Japan, Australia near trade deal as U.S.-Tokyo talks heat up

TOKYO (Reuters) - Japan and Australia are near to reaching a trade deal just as Tokyo's parallel talks with the United States heat up, adding impetus to stalled negotiations over an ambitious Pacific trade pact.

A Tokyo-Canberra deal is "within our grasp," Australian Prime Minister Tony Abbott told business leaders in Tokyo on Monday, hours before meeting his Japanese counterpart Shinzo Abe. "Things are going very well indeed.

Abe said he wants "to confirm further cooperation at the summit on various issues, including national security and the economy.

"Australia is an important strategic partner for Japan," Abe told leaders of his government and ruling coalition.

The progress toward a deal comes as senior U.S. and Japanese trade officials push for a bilateral trade deal ahead of a visit late this month by President Barack Obama.

The two sets of Tokyo negotiations are meant to help spur an overdue agreement on a broader Trans-Pacific Partnership (TPP) trade pact.

Abe and Abbott will announce the basic bilateral agreement at their Monday meeting, featuring cuts to Tokyo's tariffs on Australian beef and Canberra ending its duty on cars, major newspapers reported.

A deal with Australia that allows Japan to keep even reduced tariffs on politically-sensitive agricultural products such as beef would give Tokyo ammunition against U.S. demands to scrap tariffs in the TPP deal, which aims to remove import levies, experts said.

'PREFERENTIAL TREATMENT'

If Tokyo and Canberra agree, "Australia gets preferential treatment over the U.S., and America will be under pressure to strike a TPP deal short-term that puts it on a level playing field with Australia," said Aurelia George Mulgan, a professor of Japanese politics at the University of New South Wales.

Abbott, who has set a bilateral deal as a top priority, told the Asahi newspaper that Australia was prepared to make big concessions on cars and that cuts in Japan's beef tariffs would benefit Japan's consumers.

He said he hoped for an agreement in principle on Monday that could be formally signed when Abe visits Australia in July, the newspaper said.

Japan will agree to cut its tariffs on Australian beef to below 30 percent from the current 38.5 percent and Australia will scrap its 5 percent duty on small and midsize Japanese cars, the reports said, citing unnamed sources.

Canberra has a lower hurdle on tariffs for Japanese cars after the Australian units of the country's three remaining carmakers - Toyota Motor Corp, General Motors Corp and Ford Motor Co - decided to quit Australian domestic production by 2017 due to high costs and a strong Australian currency.

U.S. Trade Representative Michael Froman leaves on Monday for Tokyo, his office said. He will meet with Economy Minister Akira Amari on Wednesday, Japanese media said, in a bid to break a bilateral stalemate bogging down the 12-nation TPP talks.

'GAME OF CHICKEN'

Washington and Tokyo are each urging the other to be more flexible on the sticking points of access to Japan's farm and car markets and U.S. tariffs on imported cars and trucks.

The TPP, which Japan joined last year, is a centrepiece of Obama's push to expand the U.S. presence in Asia. The talks have entered their fifth year. The Japanese and U.S. economies dominate the grouping, which encompasses one-third of global imports and exports.

"What is going on is a game of chicken," Mulgan said. The U.S. and Japan "want an agreement but they are not prepared to pay a high price. Japan knows that America wants it on board because TPP without Japan is not worth all that much. Japan is playing hardball."

Froman told a congressional panel last week that "it's time for Japan to step up to the plate," while Hiroshi Oe, Japan's deputy chief trade negotiator, said recently that "in order to make a breakthrough, the United States has to show flexibility.

The United States wants Japan to open its rice, beef and pork, dairy and sugar sectors - areas Abe has vowed to defend. Japan wants a timetable on U.S. promises to drop tariffs of 2.5 percent on imports of passenger cars and 25 percent on light trucks.

Advocates say the TPP could accelerate global economic growth, boost U.S. exports and level the playing field between emerging and rich nations in one of the world's biggest trade pacts.

The TPP talks, including Canada, Mexico, New Zealand, Malaysia and others, missed a deadline for an agreement by the end of last year.

(Additional reporting by Krista Hughes and David Brunnstrom in Washington and Linda Sieg, Kaori Kaneko, William Mallard and Elaine Lies in Tokyo; Editing by Bernard Orr and Eric Meijer)

WhatsAppFacebookTwitterLinkedinBeloudBluesky