some of those gains in a bilateral deal.

The Japanese official said Tokyo will discuss “nothing more and nothing less” than what was agreed with Mr Trump in September, and currency matters may not be part of the talks as a result. “We have to be clear that anyone other than Mr Lighthizer speaking on this issue is completely irrelevant,” said the official. 

Talks between the US and Japan have been slow to start because Mr Lighthizer has been focused on agreeing a trade deal with China. Negotiations between Tokyo and Washington are unlikely to start in earnest until that process is resolved.



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