Averting trade war with China, Japan and US agree to seek pact

Japan agreed Wednesday to negotiate a trade pact with the United States, easing fears that President Donald Trump would zero in on the US ally for his next tariff offensive.

Japanese Prime Minister Shinzo Abe and Trump, meeting on the sidelines of the annual UN General Assembly session, said they would open talks on goods with a view to building freer trade.

In a joint statement, Trump and Abe pledged to "refrain from taking measures against the spirit" of their understanding for as long as negotiations go on.

Abe, addressing reporters afterward, said Japan understood that the agreement meant the United States would not take any action under so-called Section 232 -- a US legal clause, of which Trump has become fond, that allows Washington to restrict imports due to concerns over national security.

"We must not set the hands of the clock backward," Abe said, calling instead for the two countries to "reinvigorate our mutual trade and investment." Abe formed an early bond with Trump after the real estate tycoon's unexpected election victory, with the two leaders since chatting more than two dozen times on the telephone, according to officials.

But Trump, who became a business celebrity in the 1980s when Japan's economic miracle looked unstoppable, has grumbled about the US trade deficit with Japan.

He recently told The Wall Street Journal that while he had good relations with Japan, "Of course, that will end as soon as I tell them how much they have to pay."

Speaking as he announced the trade negotiations with Abe, Trump said: "Japan is very smart. Great negotiators. And, you know, up until now, they've done very well, and they'll continue to do very well." Trump this week slapped $200 billion of tariffs on China, which also has a large trade surplus with the United States, and on Wednesday he bluntly said that his onetime friendship with Chinese President Xi Jinping could be over.

He has also imposed sweeping tariffs on steel and aluminum even from allies such as the European Union and Canada, citing Section 232.

The United States and Japan, the world's first and third largest economies, together make up about 30 percent of global GDP and have long had trade ties that are both fractious and interconnected.

Abe took political risks at home in 2013 by entering negotiations for the Trans-Pacific Partnership, or TPP, conceived as a vast bloc across both sides of the Pacific which would help build US influence in Asia in the face of growing Chinese influence.

But Trump withdrew from the TPP days after taking office, fulfilling a campaign promise aimed at blue-collar workers.

Abe had previously voiced hope that the United States would return but agreed to the bilateral talks amid growing concern about Trump's intentions.

"The president is not going to join the TPP. But this is a very important step, in terms of expanding our relationship with Japan," US Trade Representative Robert Lighthizer told reporters on a conference call.

The proposed trade deal would only focus on goods and would not be a full-fledged free trade agreement, a much more complex and time-consuming deal that also looks at the service sector.

Atsuyuki Oike, Japan's deputy chief negotiator for the TPP, said the bilateral agreement could also clear the groundwork if the United States eventually comes back to the broader pact.

"If it's concluded, it's not a minus. It's actually a plus," he said, pointing out that much of TPP negotiations boiled down to individual countries sorting out arrangements on goods.

Trump has been especially perturbed over the imbalance in auto sales, with Japanese cars a constant sight on US streets but few Japanese buying from the Detroit Big Three, preferring smaller, more fuel-efficient vehicles.

Abe, however, stressed that Japanese automakers manufacture twice as many cars inside the United States as they export to the country.

In another figure he hoped would raise Trump's attention, Abe said that Japan supported 856,000 jobs in the United States -- more than any country except Britain. In the joint statement, the United States raised concerns about auto access and Japan highlighted sensitivities over its tightly protected agricultural sector.

But Oike said that the statement did not prejudge the course of negotiations.

-PTI