By Karen Gerwitz, President & CEO, World Trade Center Denver
The most recent move by President Trump to initiate a trade deal with Japan comes after two years of confusion in the area. In 2017, President Trump removed the United States from the Trans-Pacific Partnership, a trade deal created with 40% of the world’s economy. President Obama signed onto the agreement with the intention of building strength among all member countries and perhaps stunting China’s growth and control in the region. In an effort to put “America First”, President Trump vowed to avoid multilateral trade agreements and altered the country’s trade policy primarily to bilateral trade agreements. While the newest trade deal with Japan does not raise all industries to the level of access that was promised under the TPP, the agreement provides increased access for Colorado agricultural producers who wish to export to Japan and includes clarifying policy for digital trade.
Many who followed the drafting of the agreement expected to see the involvement of the automobile industry. While the U.S. does plan on reducing or eliminating tariffs on certain Japanese industrial goods (machine tools, fasteners, steam turbines, bicycles, bicycle parts, and musical instruments), the agreement does not include Japanese automobiles, aircrafts, liquefied propane gas or semiconductor manufacturing equipment from the U.S. Japan, however, will eliminate 10% duty on U.S. ethanol imports over the next 10 years. The change will impact $11 million worth of imports.
The main industries that can expect improved access and lower tariffs are U.S. pork, beef, wine, and barley. The tariff rates for those U.S. products have been lowered to match those of other agriculture producers and TPP countries such as Australia, Canada, and New Zealand. Also discussed in the agreement was a 45% reduction on Japanese markups of U.S. wheat products. Along with lower prices, the U.S. specific quota in Japan will increase to 150,000 metric tons of wheat over the next six years. Industries that have not fared as well are butter, skim milk powder, evaporated milk, and some grains, which have experienced less access to Japanese markets since President Trump pulled the U.S. from the TPP and were not included in the most recent rendition.
While the agreement was mainly focused on agriculture, there were also improvements made to digital trade. Just in the last four years since the TPP was first drafted, certain technologies including cloud computing and new financial technologies have been developed and successfully utilized. This aspect of the deal is said to be partially in response to frequent demands by Chinese companies of U.S. firms forcing disclosure of proprietary computer source code and algorithms. Differences that will be implemented in digital trade include increased rules to prohibit cross-border taxation of digital downloads and data localization requirements that existed under the TPP. There will be prohibitions on imposing customs duties on digital products transmitted electronically such as videos, music, e-books, software, and games. The new provisions under the trade agreements are said to be in line with the U.S. goals to set global internet and e-commerce rules.
Colorado specifically, has a long history of positive relations with Japan. The close relationship is illustrated both culturally and economically. Colorado and Japan share nine sister cities, and Japanese companies employ 7,200 Coloradans. Additionally, Japan is the fourth highest importer of Colorado goods. With an eye on potential improvements for Colorado agriculture, the primary export from Colorado to Japan is Bovine meat. In 2018 the product made up 20% of all exports to Japan and in 2019 made up almost 17%. With lowered tariffs and increased access to Japanese markets, Colorado beef industries will be able to increase exports to the region at a lower cost.
The World Trade Center Denver is an active member of the global World Trade Centers Association in 330 cities in 100 countries. The mission is to support the remarkable industries in the Rocky Mountain Region to grow their businesses and thrive on the global stage. For 32 years, the World Trade Center Denver has trained over 35,000 companies in our great state on how to trade effectively. The new physical campus housing the growing ecosystem of global businesses in Colorado will be opening in RiNo in 2021. For an overview of events and services, check out the website at https://www.wtcdenver.org.