September 21, 2018 / 1:51 AM / in 25 days

Japan uneasy over Trump pressure on auto as summit, trade talks loom

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe will meet U.S. President Donald Trump next week as fears grow in Tokyo that Washington could demand that Japan curb its car exports to the United States.

FILE PHOTO: U.S. President Donald Trump arrives for a joint news conference with Japan's Prime Minister Shinzo Abe in the Rose Garden of the White House in Washington, U.S., June 7, 2018. REUTERS/Kevin Lamarque

Japan is hoping to avert any import curbs and potentially steeper U.S. import tariffs on its cars, and fend off U.S. demands for a bilateral free trade agreement (FTA).

Abe and Trump will hold a summit meeting on Sept. 26 on the sidelines of a United Nations General Assembly meeting in New York, Japan’s top government spokesman said on Friday.

To lay the groundwork for the summit, top trade negotiators of the two countries - Japanese Economy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer - will hold their second round of trade talks on Sept. 24.

Trump has made clear he is unhappy with Japan’s $69 billion trade surplus with the United States, nearly two-thirds from auto exports, and wants a two-way agreement to address it.

There is uncertainty on whether Abe, who won a third term as premier in Thursday’s ruling party leadership race, can convince Trump through close ties he has forged with the president.

The threat of trade friction between Tokyo and Washington has been present since Trump took office last year with a pledge to renegotiate trade deals he considers unfair to U.S. companies and workers.

Japanese government officials are growing increasingly worried that Trump will demand a reduction in the number of Japanese auto imports to lower the trade deficit.

They also fret that Trump could impose steep import tariffs on auto and auto parts, which would deal a severe blow to the export-reliant economy.

“Japan swallowed voluntary export curbs in the past, so Washington may find this as an attractive option,” said Toshiro Muto, a former top finance ministry bureaucrat who retains close ties with incumbent policymakers and lawmakers.

“But this is something Japan must absolutely avoid,” he told Reuters. “I can’t think of any sector in Japan that can replace its giant auto industry as a key driver of growth.”

The United States is Japan’s second-largest trading partner, after China.

Some officials say Japan may have no choice but to lower the number of cars it ships to the world’s top economy, because the United States is Japan’s closet ally and guarantees its defense.

“Given our position (close diplomatic relationship), we would have to swallow their demands,” said one government official, who spoke on condition of anonymity.

Another official said Japan was trying to convince the United States to avoid imposing a numerical target on Japanese car exports.

Next week’s meeting between Motegi and Lighthizer will follow one in August, where the two sides failed to narrow differences on whether to open up negotiations for a bilateral FTA.

“Based on the common understanding we built in the first round of talks, we’ll seek a ‘win-win’ outcome that benefits both countries,” Motegi told a news conference on Friday.

Asked whether the meeting with Lighthizer could force Japan to enter into talks for a bilateral FTA, Motegi said: “I don’t think that will happen.”

Tokyo is worried that as part of any bilateral deal Washington might put pressure to open up its politically-sensitive farm market.

The sense of unease in Tokyo has increased as Trump has refused to back down in a heated trade fight with China, and has reportedly pushed Mexico into agreeing on a cap in auto exports to the United States.

Trump, according to a column published in the Wall Street Journal on Sept. 6, has suggested he will again turn his attention to trade with Japan.

Additional reporting by Stanley White, Yoshifumi Takemoto and Kaori Kaneko; Editing by Chris Gallagher & Shri Navaratnam

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