HOW HAS JAPAN COPED WITH THE TRUMP ADMINISTRATION’S TRADE POLICY? Keisuke Iida Harvard Program on U.S.-Japan Relations Occasional Paper Series 2019-02 https://programs.wcfia.harvard.edu/us-japan/research TABLE OF CONTENTS Introduction ............................................................................................................................................... 1 Uniqueness of the Trump administration ................................................................................................. 2 Challenges for Japan ............................................................................................................................... 3 Japan’s responses .................................................................................................................................... 4 Explanation .............................................................................................................................................. 5 Reactive state ........................................................................................................................................... 6 Coercive bargaining .............................................................................................................................. 11 Proactive FTA strategy .......................................................................................................................... 12 Domestic constraints .............................................................................................................................. 13 Japan’s response ................................................................................................................................... 15 Asō–Pence Talks ...................................................................................................................................... 16 Policy challenges ................................................................................................................................... 16 Trump’s hostility to TPP ........................................................................................................................ 16 Abe’s attachment to TPP ....................................................................................................................... 19 Persuasion ............................................................................................................................................. 20 Japan’s response ................................................................................................................................... 21 Abe–Trump meeting of February 2017 .................................................................................................. 21 US reactions ........................................................................................................................................... 23 First round ............................................................................................................................................. 24 Second round ......................................................................................................................................... 26 Trump’s visit .......................................................................................................................................... 27 International and domestic constraints .................................................................................................. 28 “Reactive state”? ................................................................................................................................... 30 Negotiating TPP-11 .................................................................................................................................. 31 Policy challenges ................................................................................................................................... 31 Japan’s response ................................................................................................................................... 32 Tokyo opts for TPP-11 ........................................................................................................................... 33 Minimalist option ................................................................................................................................... 36 Japan’s leadership ................................................................................................................................. 37 Keeping changes to a bare minimum ..................................................................................................... 40 US reactions ........................................................................................................................................... 43 Domestic constraints .............................................................................................................................. 45 “Proactive state”? ................................................................................................................................. 46 Negotiating the Japan–EU EPA ............................................................................................................. 47 Policy challenges ................................................................................................................................... 47 Japan’s response ................................................................................................................................... 47 Impasse .................................................................................................................................................. 49 Imai mission ........................................................................................................................................... 51 Changing the wording ........................................................................................................................... 52 ISDS ....................................................................................................................................................... 57 US reactions ........................................................................................................................................... 59 Domestic constraints .............................................................................................................................. 59 “Proactive state”? ................................................................................................................................. 60 Coping with Section 232 .......................................................................................................................... 61 Policy challenges ................................................................................................................................... 62 Japan’s response ................................................................................................................................... 63 Pleading for exemption .......................................................................................................................... 64 Product-by-product exclusions .............................................................................................................. 65 Fending off US coercion ........................................................................................................................ 66 Cooperation with third countries ........................................................................................................... 66 WTO strategy ......................................................................................................................................... 67 US reactions ........................................................................................................................................... 72 Domestic constraints .............................................................................................................................. 72 “Reactive state”? ................................................................................................................................... 73 Agreeing to Start TAG Negotiations ...................................................................................................... 73 Policy challenges ................................................................................................................................... 74 Pressure for a bilateral FTA .................................................................................................................. 74 Section 232 for autos ............................................................................................................................. 75 Japan’s response ................................................................................................................................... 77 FFR talks ............................................................................................................................................... 78 EU deal .................................................................................................................................................. 81 September 26 agreement .......................................................................................................................