U.S., Japan Launch a New Trade Initiative with a Clear Focus on China

November 2021

BY

Damen V. PikePrincipal, Customs & International Trade Services

In a joint statement released on November 17, 2021, the U.S. and Japan announced the formation of the U.S.-Japan Partnership on Trade, an initiative to facilitate regular discussions on trade issues, which both nations consider critical due to China’s continuing economic rise.
 
The announcement was made during the first visit to Japan by the U.S. Trade Representative (USTR) and underscores the importance both governments are placing on the long-running issue of “market-distorting practices,” such as industrial subsidies and overproduction.  According to the announcement, the intent of this trade initiative is to deepen cooperation between the U.S. and Japan and reaffirm their “shared commitment to strengthen this alliance through regular engagement on trade-related matters of importance to both countries.”
 
The initial areas of focus will include:
  • Third-country concerns;
  • Cooperation in regional and multilateral trade arenas;
  • Labor- and environment-related priorities;
  • Supportive digital ecosystems; and
  • Trade facilitation.
 
The first series of meetings under the U.S.-Japan Partnership on Trade are expected to occur in early 2022. Thereafter, periodic meetings will be held on a regular basis to advance a shared agenda of cooperation across a broad range of issue areas, as well as to address bilateral trade areas of concern.
 
Although USTR Katherine Tai provided no specifics with regard to what actions may be taken by the U.S. or Japan as a result of this initiative, she did state “[o]ur close collaboration will support the Biden-Harris administration’s economic framework for the Indo-Pacific and help create sustainable, resilient, inclusive, and competitive trade policies that lift up our people and economies.” Whether this may ultimately lead to additional trade sanctions or other actions against China due to its market-distorting practices, forced labor concerns, required technology transfers and other trade related issues is an open question.
 
It is also significant to note that USTR and the trade ministers of Japan and the European Union issued a joint statement also on November 17 announcing their agreement to “renew” their partnership to deal with the “global challenges posed by non-market policies and practices of third countries.” This may signal the start of a multilateral effort to curb the market disruptions believed to be caused by China’s non-commercial practices. How sustained these collaborative efforts may be and whether they will have any immediate or long-term impact on China’s behavior remain to be seen. However, the fact that various countries are entering into such agreements primarily due to the impact of Chinese trade policies should, at a minimum, alert China that its trade practices are of growing concern globally.
 
The U.S. and Japan also confirmed that they will work to resolve a dispute over additional U.S. tariffs on steel (25% ad valorem) and aluminum exports (10% ad valorem) to the U.S. imposed by the prior U.S. administration. Japan is seeking the normalization of trade in steel and aluminum similar to that recently resolved between the U.S. and the EU. Further, the U.S. and Japan will establish a new partnership to strengthen industrial competitiveness, supply chains for key components (including semiconductors and those linked to 5G networks) and economic security.
 

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