Extraordinary Press Conference by Foreign Minister MOTEGI Toshimitsu
Wednesday, September 25, 2019, 2:01 p.m. New York City, United States
Mr. Toshimitsu Motegi, Minister for Foreign Affairs: Today from 12 o’clock, a signing ceremony for trade agreements was held for 20 minutes, and after that Japan-U.S. Summit Meeting was held for 70 minutes. The two leaders confirmed that they had reached the final agreement on the Japan-U.S. Trade Agreement and the Japan-U.S. Digital Trade Agreement. Furthermore, the two leaders agreed that afterwards they would sign these agreements promptly and that they would bring the agreements into force quickly after their respective domestic procedures will have been completed, and then they signed the U.S.-Japan Joint Statement.
The two leaders once again declared that the Japan-U.S. Trade Agreement would expand the bilateral trade between Japan and the United States, which accounts for approximately 30% of the world’s GDP, in a strong, stable and reciprocal manner, and that the Japan-U.S. Digital Trade Agreement presents high-standard rules in this area, and that Japan and the United States would continue to play a leading role in global rule-making on digital trade.
Let me now explain the outline of the content of the agreement.
In your hands you have the materials explaining the outline of the Joint Statement and the related contents of the agreements that we handed out earlier. I will explain following these materials.
Firstly, the Japan-U.S. Trade Agreement is an agreement concerning the trade in goods between Japan and the United States, which accounts for approximately 30% of world’s GDP. Combined with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP11), which already came into force, the Japan-EU EPA and this Japan-U.S. agreement, Japan has built an enormous common market accounting for approximately 60% of world’s GDP, with a population of 1.34 billion people.
Now I will get into the specific content of the agreements.
Firstly, Japan’s tariff concessions on agricultural products are all limited within the range established in the Trans-Pacific Partnership (TPP). In particular, rice has been completely excluded from the concession. Furthermore, for 33 products such as powdered skim milk and butter, whose tariff quota has been established at the level of TPP, it was decided not to establish any new special quota for the United States. For other products on which we agreed to grant concessions, the conditions are the same as those stipulated in the TPP: the same tariff rates as those applicable between the Parties to TPP11 will be applied to these commodities after the agreement’s entry into force. On the other hand, no concessions were granted for a large number of products, such as all forestry and fishery products.
The main contents agreed upon this time are recapitulated on the second page and onwards on the material. Regarding rice, as I said earlier, while the TPP recognized the United States’ quota of 70,000 tons for rice and rice powder, this time quotas for the United States are not recognized, and not only rice, rice powder and all other preparations but all rice-related products, are fully excluded from the quota. Regarding beef, the reduction of tariffs is the same as defined in the TPP. Regarding safeguards, implementation criteria are determined in the TPP, so they cannot be directly applied to the United States. Therefore, after the negotiations, it was agreed to set the implementation criteria quantities with respect to the United States to 242,000 tons for the fiscal year 2020, whose figure is smaller than 255,000 tons of imports from the United States in fiscal year 2018. Please note that it has been decided that from the fiscal year 2023 onwards, given that the TPP11 agreement will have been amended by then, consultations will be held to consider switching to a method under which the imports from the United States and the Parties to TPP11 will be added, to which the safeguard implementation quantity criteria set for the TPP will be applied.
Going on to the third page, concerning tariff reduction and elimination for commodities such as pork, wheat and dairy products, the contents are the same as under the TPP. Furthermore, regarding wine, the tariffs are eliminated under the same condition as stipulated in the TPP. On the other hand, in order to promote exports of Japan-made alcoholic beverages to the United States, this time we have obtained a promise from the United States regarding non-tariff barriers such as revision of the capacity regulations on alcoholic beverages in the United States, which Japan has sought from the United States since the time of the TPP.
Furthermore, in order to contribute to the promotion of export of Japan’s agricultural products, regarding beef exported from Japan for the United States, we have secured access to a low-tariff quota of 65,005 tons, the sum of the current quota of 200 tons for Japan and that for multiple countries (other countries) which is currently set to 64,805 tons. This means an expansion of more than 300 times from the current situation.
Industrial products are mentioned on the fourth page. Regarding automobiles and automobile parts, the “elimination of tariffs through further negotiations” is now clearly stated in the tariff schedule of the United States. The specific timing for the elimination of the tariffs will be decided in the negotiations going forward, but the rules of origin that the industrial world was strongly concerned about are not provided for in this agreement. Regarding automobiles, it would enter a period of major transformation due to electrification of automobiles and automation of driving. There would be a change in the combination of a variety of components used, and naturally their importance will change. It was judged appropriately that we will carefully monitor this situation and continue to hold consultations.
