Some details are still elusive on the Japan agreement, but here is what I know:
- The Japanese have a quota on imported rice. The agreement increases the American share of the quota but does not expand the quota itself. As a result, it will provide American farmers with a slightly expanded market, but it is hardly a blow for free trade.
- The identity of the parties who will ultimately bear the cost of the tariffs will not be known until they have been fully implemented and we have the relevant data. Over time, expect the share born by the American consumer to increase, as it will no longer be possible to rely on stockpiled goods.
- It appears that the agreement contemplates that investments will be made by both the Japanese government (in the form of loan guarantees) and the private sector, although the specific nature of the private sector obligations and the method by which they are enforced will have to be identified and put into law by the Japanese themselves. I also understand that the objects of investment are set out in the agreement and are generally appropriate for an evolving American economy. The issues now revolve around interpretation, enforcement, and the use of discretion. What happens if the Japanese companies refuse to make the ordered investments? What if Trump decides to go outside the list in the agreement and order investments in, say, private prisons for immigrants and fossil fuels? What if he uses his discretion purely to help his friends and punish his enemies? Who can stop him from doing that, given that the agreement is not subject to ratification by Congress? TBD.