World Economy

Why US-Japan trade talks are a political theater

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After two days of talks, Japan and the U.S. say they are close to a trade deal, but the official statements are little more than political theater for key constituents back home, analysts say.

"Even if the economic argument is 100 percent…it's not, because [we] live in a political world," Asian Trade Centre (ATC) executive director Deborah Kay Elms told CNBC. "At this point we're in a little bit of political theater for both sides."

After two years of talks over lowering trade tariffs the U.S. and Japan are finally close to a deal, the two sides said Monday following recent talks.

Negotiations have been whittled down to what each country sees as national symbols and sacred cows – rice for the Japanese and cars for the Americans.

The U.S. demands that Japan open up its market to American rice, while the Japanese are holding out for a resolution on U.S. car parts tariffs.

Economically nonsensical

Playing to constituents back home can lead to official positions that do not make any sense in the real world, analysts said.

For example, persistent demands to open up the Japanese market to U.S. carmakers are a legacy of more than thirty years of fights over the American auto market, according to ATC's Elms.

Kevin Winter | Getty Images

"They are still fighting the last war but need to show their key constituents back home that they fought the battle on autos all the way to the last second," she said. In fact, most vehicles sold by Japanese companies in the U.S. are made in North America, while Japan does not impose any tariffs on car imports.

All the talk about giving American cars' access to the Japanese market is "just a bargaining chip to strengthen their hand in the negotiations over rice," said Advanced Research auto analyst Koji Endo.

Country clout

Both sides are posturing for powerful domestic lobbies, however.

The U.S. negotiators are appealing to powerful political lobbies such as Detroit's Big Three automakers and the United Auto Workers union, and the Japanese government has its own vested interests to contend with.

The vast majority of Japanese may live in cities, but Japan's aging and shrinking population of rice farmers have a political clout disproportionate to their actual numbers.

Not only are Japan's electoral districts heavily skewered towards sparsely populated rural areas, but the famers' cooperative is a powerful vote collection machine for the ruling Liberal Democratic Party.

"The rural [voting] districts are very over weighted, which means the influence of farmers, even if they are older, smaller scale and part time, is very strong in the political structure in Japan so it's very hard to do something against their interests," she said. The size of an average Japanese farm is around two hectares and the farmer's average is 66.1 years, according to government figures.

And so, at least for now, the Japanese government will fight to keep Japan's 500 percent tariff on rice imports in place, noted ATC's Elms.

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