Furthermore, regarding the handling of Section 232 of the Trade Expansion Act pertaining to automobiles and automobile parts, in paragraph 4 of the Japan-U.S. Joint Leaders’ Statement that was issued earlier, it is clearly stated that “while faithfully implementing these agreements, both nations will refrain from taking measures against the spirit of these agreements and this Joint Statement.” Moreover, at the Summit Meeting held earlier, Prime Minister Abe clearly confirmed with President Trump that the gist of this phrase is that additional tariffs would not be imposed on automobiles and automobile parts from Japan. Furthermore, two days ago on September 23, at the Ministerial Consultation, Representative Lighthizer and I once again clearly confirmed that “measures such as quantitative restrictions and voluntary export restrictions will not be imposed” on exports of Japanese automobiles and automobile parts. Furthermore, we have obtained the consent of the U.S. side to announce this publicly.
Regarding other industrial products, we have realized the early elimination and reduction of tariffs, including immediate elimination in some cases, primarily for commodities which Japanese companies are highly interested in exporting and are traded in large volumes. Taking several examples, tariffs on high-performance machine tools and components that embody Japan’s high level of manufacturing capacity, for instance a machining center, a numerically controlled machine tool, will be eliminated on the second year. Furthermore, tariffs will be eliminated immediately for the materials deemed necessary for local production in the United States by Japanese companies, including components of air conditioners. Tariffs on fuel cells will be eliminated immediately, as they are commodities related to cutting-edge technologies, the market size of which is expected to greatly expand going forward.
The above is the outline of the content of the agreement concerning the Japan-U.S. Trade Agreement. As you understood when listening to the explanation, I believe that the contents are balanced regarding both agricultural and industrial products. I suppose that all the farmers can have peace of mind over the agreement, and that the content is sufficiently acceptable for Japan’s automobile industry and the industrial world as well. Regarding agricultural products in particular, I believe that the content of the present agreement constitutes the final common ground between the position of Japan, for whom the maximum concession level is limited to what has been stipulated in previous economic partnership agreements, as clearly stated in last year’s Joint Statement, and the demand of the United States to end the subordination to other countries such as the TPP member countries, as soon as possible.
Next, the outline of the agreement pertaining to the Japan-U.S. Digital Trade Agreement is shown on page 5 of the material. This is an agreement with the purpose of developing the rules for the promotion of smooth, highly reliable, and free digital trade, and it has a different character from the Japan-U.S. Trade Agreement, which provides for the elimination and reduction of tariffs on goods, which is why this forms a separate agreement.
Specifically, as written in the materials, provisions similar to the chapter on electronic commerce in the TPP is expected, for example, no-imposition of tariffs on electronic transmissions and non-discriminatory treatment of digital products. Furthermore, there are provisions based on those of the TPP but strengthened given the development in this field, including a ban on requests to disclose algorithms or codes. Moreover, it incorporates new elements reflecting the recent situation, such as provisions concerning the civil liability of service providers of social networking services (SNSs). At a time when it has become important to establish rules on the way we use digital data that is the key to the data-driven economy, involving AI, e-commerce, big data and more, I think that this agreement compiled between Japan and the United States is extremely valuable.
Please note that the schedule concerning the Japan-U.S. Trade Agreement and the Japan-U.S. Digital Trade Agreement is to carry out legal scrub of the clauses including the main text of the agreement and the concession schedule, and then sign the agreement promptly. A side letter will also be exchanged at the time of signing. After that, both Japan and the United States will carry out the necessary domestic procedures to swiftly bring the agreement into force.
If you have any questions about the content and details written in the agreement, officials will provide supplementary explanations.
Virtually, we were able to reach the final agreement in half a year. We started Japan-U.S. negotiations on September 26 last year, which is exactly one year ago. I think it was important that in the Japan-U.S. Joint Statement on September 26 last year we agreed to launch negotiations and start from sectors where results could be expected quickly. In the present negotiations, we were able to hold concentrated discussions by focusing on the sectors of goods trade and digital trade.
Finally, I think that we managed to find common ground, even in tough negotiations in which the national interests of the two countries clashed, precisely because of the relationship of trust between Japan and the United States and the relationship of personal trust between Prime Minister Abe and President Trump. That is all from me.
Reporter: May I ask a question regarding automobiles? The outline mentions re-negotiation. By when do you intend to ultimately eliminate tariffs? Is there a target? Please explain the upcoming negotiation schedule.
Minister Motegi: With regard to automobiles and automobile parts, the content of the concessions and concession schedule is as I stated earlier. It was decided that this Agreement would not stipulate the specific timing of tariff elimination or rules of origin. However, automobiles are undergoing a period of grand transformation due to electrification and autonomous driving, and there is a significant possibility that the composition of various parts and their importance will change. Based on such circumstances, it was deemed appropriate to continue consultations. As explained, also under the TPP, duties on automobiles were to be eliminated over a long phase of around 20 years. We will discuss tariff elimination going forward, and in this process, we shall also discuss what timing would be appropriate.
