After more than a year of tariff disputes dominating the headlines, there is finally reason for a little optimism about U.S. trade policy.
News that the United States and Japan are moving forward with talks for a bilateral trade agreement is a welcome development for the millions of Americans – including farmers, business owners and consumers – suffering from a host of protectionist policies (withdrawal from Trans-Pacific Partnership, tariffs on steel and aluminum, those imposed on Chinese goods, and those imposed by other countries in retaliation).
Americans are facing higher prices for basic goods. Businesses are losing access to foreign customers and paying more to manufacture their goods, forcing them to pass those costs to the consumer. The withdrawal from TPP means that the United States will miss out on $123 billion in exports and the creation of potentially 650,000 jobs, that other countries will now enjoy.
When it comes to those policies, the damage has already been done. But it isn’t too late to move in a different direction. Reengaging the TPP would be ideal – with American participation, it would be the world’s largest free trade deal, covering 40 percent of the global economy.
However unlikely rejoining the TPP may be, as a necessary precursor, a free trade agreement with Japan would be a boon to the American economy and signal a welcome new direction from Washington on trade. Japan is the third-biggest economy in the world and is America’s fourth-largest trading partner. Our country’s aircraft manufacturers, oil producers and farmers already benefit from selling their goods to Japan. Meanwhile, Americans benefit from access to Japan’s automotive and agricultural industries. As many as 1.3 million American jobs depend on trade with Japan.
Adding urgency to signing a trade agreement with Japan is the deal Tokyo recently forged with the European Union. That agreement created the largest free trade zone ever, while the United States stands outside.
Failure to come to an agreement could ensure that the United States is not able to benefit from broader access to Japanese markets. Thanks to the new TPP, this trend is happening anyway: America’s share of pork and beef imported into Japan has decreased for 2019, as compared to the average share across 2018, while Europe, Canada and New Zealand’s shares have risen.
A trade agreement is only helpful, however, if it is truly free. The negotiations with Japan must be guided by two key principles.
First, the goal of the talks should be to eliminate all existing tariffs. The reality is that tariffs are a tax that impose higher costs on American families and businesses. Using tariffs for leverage in negotiations reduces individuals’ livelihoods to mere bargaining chips. Both sides should remove existing tariffs, such as Japan’s agriculture tariffs and the U.S. auto and truck tariffs. Second, in addition to eliminating tariffs, the talks should focus on getting rid of the many non-tariff barriers that exist in both the United States and Japan.
The lesson of the last two years is clear: trade barriers don’t work. The time has come to change direction on trade policy, and the upcoming negotiations with Tokyo are the perfect place to start.
Nathan Nascimento is executive vice president of Freedom Partners Chamber of Commerce.