Policy Article

The US–Japan Trade Deal: Narrow Scope, Wider Implications

Kiel Policy Briefs, 131

The authors analyze whether the US–Japan Trade Agreement is consistent with GATT Article XXIV that carves out an exception to the WTO’s ‘Most-Favored Nation’ (MFN) principle. They conclude that the agreement is unlikely to meet the ‘substantially all the trade’ criterion of GATT Article XXIV since the scope of tariff liberalization is very narrow. The US and Japan have agreed to liberalize just 3.4% and 10% of tariff lines with positive MFN duties, respectively. Key sectors for US exports to Japan such as machinery and instruments are not liberalized under the agreement. Though the market access offered to specific US agri-food products is similar to Japan’s commitments under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Japan has not ‘rolled over’ the entire CPTPP schedule for the US. Tariff concessions are asymmetric and indicate the relative disadvantage with which Japan entered into bilateral negotiations with the US. Overall, the market access gained by Japan from this deal is highly circumscribed in comparison to the recently implemented EU–Japan Economic Partnership Agreement.

Authors

Sonali Chowdhry
Toshihiro Okubo