By Kiyoshi Takenaka
TOKYO (Reuters) - Japan and Australia clinched a basic trade deal on Monday to cut import tariffs, as U.S. and Japanese officials stepped up efforts to reach a parallel agreement that would re-energise stalled talks on a broader regional pact.
The agreement between Tokyo and Canberra comes as the United States and Japan push for their own two-way trade deal - a key component of a broader U.S.-led Trans-Pacific Partnership (TPP) pact, before a visit this month by President Barack Obama.
The two sides said in a media statement that Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe had confirmed at talks in Tokyo a basic agreement on the deal, and agreed to work towards signing it as soon as possible.
The bilateral deal, which is expected to be finalised when Abe travels to Australia in July, features cuts to Japanese tariffs on Australian beef and an end to Australian duty on cars, major newspapers reported earlier.
A deal with Australia that lets Japan keep even reduced tariffs on politically sensitive agricultural products such as beef would give Japan ammunition against U.S. demands to scrap tariffs in the TPP deal, which aims to remove import levies, experts said.
Such a deal means "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.
Japan will agree to cut its tariffs on Australian beef to less than 30 percent from the current 38.5 percent and Australia will scrap its 5 percent duty on small and midsize Japanese cars, the media reports said, citing unidentified sources.
Australia had a lower hurdle on tariffs for Japanese cars after Australia'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.-JAPAN "GAME OF CHICKEN"
U.S. Trade Representative Michael Froman leaves on Monday for Tokyo, his office said. He will meet Economy Minister Akira Amari on Wednesday, Japanese media said, in a bid to break a bilateral stalemate bogging down the 12-nation TPP talks.
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 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."
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. The TPP talks, including Canada, Mexico, New Zealand, Malaysia and others, missed a deadline for an agreement by the end of last year.
Abe and Abbott are also stressing their countries' close security ties as Japan seeks tighter relations with regional partners to cope with a rising China.
In a symbolic gesture, Abbott became the first foreign leader to attend a special session of Japan's National Security Council, set up last year to coordinate policies.
"I think this fact that we are having this session with you signifies the fact that there is a strong bond of trust between Japan and Australia," Abe told Abbott at the beginning of the session.
(Writing by Linda Sieg and William Mallard; Additional reporting by Krista Hughes and David Brunnstrom in Washington and Kaori Kaneko and Elaine Lies in Tokyo; Editing by Eric Meijer and Robert Birsel)