On the other hand, with regard to automobile parts, we would probably see the emergence of autonomous cars and electric vehicles. Electrification will entirely change the number of parts and engine composition, the number of parts will decrease considerably, and the importance of each component will also change. Thus, rather than determining on which parts tariff eliminations will be applicable at this point without examining such circumstances, we considered that it is more appropriate to hold negotiations after having considered such circumstances, which I believe will become evident in the next few years, and narrowing the target, that is, the parts Japan is most interested in. This is why this format was chosen.
Reporter: For example, in the first year immediately following the entry into force, Japan will import agricultural products under the same condition as under the TPP. However, is my understanding correct that the level of concession on automobile duties is inferior to that under the TPP in the first year?
Minister Motegi: For example, rice, considered a sanctuary in agriculture for Japan, was completely excluded from the concession. Furthermore, no new quota has been established for the United States for the 33 items whose quota are established in the TPP and are applicable to all Parites. Meanwhile, tariffs on beef and other items whose concession status was behind that of other countries will become the same as the others. However, as I explained with regard to parts and industrial products, tariffs will be eliminated immediately, in the second year, for parts and industrial products that are important for Japan for an active sales, such as machining center, air conditioner parts, and fuel cell. We consider that this is a balanced agreement, including such aspects.
Reporter: The third paragraph of the Joint Statement states that Japan and the United States intend to “enter into negotiations thereafter in the areas of customs duties and other restrictions on trade, barriers to trade in services and investment, and other issues.” What time schedule do you envision for these negotiations? If the two countries were to conduct negotiations, will it be held between you and United States Trade Representative Lighthizer?
Minister Motegi: It is as is stated. If I can explain, first Japan and the United States intend to conclude consultations over the agenda of discussion within four months after the date of entry into force of the Japan-U.S. Trade Agreement. Thereafter, we intend to enter into negotiations in the areas of customs duties and other trade restrictions, barriers to trade in services and investment, and other issues in order to promote mutually beneficial, fair, and reciprocal trade. It does not mean negotiations in all of these areas. In the consultations that is intended to be concluded in four months, we will decide which areas should be covered, and then we will start negotiations. By the way, “customs duties” stated here for further consultations under this Agreement envision items over which we have decided to pursue further negotiations. Other items are not envisioned.
As for the question of who will do it, at the very least it has been decided that they will be carried out between Japan and the United States. I believe these consultations will first be conducted at the working level.
Reporter: A related question, at the beginning of the signing ceremony, President Trump stated that the “team will continue negotiations on areas to reach comprehensive agreements.” Is it correct to understand that these “comprehensive agreements” refer to the consultations you just mentioned?
Minister Motegi: First of all, with regard to what President Trump meant by “team,” I suppose the simplest understanding is that it refers to those who have been involved in the negotiations thus far. The negotiations this time were narrowed down to trade in goods and digital trade. In this regard, President Trump may have used the term “comprehensive” to mean that the areas will be expanded from trade in goods and digital trade.
Reporter: Then there is no discrepancy if the President’s comment is interpreted as taking into account the third paragraph of the Joint Statement?
Minister Motegi: Yes, naturally, after all this is a joint statement between Prime Minister Abe and President Trump.
Reporter: You said that the tariff levels for agricultural products under this trade agreement fall within the levels set in the TPP. If the United States will ask for further opening of Japanese agricultural products market, does Japan intend to agree to hold negotiations?
Minister Motegi: As I responded earlier, the third paragraph just mentioned envisions negotiations on customs duties, and it is evident from reading the statement, as it is stated specifically, that it covers the items that are subject to continued consultations under the Agreement. This is what we envision, and at this stage, we do not envision anything else related to trade in goods.
Reporter: I have a question regarding additional automobile duties under Section 232. The Joint Statement contains a phrase “while faithfully implementing these agreements.” Is it OK to interpret that Japan will be exempt from Section 232 the whole time while the trade agreements are in force?
Minister Motegi: Generally speaking, we consider that this agreement is being faithfully implemented unless measures are taken against it, and Prime Minister Abe directly confirmed with President Trump at the Summit Meeting that during such time, Section 232 will not be imposed.
Reporter: Please tell us the two sides’ tariff elimination rate per item. Also, regarding duties on beef, I think that the margin of concession for the United States was inferior to Australia and New Zealand under the TPP. The TPP is in its first year after its entry into force, and the United States would not be able to catch up with Australia and New Zealand. Can you tell us how duties on beef will be reduced from 38.5% to 9%?
Minister Motegi: With regard to the first value, there is a way to find this out. I would like to respond to your question on the values at some point upon carefully examining them. In addition, same as the TPP means, for example, if the United States had remained in the TPP, or if there are new signatories to the current TPP11 on a year I do not know, let us now say the third, that Australia, New Zealand or Canada have entered its third year under TPP, the tariff rate will decrease and the tariff rate for the third year will be applied from the time of accession. The same format will be adopted for the United States. The similar method as the TPP rules will be followed in the latest Japan-U.S. Trade Agreement.