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  August 25th, 2016 | Written by

Japan or the UK?: Prioritizing U.S. Trade Talks

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  • UK break with the EU was was more important than trade agreements with the U.S.
  • The presidential candidates are enthused with the Trans-Pacific Partnership.
  • Japan’s Prime Minister, Shinzo Abe, wants TPP as much as Obama.

When CNN and other networks present their year in review broadcasts in a few months, and they get to the winners and losers section, one of the biggest losers will be international trade—or, at least, the perception of international trade.

The United Kingdom’s break with the European Union was a declaration of independence from meddling Brussels bureaucrats, which was deemed more important than eligibility for trade agreements with the U.S. and other nations. The U.S. and the EU are currently negotiating the Trans-Atlantic Trade and Investment Partnership (TTIP).

Meanwhile, President Barack Obama continues to sing the praises of the Trans-Pacific Partnership agreement, but his enthusiasm is not shared by either of his potential successors, and Congress has no interest in moving forward on its passage.

Assuming this does not change after a new president takes the oath of office, new free trade agreements will have to be negotiated with both the UK and Japan. The question is, which should be the first order of business for the new administration?

U.S. – UK: The Special Relationship

At the moment the UK appears to take precedence, not surprising as it is the single largest foreign investor in the U.S., supporting one million jobs across the country, nearly 25 percent of which are in manufacturing.

U.S. exports to the UK totaled $123 billion last year, $5 billion more than the previous year. The country is the fourth largest global market for U.S. products.

Discussions are already underway on a new trade deal. The Confederation of British Industry has recommended that the U.S. be put at “the top of the list” when establishing new trade and investment relationships. And while President Obama had threatened to send the UK to the back of the queue if Brexit passes, his rhetoric since the vote been less confrontational.

U.S.-Japan: It’s Complicated

When Donald Trump talks about how the United States negotiates lousy trade agreements, Japan is often the first country cited as evidence. In the first six months of 2016, U.S. trade in goods with Japan topped $63 billion in imports, but just over $30 billion in exports, a trade deficit of more than $33 billion.

Should Mr. Trump win in November, such attacks and his fervent opposition to TPP may sour negotiations for something deemed more acceptable.

Japan’s Prime Minister, Shinzo Abe, wants TPP as much as President Obama, insisting that the agreement is vital to bolstering his country’s stagnant economy. That has put him in opposition to Japan’s farm lobby, which does not wish to consider lower barriers to important of rice and other agricultural products.

The United States is the leading agricultural supplier to Japan. Farmers and food suppliers in the U.S. saw in TPP an opportunity to expand further into the Japanese market, as the agreement would have eliminated long-standing tariffs and quotas on American meat imports such as beef and pork.

Japanese protectionism is not limited to what’s for dinner. The U.S. auto industry has long operated at a disadvantage because Japanese consumers believe it is their civic duty to buy cars made in Japan. Imports account for less than 10 percent of sales in Japan according the data from the respective industry associations.

If U.S. automakers want to crack that market, they are almost forced to build their cars in Asia, which takes away U.S. jobs.

Currency manipulation is another issue. An Economic Policy Institute report cites this action as the most significant cause of the trade deficit, and claims it cost the U.S. nearly 900,000 jobs in 2012.

This issue is not one that TPP would have addressed – U.S. Trade Representative Michael Froman said currency provisions would not be rolled into the agreement, and President Obama told House Democrats that adding currency provisions is too complicated and not workable.

Should Trump be elected, one assumes this situation would have to be resolved before a new trade agreement is reached. That may also be the case if Hillary Clinton is elected, since the issue is now one that is much more familiar to American voters.


The priority will likely be finishing a new free trade agreement with the UK, as it presents fewer roadblocks to completion. There is much untapped potential in the future of U.S.-Japan trade, but it may never be achieved if Japan clings to its current protectionist stance.