US To Start Trade Talks With Japan With Aim Of Reduce Its $56 Billion Trade Deficit

For Japan, exports are much more than the crucial factor for economic growth – it is also the foundation of growth model of the country and a very crucial and dynamic component that drives the business cycle of the economy.

About one third of the GDP of the country last year was accounted to for by net exports. And about a quarter of aggregate demand was accounted for by it in the first nine months of this year. It is estimated that this year too, the net exports would be similar to those last year.

Japan exported goods worth about $117.6 billion to the US in the first 10 months of the current year, which is almost the same as the amount of exports that Tokyo did to China in the same period. But there is a major difference in both the numbers because Japan generated a $56.2 billion trade surplus with the U.S., while it had a trade deficit with China to the tune of $23.3 billion.

And Washington has now apparently realised the need to bring down its trade deficit with Japan as well as the high trade barriers that denies US companies access to the Japanese market — two years since Donald Trump took charge of the Oval office. The US and Japan are set to begin negotiations on trade on January 20, 2019, which would focus on agricultural goods and tariff-free exports of American manufactured from Washington’s side.

The US also seeking a better balance in trade of motor vehicles which comprises about 75 per cent of the U.S. trade deficit with Japan. According to demands of United Auto Workers union, US should impose quotas on import of Japanese vehicles and parts and quotas should only be increased if there is a corresponding increase of US auto and parts to Japan.

And even though Japan could be given some time by the US to adjust to the new trading regime – specifically in relation to agriculture, the writing is more or less etched on the wall in terms of trade relations. However demands for tightening up the enforcement instruments and procedures by the US are already being made by the Democrats there.

And for the Donald Trump’s administration, the results of an opinion poll in Japan published last Wednesday, holds a different story apart from its trade relations with Japan. The results showed that only that only 39 per cent of respondents were of the opinion that the relatio0n between the US and Japan were “good”. The same number last year was 56 per cent. Almost 40 per cent of the respondent believed that the US-Japan relations were “bad,” which was almost half of the number on the same question a year ago.

That is a tricky situation for the US with respect to an ally whose security is mostly dependent on the US and whose flourishing of the economy is directly related to the unhindered access that Japanese companies get to US market and customers.

This could be a problem for Trump and his trade representatives when they sit with t heir Japanese counterpart next year.

(Adapted from CNBC.com)

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Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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