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U.S. Approves Japan’s Entry into Trans-Pacific Talks After “Robust Package” of Concessions

Wednesday, April 17, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

The U.S. has approved Japan’s bid to join the ongoing Trans-Pacific Partnership negotiations after “concluding a robust package of actions and agreements” aimed at resolving several long-standing trade irritants. The U.S. will now work with the other ten TPP countries “to facilitate Japan's participation in the TPP negotiations as expeditiously and smoothly as possible.” Japan could take part in the talks as soon as mid-July, which some observers say could jeopardize the goal of concluding an agreement by the end of this year.

Information made available by the Office of the U.S. Trade Representative states that the two sides have agreed on a process for addressing in parallel to the TPP negotiations a number of non-tariff measures in the areas of insurance, transparency, trade facilitation, investment, intellectual property rights, standards, government procurement, competition policy, express delivery, and sanitary and phytosanitary standards. Outcomes achieved on these NTMs will be tangible and meaningful and implemented through legally binding agreements, exchange of letters, new or amended regulation or law, and/or other mutually-agreed upon means when the TPP takes effect with respect to both countries.

With respect to trade in motor vehicles, which has been a politically sensitive topic for many years, the two sides will use a bilateral negotiation parallel to the TPP talks to address a broad range of NTMS in Japan’s automotive sector, including those related to transparency in regulations, standards, certification, green and new technology vehicles, and distribution. They will also negotiate a special motor vehicle safeguard provision as well as a mechanism to “snap back” tariffs as a remedy in dispute settlement cases. In addition, Japan has agreed that U.S. tariffs on imports of Japanese motor vehicles will be phased out in accordance with the longest staging period for any other product in the TPP negotiations, that these phase-outs will be “back loaded” to take place at the end of the staging period, and that “treatment of these U.S. tariffs will substantially exceed the U.S. tariff treatment provided in the U.S.-Korea Free Trade Agreement.” Finally, Japan unilaterally decided to more than double (from 2,000 to 5,000) the number of motor vehicles annually eligible for import under its Preferential Handling Procedure, which is a simpler and faster certification method often used by U.S. auto manufacturers to export to Japan.

A USTR fact sheet notes that bilateral consultations have also yielded an agreement to address concerns about “the lack of a level playing field for U.S. companies in Japan’s insurance market in relation to Japan Post Insurance” in the TPP talks as well as through parallel negotiations. In addition, Japan unilaterally announced that it will refrain from approving new or modified cancer insurance and/or stand-alone medical products of Japan Post Insurance until it determines that equivalent conditions of competition with private sector insurance suppliers have been established and Japan Post Insurance has a properly functioning business management system in place, which Japan expects will take at least several years to achieve.

Reaction to USTR’s announcement from key U.S. lawmakers was largely skeptical. Senate Finance Committee Ranking Member Orrin Hatch, R-Utah, said that the Obama administration “must believe that Japan has the ability and political will to meet the high-standard, comprehensive commitments that have long defined U.S. trade agreements” and that he “sincerely” hopes that is the case. House Ways and Means Committee Chairman Dave Camp, R-Mich., said “the bottom line” is that Japan must address well-known barriers to U.S. exports, and he called for “airtight assurances” that Japan’s participation in the TPP “will neither diminish the comprehensive and ambitious nature of these negotiations nor delay the goal of concluding the negotiations this year.” Ways and Means Ranking Member Sandy Levin, D-Mich., said the package negotiated by USTR “does not provide an adequate basis” for Japan’s entry into the TPP, criticizing particularly the provisions on auto trade and the “absence of any mention of currency.”

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