The U.S. and Japan have agreed to begin talks that could lead to the elimination of import tariffs on Japanese-made cars and trucks, angering many politicians and the domestic automakers.
As part of the Asia-Pacific trade agreement, the two nations sorted their differences among politicians, allowing Japan to join a larger Trans Pacific trade agreement. Ordinarily, we’d be happy to say “Yay, free trade!” But this one…not so much. Currently, the U.S. has a 2.5-percent tariff on cars imported from Japan and a 25-percent tariff on trucks. Japan has a hyper-protective trade policy in response, allowing just 2,000 vehicles per specific type to be imported from the U.S. Under the agreement proposed, that would increase numbers to 5,000 be vehicle class.
“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 earlier this week, according to Automotive News.
Other parts of the negotiations are focused on strengthening patent protection laws between countries and granting easier access to government contracts. That may help other sectors in the economy, but it leaves the Big Three automakers out to dry.
“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,” a group of Democratic lawmakers wrote to President Obama.
In the U.S., some of the tariffs have existed since the 1970s when Japanese automakers emerged as a serious threat to trade. Initially, the U.S. also had an allowance of just 1 million cars imported from Japan per year, which is part of the reason why Honda built a plant in Marysville, the first Japanese automaker to build a plant in the U.S. Toyota would follow suit with its NUMMI partnership with General Motors in California a few years later before expanding.
The U.S. has gradually made it easier for foreign automakers to import cars; Japan hasn’t always reciprocated equally.
Last year, the U.S. and South Korea opened up free trade among each other. There are no caveats. The Korean market is still extremely nationalistic, but more than 10 percent of new cars sold in South Korea are now from import brands. That number is increasing each year, too.
If negotiations work out, Japan could join the Trans Pacific Partnership as early as July, a group that also includes Australia, Canada, Malaysia, New Zealand, Singapore, Brunei, Vietnam, Peru, and Chile. Together, the countries in the TPP comprise 40 percent of the world’s economy.
Source: Automotive News (Subscription required)