US - Japan: Deal or no deal?

US - Japan: Deal or no deal?

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It is still unclear whether the US and Japan have reached agreement on a bilateral deal.

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THE 74th session of the UN General Assembly opened on Tuesday this week in New York so if US President Donald Trump and Japan's Prime Minister Shinzo Abe have followed through on their trade-deal timeline announcement made at G7 on August 25, there should be confirmation any day now that the much-anticipated deal has been signed.

Such an agreement would see the US recover the agricultural concessions it lost when it walked away from the Trans Pacific Partnership deal when Trump first took office.

Since then it has been an open secret that Japan has remained willing to agree to TPP equivalence for the US in the agricultural component of a bilateral deal but it is not so obvious that the US is willing to agree to what Japan wants in return.

It is this latter point that World Politics Review columnist Kimberly Ann Elliott focused on earlier this month warning that it is not clear when or even if the outstanding issues between Washington and Tokyo will be resolved.

As a visiting scholar at the George Washington University Institute for International Policy and a visiting fellow with the Centre for Global Development, Elliott is an astute observer of the nuances that lie in the stated and unstated words of announcements such as the one made at G7.

She noted Trump's tendency to spin the results of negotiations to suit himself and Abe's mild rebuff of obvious untruths.

Trump's claim that America and Japan had "agreed to every point" of the trade deal was moderated in Abe's statement that there was still work to be done "finalising the content of the agreement itself".

Trump's claim that America and Japan had "agreed to every point" of the trade deal was moderated in Abe's statement that there was still work to be done "finalising the content of the agreement itself".

Trump's claim that America and Japan had "agreed to every point" was moderated in Abe's statement that there was still work to be done "finalising the content of the agreement itself".

Noticeably, US Trade Representative Robert Lighthizer, who attended the G7 announcement with Trump, stated merely that there had been agreement only on "core principles" of a trade deal which would cover agriculture, industrial tariffs and digital trade.

But as noted by Elliott, often the most powerful message is in the words that are not spoken.

Both Trump and Lighthizer would not have mentioned automobile tariffs at all had the issue not been raised by a reporter.

Lighthizer conceded that the existing 2.5 per cent tariff on all foreign automobile imports will not change.

The US had agreed to abolish automobile tariffs under TPP but that changed when the US pulled out.

Instead, Washington has agreed to abolish tariffs on some auto parts and a broad range of non-auto manufactured goods.

However from Abe's perspective that is not enough to sell the deal back home.

To do that he needs an ironclad promise from the US that it will not use section 232 of its Trade Expansion Act to limit or impose further tariffs on imports of Japanese autos.

If Trump concedes, Japan will close the deal.

If that announcement is made in the days ahead it can be expected to go to a vote in Japan's parliament before the northern autumn turns to winter and that would conclude Japan's side of the ratification process.

US congressional approval is not always required for trade deals so the agreement could take effect within a couple of months of Japan's ratification.

That would see Australia's significant tariff advantage over the US in the Japanese beef market come to a grinding halt.

On the other hand if the assurance that Abe wants is a step too far for Trump, the likely outcome is no deal and a reprieve for Australia until Trump is prepared to accept that the give-and-take nature of this deal is going to require a bit more give on his part.

Markets adjusting as cattle continue to flow

IT was noticeable in the physical markets last week and the early sales this week that the heady rates that have prevailed in the southernmost parts of the eastern seaboard are now starting to readjust.

Despite this there is still very good money on offer, particularly for cows, and that is important as they are foremost in the firing line as drought continues to displace them from the breeder herd.

It is not often that we see an elevated slaughter market in parallel with drought destocking.

Usually, as happened in 2014-15, liquidation supply exceeds processing capacity and the market falls.

While the start of the southern seasonal flow of cattle is still some weeks away and some of those operators are still pushing up into northern markets to secure cattle, the general picture of the situation in Queensland is one of relative stability.

One major processing contact confirmed that supply in the south of the state was around two weeks in front while the situation in central and northern Qld had tightened a touch to three to four weeks out.

Normally that degree of balance would not prompt a price adjustment either way as evidenced by the stability in public and non-published grids since mid-August.

The most recent 5c/kg adjustment therefore probably has more to do with what is happening in physical markets.

In southern Qld 4-tooth ox are currently quoted at 555-560c/kg and heavy cows at 455-460c.

Central and northern Qld rates are 5-10c behind these rates.

Published grids for Wagga and Naracoorte, however, show a 20c drop for both ox and cow on Monday bringing them to 545c and 460c respectively.

Last week's Wodonga cow market saw heavy weights 6-8c off, bringing averages back to the equivalent of high 490s DW, but Wagga on Monday saw a further 5-9c drop causing averages to trend more toward 470-480c for heavy weights and 460c for medium weights.

Overseas markets meanwhile continue to show strong demand.

Australia's trade with China is showing no downside from the extra 6pc duty triggered by exceeding safeguard volume and progressive beef export figures suggest September will be similar to August.

In the face of this strong export demand, there is every reason to think that throughput and current shift arrangements will roll on into the final quarter until weather intervenes to put the brakes on supply.

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