US-Japan Trade Pact: Advisory Committee Reports

The U.S. trade advisory committees submitted reports to the U.S. Trade Representative (USTR) in October on the recently signed U.S.-Japan trade agreements on agricultural and industrial tariffs and digital trade, referred to as “Stage One” agreements. According to Inside U.S. Trade, USTR sent the reports to Congress (Senate Finance and House Ways and Means Committees) on November 15. While the reports garnered support from those with a direct interest in the mini agreement, a number of committees focused on the need to move to negotiations of a comprehensive trade agreement. This post highlights certain recommendations, in particular with respect to government procurement.

The Advisory Committee for Trade Policy and Negotiations (ACTPN), the top advisory panel, the Intergovernmental Policy Advisory Committee (IGPAC) and 17 committees representing agricultural and industry sectors, as well as labor and environmental interests, provided their assessments of the Stage One agreements. Their reports were required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA) and the Trade Act of 1974.

Advisory committees with direct interests in elements of the mini deal were overall supportive of the results. Particularly important to those representing agricultural interests was the need to quickly remove tariffs and trade barriers that have placed U.S. agricultural products at a disadvantage with respect to products from countries benefiting from the Comprehensive and Progressive Trans-Pacific Partnership and Japan’s recent agreement with the European Union.  

With respect to the Digital Trade Agreement, the Services Committee welcomed its guarantee that U.S. services exporters will be able to move their data in and out of Japan and commitments that Japan will not force the localization of data storage. The advisory committee on the Digital Economy found that Agreement “provides both equity and reciprocity in the digital economy sector” but emphasized that it represents “only one step” forward in the U.S.-Japan trade relationship. It urged USTR to seek further commitments in Stage Two and negotiate a comprehensive agreement that would include the various issues found in a traditional FTA and provide for dispute settlement.  It noted that the Digital Trade Agreement “is only enforceable through unilateral action under Section 301 of the Trade Act of 1974” (the law that the president has used as authority for his tariffs on China).

The ACTPN and a number of other committees also stressed the importance of negotiating a comprehensive agreement that would cover “substantially all trade” with Japan and address all TPA objectives. The ACTPN’s specific recommendations include negotiation of a strong Regulatory Coherence chapter that would promote the use of good regulatory practices. It drew attention to concerns with Japan’s regulatory environment, in particular the implementation of its Public Comment Procedure where ministries and agencies apply “a too-short timeframe” and the lack of uniform provision of “meaningful opportunity to comment and submit new data on the impact of policies, regulations, standards, procedures and other measures as they are developed.” 

Several committees, in particular ACTPN and the Services and Digital Economy Committees, advocated negotiation of a government procurement chapter that includes transparent, open and nondiscriminatory requirements and ensures U.S. firms have equal access to Japan’s government market. ACPTN also seeks “an explicit requirement that governments should use only non-infringing software and according to its licenses.” The Services committee added that U.S. service providers should have access to “objective reviews of procurement decisions.”

The Digital Economy Committee does not consider Japan’s commitments under the WTO Government Procurement Agreement (GPA) to be sufficient “to ensure that U.S. providers can compete effectively in Japan’s government procurement market,” which it referred to as “historically-closed.” It pointed out that the inadequacy of plurilateral obligations had led the United States in the 1990s to negotiate a number of bilateral procurement agreements with Japan that covered computers, supercomputers, telecommunications and NTT procurement. It noted that those agreements “did not provide for reciprocal market access; rather, they obliged Japan to undertake a series of procedural reforms and commit to market access outcomes that were only partially successful.” Since those agreements “have lapsed,” it urges the negotiation of new bilateral procurement commitments as part of a comprehensive agreement.

The approval of the trade pact by the lower house of Japan’s Diet on November 18 increases the likelihood that the Stage One agreements will enter into force in January 2020. What is less certain is the negotiation of a comprehensive agreement that addresses all the issues not covered in the first stage.

Jean Heilman Grier

November 20, 2019

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