New York — The United States and Japan are intensifying auto talks aimed at reaching a 12-nation free trade deal — an agreement that could have major impacts for large automakers.
[Reposted from The Detroit News | David Shepardson | April 1, 2015]
A deal that opens Japan’s market to U.S. autos is key to winning support from Congress, the Obama administration’s top negotiator said.
Congress is preparing to vote on granting the Obama administration Trade Promotion Authority, known as “TPA” or “fast track.” That would require Congress to hold an up or down vote without amendments on a 12-nation free trade deal called the Trans-Pacific Partnership known as the “TPP.”
Many of the nations are reluctant to agree to a final deal without assurances that Congress will vote on the bill. If Congress was allowed to amend the deal, the fear is it would make it nearly impossible to reach a deal. The U.S. and Japan hope to reach a deal or make dramatic progress before Japanese Prime Minister Shinzo Abe comes to Washington for meetings with President Barack Obama and to address Congress on April 29.
“Japan has zero tariffs on autos and trucks, and yet access to the Japanese automotive market is limited. There is an array of non-tariff barriers in Japan that have effectively closed the Japanese auto market to U.S. producers,” U.S. Deputy Trade Ambassador Wendy Cutler said Monday at a forum in New York. “We are now working intensively with the Japanese to make as much progress as possible before the prime minister comes to the United States.”
The U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free-trade zone comprising 40 percent of the world's economy for more than four years. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are part of the talks.
The thorny auto issues prompted the U.S. to hold bilateral talks with Japan. Cutler noted that a Japanese team was in Washington last week to talk about auto issues.
“These are tough issues to resolve,” Cutler said, saying there are still “significant gaps” on auto issues. “We are making good progress but we have more work to do.... The remaining issues could not be tougher.”
American automakers fear if Japan intervenes to weaken its currency, its automakers eventually will be able to dramatically undercut them, especially when U.S. tariffs are phased out — 25 percent on light trucks and 2.5 percent on cars. Automakers want the tariffs kept in place for at least 25 years or more. And China could seek to enter the free-trade agreement under the same rules down the road.
Cutler noted the U.S. has agreed to eventually eliminate those tariffs with Japan but hasn’t said it reached agreement on precisely how long they would be in effect before being phased out.
“A strong autos deal is extremely important for the United States if the TPP agreement with Japan is going to be passed by Congress,” Cutler said.
U.S. automakers have previously said the auto tariffs should remain in effect for at least 25 to 30 years or longer.
U.S. automakers and some lawmakers have been lobbying the Obama administration to include provisions to crack down on currency manipulation in the deal, but the U.S. Trade Representative’s Office has steadfastly refused to raise currency in the talks.
Sen. Sherrod Brown, D-Ohio, visited Ford Motor Co.’s Cleveland Engine Plant Tuesday to talk about currency and meet with Ford and United Auto Workers officials. Brown’s office said he was calling “for the inclusion of currency provisions in the agreement to protect the American auto industry and its workers from unfair trade practices. ... The American auto industry is hurt when countries cheat trade law by undervaluing their currency.”
Brown noted that Ford started this month building four-cylinder, 2.0-liter and 2.3-liter EcoBoost engines previously made in Spain, bringing 450 jobs and a nearly $200 million investment to Cleveland.
Last month, Labor Secretary Thomas Perez rejected the idea that the administration is "insensitive" to the auto currency issue, when it was noted that the administration publicly hasn't backed down from its position refusing to discuss currency as part of the trade talks.
"We are anything but," Perez said, noting that Obama has repeatedly raised the issue of currency in China.
Perez said the administration has been discussing the currency issue on Capitol Hill.
"We recognize the importance of this issue, and at the same time, we want to do something — if anything — that builds upon the progress that we have already made but also doesn't have unintended consequences," Perez said. "I would simply respectfully take issue with the notion that no one has given ground on this because this continues to be the topic of significant dialogue with folks on the Hill."
Michigan members of Congress, Detroit's Big Three automakers and the United Auto Workers have been pushing for at least three years to convince the Obama administration to include provisions in the agreement barring the countries from currency manipulation. But Treasury Secretary Jacob Lew has repeatedly shown no interest in doing so, arguing that such issues are better addressed by global forums like the World Trade Organization.
Automakers worry that foreign governments like Japan's will be able to weaken their currency to undercut U.S. vehicle production.
The U.S. auto industry is worried a deal will be reached that doesn't do enough to open the Japanese auto sector to American products. Japan has historically imported very few foreign automobiles. The auto sector accounts for more than 70 percent of the U.S. trade deficit with Japan.
"Right now, Japanese cars are abundant in America. American cars are virtually nonexistent in Japan — and when you talk about that, you talk about opportunity," Perez said.