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Published: Thursday March 13, 2014 MYT 9:36:04 AM
Updated: Thursday March 13, 2014 MYT 9:36:58 AM

Japan, U.S. make 'bit of progress' in trade talks -Japanese official

WASHINGTON (Reuters) - The United States and Japan made some progress on resolving a deadlock over tariffs on farm and industrial exports which is dragging on a wider Pacific trade deal, a senior Japanese official said on Wednesday.

Plans for a free trade agreement among 12 Pacific Rim nations, the Trans-Pacific Partnership (TPP), have been bogged down amid a stand-off between the United States and Japan over market access.

"I don't say that there's a breakthrough but that we had a bit of progress, little progress," Japanese deputy chief negotiator Hiroshi Oe said after two days of talks, the third round of bilateral negotiations in less than a month.

The United States had hoped to wrap up the TPP, which includes Canada, Mexico, New Zealand, Malaysia and others, by the end of last year but many issues are still on the table.

Japan, which has tried to protect its rice, wheat, beef and pork, dairy and sugar from outside competition, is at the centre of the debate as farmers in big agricultural exporting nations push for elimination of all tariffs.

U.S. Acting Deputy Trade Representative Wendy Cutler said on Friday the United States continued to seek "meaningful market access" from Japan for agricultural exports.

The United States is also nervously eyeing a trade deal close to conclusion between Japan and Australia, another TPP partner, which may give Australian exporters better access to Japan than their U.S. counterparts.

Japan's entry to the TPP last year raised the stakes for all participants, given the size of its market and past reticence in signing up to free trade deals, but it also created controversy in the United States, where trade with Japan continues to be a hot political issue.

"We are not going to be supportive of an agreement with Japan in it unless there is certainly a clear opening of their markets for their sensitive products," American Farm Bureau Federation President Bob Stallman said.

FOOD SAFETY RULES

Japan's food safety rules as well as tariffs and quotas are a source of concern for trading partners. Beef producers in Canada and the United States lost share in the Japanese market to Australia, and to a lesser extent New Zealand, after Japan banned beef imports after an outbreak of mad cow disease in North America.

Autos are also a source of contention. U.S. automakers complain that Japan, where imported cars make up less than 10 percent of the market, sets up barriers to imports such as strict dealership limits, regulation and taxes, even though there are no tariffs.

But Japanese automakers argue that U.S. manufacturers are not producing and marketing enough of the small cars which are popular with domestic consumers. Japan wants the United States to set a timeline for scrapping tariffs of 2.5 percent on imports of passenger cars and 25 percent on light trucks.

U.S. opponents of the TPP said since a free trade deal was signed with South Korea two years ago, imports of passenger vehicles from South Korea had risen more quickly than U.S. vehicle exports, setting a worrying precedent for future trade agreements.

A fall in the total value of U.S. exports to South Korea in the last two years showed why TPP talks should stop, said trade groups including consumer group Public Citizen and the United Steelworkers Union.

The U.S. Trade Representative's office said an 80 percent rise in passenger vehicle exports and an increase in exports of agricultural products such as dairy and soybean oil were evidence the agreement was worthwhile.

(Reporting by Krista Hughes; Editing by Mohammad Zargham)

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