During discussions on the sidelines of the United Nations General Assembly in New York on 26 September, President Donald Trump and Japanese Prime Minister Shinzo Abe agreed to launch bilateral negotiations to reach what Abe termed a “Trade Agreement on Goods.” The statement issued by the two leaders of the world’s first and third largest economies envisages negotiations proceeding in two phases, the first designed to achieve market-opening largely through concessions in the agriculture sector as well as in automobile-related tariffs and on regulatory issues. A second phase of negotiations would extend to services and other issues of mutual interest, such as insurance, pharmaceuticals and digital trade.

The decision to proceed with the bilateral agreement shields Japan from possible tariffs on autos and auto parts by the U.S. under a possible section 232 action so long as both sides are engaged in market-opening discussions. The negotiations may provide a pathway that could lead to the lifting of section 232 tariffs already in place on Japan’s steel and aluminum exports, although this is unclear.

The two leaders made clear that the bilateral agreement they foresee will be more limited in scope than the Trans-Pacific Partnership (TPP) from which President Trump withdrew the United States, and the other economic partnership agreements Japan has negotiated, including with the European Union. An important element in Prime Minister Abe’s decision to agree to bilateral negotiations was a concession by the United States that Japan’s market-opening in agriculture would not have to exceed the tariff and non-tariff concessions Japan had already made in these previous agreements.

The negotiations can proceed after both sides complete their respective domestic consultation procedures. For the United States, USTR Robert Lighthizer immediately began consultations with the relevant congressional committees, signaling that the negotiations themselves will proceed according to the President’s Trade Promotion Authority procedures and timelines. Action by the White House to notify Congress of the intention to proceed with negotiations triggers the start of a 90-day consultation period to define negotiating objectives before bilateral discussions can officially begin (although the two sides can begin to exchange trade data and other documentation to prepare for negotiations). The congressional consultations could identify additional issues and concerns that U.S. negotiators would need to take into account. Also during this period, USTR typically calls for public comments from interested parties, and usually schedules public hearings to accept testimony and written views to help determine U.S. negotiating priorities.

Much attention in these negotiations is certain to focus on the auto sector. The Trump-Abe statement specifically notes that an objective of the negotiations will be to “increase production and jobs in the United States in the motor vehicles industries.” This perspective raises a number of questions: Will the U.S. seek to restrain Japan’s motor vehicle exports? Will the U.S.-Mexico Trade Agreement’s rules of origin offer a prototype for similar rules for vehicles and components imported from Japan? Will Japan agree to accept fully the U.S. Federal Motor Vehicle Safety Standards? Will the U.S.-Japan agreement advance possibilities for the two partners to be able to expand joint R&D efforts to take full advantage of innovation and strategic capabilities? All these questions should be at the forefront of negotiators’ minds as they prepare to begin bilateral talks.

Other sectors that want to be part of an “early harvest” effort with Japan will also need to identify their priority interests and make these known to U.S. negotiators before U.S. objectives become set in stone. Developing priorities for the U.S. pharmaceuticals sector and accelerating negotiating outcomes to the first phase offer a particular example: What time period should industry seek for data exclusivity obligations for biopharmaceuticals? What transparency and consultation procedures should be in place to cover marketing approval and government pricing and reimbursement determinations? How should cross-border health data transfers be handled?