UAW says U.S. should go beyond USMCA gains in any free-trade deal with Japan

WASHINGTON -- The UAW is urging the White House to go beyond gains in the tentative United States-Mexico-Canada Agreement in any free-trade agreement negotiated with Japan.

Rules governing how much vehicle content should be procured from Japanese and American sources should exceed the 75 percent regional amount eligible for duty-free treatment in the North American trade zone and the transition period for automakers to meet the target should be shortened from three years to prevent companies in other countries from taking advantage of the bilateral deal, the union said.

It also called for USMCA’s $16 minimum wage on a large portion of each vehicle to be raised to $24 an hour for final assembly, engines, transmission, axles, battery cells and packs, frames and r&d, and $17 an hour for all other components and material handling.

The UAW’s written comments were part of a series of recommendations to the U.S. trade representative, which held a public hearing here Monday to gather more feedback as the administration prepares to negotiate a free-trade agreement with Japan.

‘Deeply concerned’

Japan belongs to the Trans-Pacific Partnership agreement from which President Donald Trump withdrew days after taking office last year, with the administration preferring to establish bilateral deals instead.

Automakers and the union reiterated concerns about Japan’s seriousness to open its market, saying Japan should not receive tariff reductions until solid evidence exists that automotive trade has been equalized.

“We are deeply concerned that a FTA with Japan could ultimately further widen our enormous auto trade deficit and hurt our domestic auto industry,” UAW Legislative Director Josh Nassar wrote. “Our preference is to exclude the auto sector from the negotiations but recognize that is unlikely to happen. At a minimum we should not make it even easier for Japanese automakers to import cars into the U.S. until we have a truly level playing field.”

Japan, the world’s third-largest auto market, imposes no automotive tariffs, but domestic U.S. automakers say they have been mostly frozen out by nontariff barriers that make it too costly to do business there.

Japanese barriers

Nearly three-quarters of the $69 billion trade deficit with Japan is tied to motor vehicles and parts, with the imbalance increasing over the past 15 years even though Japanese automakers produce vehicles at many U.S. plants. Last year, the U.S. imported 1.73 million vehicles from Japan, but only exported 17,381 vehicles there, according to the United Nations’ Comtrade Database.

Barriers cited by the U.S. auto industry include:

• Unique certification procedures for imported cars.
• A discriminatory system of taxes.
• A complex and changing set of safety, noise and pollution standards, many of which don’t conform to international standards and add significant development and production costs.
• An unwillingness by Japanese dealerships to carry foreign vehicles.
• Government incentives to buy Japan-made cars.

The American Automotive Policy Council, representing the Detroit 3, and the UAW called for long phaseout periods for U.S. tariffs on Japanese imports (2.5 percent on cars, 25 percent on trucks). The UAW said tariff relief should be granted only after Japan’s import penetration rate reaches 49.2 percent from its current 6.7 percent and the American Automotive Policy Council said the phaseout should be at least 25 years for cars and 30 years for light-duty trucks.

The administration should “avoid making any concessions that would further open the U.S. market to Japanese imports, unless and until there is evidence that Japan is truly committed to opening its auto market to American vehicles,” American Automotive Policy Council President Matt Blunt testified. “We believe the best way to achieve such an outcome is for the U.S. to only agree to long, back-ended tariff phaseouts that are contingent upon measurable increases in import market share in the Japanese auto market.”

Floating quota

The Association of Global Automakers, whose members include Honda, Toyota, Nissan and Subaru, countered with a proposal for all vehicle tariffs to be eliminated as soon as possible. And CEO John Bozzella said any rules of origin should be “balanced, flexible and consistent with the tariff benefits obtained.”

The UAW called for the U.S. to impose a floating quota as part of any deal, which would follow the import rate of American autos and auto parts to Japan for the previous quarter. It said any Japanese imports over the reciprocal rate would be subject to national security tariffs of up to 25 percent, which Trump is considering for all imported vehicles.

The union said a U.S.-Japan free-trade agreement must include strong labor standards and collective bargaining rights, and singled out Nissan Motor Co. for intimidating workers from organizing at its plant in Canton, Miss. The Japanese government must be required to intervene with Japanese automakers to guarantee international labor standards, it said.

The UAW also recommended that the administration impose tariffs on lithium ion batteries, electric motors, e-axles, battery safety and thermal systems, semiconductors, lidar and automotive computer processing units to ensure the U.S. doesn’t lose more ground to Asia and Europe in electric vehicle and component r&d and manufacturing.

The Detroit 3 urged that negotiators follow the precedent set in USMCA and freshened U.S.-Korea trade deals by having Japan fully accept U.S. vehicle safety and environmental standards as sufficient for sale. The two nations should also work to harmonize nascent regulatory frameworks governing automated vehicles, the automakers said. Bozzella suggested instead that the nations pursue global auto standards.