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House Ways & Means Subcommittee Hearing on the U.S.- Japan Agreement

House Ways & Means Subcommittee on Trade

“U.S.-Japan Trade Agreements”

Wednesday, November 20, 2019

Key Topics & Takeaways

  • TPP: Darci Vetter, Edelman U.S. Public Affairs, stated that the Trans-Pacific Partnership (TPP) framework is superior to a one-off deal with Japan and that it was crafted with knowledge of increasing the volume of traders access to the six “sacred” Japanese products, investment access to Southeast Asia as well as building a culture of trade and rules for multilateral trade. She recommended the creation of a comprehensive ‘phase two’ of a U.S.-Japan agreement that incorporate many of the dynamics and provisions of the TPP.
  • Congressional Consultation: Vetter said that during TPP discussions, Congress and staff were provided general updates and were sought for advice. She added that this helps foster conversations about specific products and provisions that need to be crafted to benefit the U.S. while negotiating. Matthew Goodman, Center for Strategic & International Studies, added that consultation helps make the process clear and is an essential part of the process. John Nassar, United Automobile Workers, and Russell Boening, Texas Farm Bureau, both said that the process should have included meaningful consultation.
  • Provisions of Agreement: Boening stated that the agreement would open markets for agricultural trade between the two countries. Goodman said the agreement maintains agreed-upon provisions from the TPP, noting the need to address regulatory and World Trade Organization (WTO) rules. Nassar stated that the agreement does not entirely benefit U.S. autos because Japan has been allowed to keep their auto markets closed. He emphasized Japan’s practice of currency manipulation and taxes that result in an imbalance in the auto trade.
  • Digital: Goodman reiterated the importance of the U.S. leading the conversation and added that U.S. partnerships with countries like Singapore and Australia are critical. He stated that Europe and China are moving forward in a different direction than what the U.S. may prefer and that the U.S. should work through different forums to push out the preferred approach. Goodman emphasized that robust and high-value technological innovation is mutually beneficial for both the U.S. and Japan.

Witnesses

  • The Honorable Darci Vetter, Global Lead, Public Affairs; Vice Chair, Agriculture & Food, Edelman U.S. Public Affairs
  • Matthew Goodman, Senior Vice President, Simon Chair in Political Economy & Senior Adviser for Asian Economics, Center for Strategic & International Studies
  • Josh Nassar, Legislative Director, United Automobile Workers
  • Russell Boening, Owner, Loma Vista Farms & Boening Bros Dairy Inc; President, Texas Farm Bureau

 

Opening Statements

Chairman Earl Blumenauer (D-Ore.)

In his opening statement, Blumenauer expressed his disappointment with the President for removing the U.S. from the TPP, as well as his disappointment with the Office of the U.S. Trade Representative (USTR) for not consulting with Congress during U.S.-Japan negotiations. He stated that the Committee would review the partial agreement alongside its ongoing review of the U.S.-Mexico-Canada Agreement (USMCA). Blumenauer continued that the U.S.-Japan deal has areas in need of improvement, such as digital agreements and WTO provisions.

Ranking Member Vern Buchanan (R-Fla.)

In his opening statement, Buchanan stated that the U.S.-Japan agreement is important due to the major trade partnerships of both countries. He added that he is encouraged by the progress being made as the U.S. works towards a more comprehensive agreement. He emphasized the need to address trade barrier challenges, especially for farmers, as well as other challenges including leveling the playing field for the free flow of digital data. Buchanan also urged Congress to move forward in passing the USMCA, stating that delays have real costs for U.S. business and economic growth.

Testimony

The Honorable Darci Vetter, Global Lead, Public Affairs; Vice Chair, Agriculture & Food, Edelman U.S. Public Affairs

In her testimony, Vetter discussed how the agreement is critical for agriculture trade to remain competitive. She said that agriculture has been struggling for several years, with net farm incomes decreasing in the U.S. Vetter noted that the U.S. and Japan are among the top three largest trading economies globally and that the agreement is critical. However, she added that the agreement lacks specific exclusions, does not elevate non-tariff barriers and fails to include data flow provisions. Vetter emphasized the importance of pushing forward in securing a comprehensive trade agreement with Japan.

Matthew Goodman, Senior Vice President, Simon Chair in Political Economy & Senior Adviser for Asian Economics, Center for Strategic & International Studies

In his testimony, Goodman stated that the agreement is a step in the right direction, but is only a step. He praised the agreement for leveling the agriculture trading field, advancing discussion concerning the U.S. preferred digital rules for e-commerce, emphasizing data localization, bolstering the free flow of data and allowing the U.S. and Japan to focus on other priorities. Goodman continued that the agreement does not adequately address autos, is inconsistent with congressional consultation practices and WTO authority and fails to maximize U.S.-Japan trade relationship potential. He said that there is a long way to go for the trade objectives and recommended that the U.S. rejoin the TPP.

