U.S. to gradually drop tariffs on Japan vehicles under trade deal
Tokyo agrees to join Asia-Pacific trade talks; Detroit 3 opposed
The United States will gradually scrap auto tariffs on Japanese vehicles under a Trans-Pacific Partnership free trade pact after the two countries agreed on a deal that will allow Tokyo to take part in talks on the Asia-Pacific trade agreement.
In a move strongly opposed by Detroit's 3 automakers, Japan said today it reached a deal with the United States on bilateral trade issues that cleared the way for the world's third-largest economy to join talks on the Trans Pacific Partnership regional trade deal as soon as July.
Japanese Prime Minister Shinzo Abe today told a meeting of his Cabinet in Tokyo that an agreement had been reached.
Japan is pushing to gain the necessary approval from all 11 members of the talks, with Canada, Australia, New Zealand and Peru yet to give their consent.
The negotiations are aimed at boosting trade by lowering tariffs and also at strengthening patent protection and improving access to government contracts.
U.S. automakers have opposed Japan's participation unless it eases market barriers they say restrict American auto sales in Japan.
"We don't believe, based on experience, that Japan will truly open its market," Matt Blunt, a former Missouri governor and president of the American Automotive Policy Council, said Thursday.
The group represents General Motors, Ford Motor Co. and Chrysler Group.
Ford officials have been particularly vocal in opposing Japan's participation in the talks.
"We're strong supporters of the TPP," Blunt said. "If you add Japan you really undermine the quality of the agreement itself and certainly delay its completion."
The U.S. and Japan agreed to conduct negotiations on the automobile trade in parallel with TPP talks, according to a statement released by the Japanese government.
Both governments confirmed that as part of the TPP negotiations, U.S. tariffs -- 2.5 percent on cars and 25 percent on trucks -- will be abolished through gradual reductions "over the longest possible period of time."
The phase out of American tariffs will take more time than what the U.S.-Korea free trade treaty calls for, according to Japanese Economy Minister Akira Amari.
U.S. labor groups are worried about the impact of removing U.S. tariffs on Japanese light-vehicles. Some of the tariffs have been in place since the 1970s, when Japanese imports first began making inroads in the U.S. market.
"The American auto industry and its workers have come too far and sacrificed too much to risk all on a one-sided trade agreement with Japan," the UAW said in a statement.
Last month, a group of Democratic lawmakers sent a letter to President Obama opposing any efforts to reduce the tariffs.
"In an industry with razor-thin profit margins, the elimination of the 2.5 percent car tariff (as well as the 25 percent truck tariff) would be a major benefit to Japan without any gain for a vital American industry," the lawmakers said in the letter to Obama.
A study released in August 2012 by the Center for Automotive Research in Ann Arbor, Mich., said Japanese light-vehicle exports to the United States would increase by 105,000 units or $2.2 billion -- up 6 percent -- if the 2.5 percent tariff on cars was scrapped.
The study, partially underwritten by Ford, claims that U.S. vehicle production would fall by 65,100 units, resulting in a loss of 2,600 direct auto factory jobs in the United States. Employment at U.S. suppliers would drop by 9,000.
The American Automotive Policy Council today again called on the Obama administration to reevaluate the trade policy.
"After all the sacrifices made by taxpayers, autoworkers, dealers, suppliers, and other stakeholders that resulted in a necessary restructuring of the American auto industry, it is stunning that the U.S. government would endorse a trade policy that puts the industry at a competitive disadvantage and comes at the cost of American auto jobs," the American Automotive Policy Council said today.
"Furthermore, that policy undermines the fundamental goal of the TPP to create a standard for fair and open trade for all partners. Japan is clearly not interested in adhering to those standards, and we urge the Administration to reconsider its position."
In Washington, Acting U.S. Trade Representative Demetrios Marantis said Japan had agreed to "a robust package of actions and agreements" to address U.S. concerns in the automotive, insurance and other sectors.
"As a result, we are pleased to welcome Japan's participation in the TPP negotiations pending a consensus agreement among the current TPP members and the completion of our respective domestic processes," Marantis said.
Michigan lawmakers quickly voiced opposition to the plan.
"This package is not at all adequate as a basis for Japan's entry into TPP," U.S. Rep. Sander Levin, D-Mich., the top Democrat on the House Ways and Means Committee, which oversees trade legislation, said today on a conference call with reporters. He said the agreement doesn't offer enough specific measurements to show that Japan will open its auto market further to foreign competitors.
Another key Republican from Michigan said he would reserve judgment on the deal.
"I will not support Japan's entry into TPP unless we obtain airtight assurances that Japan's participation in the TPP negotiations will neither diminish the comprehensive and ambitious nature of these negotiations nor delay the goal of concluding the negotiations this year," said Rep. Dave Camp, R-Mich., chairman of the Ways and Means Committee.
Also on Friday, Japan said it will more than double the number of American vehicles eligible for import under its fast-track rules.
The co-called Preferential Handling Procedure is a simpler and faster certification method often used by U.S. manufacturers to export to Japan.
"In the near term, U.S. auto producers will be allowed to export up to 5,000 vehicles annually of each vehicle type under the PHP program, compared with the current annual ceiling of 2,000 vehicles per vehicle type," the Japanese government said in a statement, The Detroit News reported.
Joining the TPP would boost Japan's gross domestic product by 3.2 trillion yen ($32.3 billion) while cutting farm and marine production by 3 trillion yen, according to a government estimate.
The other members of the talks are Australia, Canada, New Zealand, Singapore, Brunei, Malaysia, Vietnam, Peru and Chile.
Japan needs formal approval by all 11 participating countries to take part in the talks. If Japan does join, the pact would cover an area that accounts for almost 40 percent of world economic output.
David Phillips, Bloomberg and Reuters contributed to this report.
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