Josh Nassar, Legislative Director, United Automobile Workers

In his testimony, Nassar stated that over 70 percent of trade with Japan is auto-related and that Japan has maintained a relatively closed market for auto trade. He said that the agreement is a mistake because it may potentially be harmful to the auto industry due to Japanese practices of currency manipulation and anti-labor provisions not being addressed. Nassar recommended an examination of the entire trade market with Japan as well as the establishment of a limit on the number of Japanese auto imports.

Russell Boening, Owner, Loma Vista Farms & Boening Bros Dairy Inc, President, Texas Farm Bureau

In his testimony, Boening echoed many of the points put forth by his fellow witnesses about how the agreement would benefit agriculture. He said that having a strong trade relationship helps the U.S. make sustainable advances in the agriculture industry. Boening expressed a desire for the U.S. to further pursue additional market access for farmers and recommended the passage of the USMCA.

Question & Answer

TPP

Reps. Ron Kind (D-Wis.), Jimmy Panetta (D-Calif.) and Suzan DelBene (D-Wash.) asked about the importance of U.S. involvement in the TPP and the consequences of leaving. Vetter stated that the TPP framework is superior to a one-off deal with Japan and that it was crafted with knowledge of increasing the volume of traders, access to the six “sacred” Japanese products, investment access to Southeast Asia as well as building a culture of trade and rules for multilateral trade. She recommended the creation of a comprehensive ‘phase two’ of a U.S.-Japan agreement that incorporates many of the dynamics and provisions of the TPP.

Congressional Consultation

Reps. Bill Pascrell (D-N.J.), Don Beyer (D-Va.) and Blumenauer asked about the importance of congressional consultation in trade agreements. Vetter said that during TPP discussions, Congress and staff were provided general updates and were sought for advice. She added that this helps foster conversations about specific products and provisions that need to be crafted to benefit the U.S. while negotiating. Goodman added that consultation helps make the process clear and is an essential part of the process. Nassar and Boening both said that the process should have included meaningful consultation.

Provisions of Agreement

Reps. George Holding (R-N.C.), Danny Davis (D-Ill.), Drew Ferguson (R-Ga), Jodey Arrington (R-Texas), Dan Kildee (D-Mich.), Beyer, Murphy and Buchanan asked how provisions of the agreement would impact agriculture, autos and U.S. competitiveness. Boening stated that the agreement provides a level of certainty and comfort for agriculture, especially for young producers who have seen their incomes decrease over the last decade. He added that the agreement would open markets for agricultural trade between the two countries. Goodman said the agreement maintains agreed-upon provisions from the TPP, noting the need to address regulatory and WTO rules. Nassar stated that the agreement does not entirely benefit U.S. autos because Japan has been allowed to keep their auto markets closed. He emphasized Japan’s practice of currency manipulation and taxes that result in an imbalance in the auto trade.

Future U.S.-Japan Conversations

Reps. Jason Smith (R-Mo.), David Schweikert (R-Ariz.), Beyer, Murphy, Buchanan and Blumenauer asked what future negotiations should incorporate. Goodman expressed a pessimistic view of the likelihood of including further provisions in the next phase of discussions. He added his belief that Japan would prefer the U.S. to rejoin the TPP, which makes them reluctant to move forward on bilateral trade agreements. Vetter said that in the TPP, the level of access to agriculture, industrial goods and autos have a relative balance of trade. She said further discussion concerning market access for these products is needed. Goodman echoed this point and stated that the U.S. should be pushing for mapping out digital rules.

Digital

DelBene and Davis asked about discussions as to whether the U.S. should engage in a digital rule structure. Goodman reiterated the importance of the U.S. leading the conversation and added that U.S. partnerships with countries like Singapore and Australia are critical. He stated that Europe and China are moving forward in a different direction than what the U.S. may prefer and that the U.S. should work through different forums to push out the preferred approach. Goodman emphasized that robust and high-value technological innovation is mutually beneficial for both the U.S. and Japan.

USMCA

Reps. Kenny Marchant (R-Texas), Adrian Smith (R-Neb.) and Beyer asked about the impacts of USMCA on the auto industry. Beyer asked specifically about Nassar’s concerns with labor provisions in trade agreements. Boening said that the passage of the USMCA would give U.S. trade partners certainty and would help in the adoption of other deals. Nassar noted that labor provisions have been a failure for autoworkers and that any agreement must be enforceable.

For more information about this hearing, click here.

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