How will U.S. Automakers React to Obama’s Invitation to Japan?

The Obama administration said on Friday that Japan is allowed to join 11-nation free-trade talks called the Trans-Pacific Partnership. The partnership’s goal is creating a free-trade zone that would would include 40 percent of the world’s economy. U.S. automakers and the United Auto Workers union are both strongly opposed to Japan’s entry to the talks, according to Detroit News.

Japan is the third-largest economy in the world. According to U.S. Rep. Sander Levin, D-Royal Oak, Michigan, Japanese automakers sold 5.3 million vehicles in the US in 2012–almost 40 percent of total U.S. auto sales. U.S. automakers only sold 13,367 vehicles in Japan during the same year. Only six percent of auto sales in Japan are imports.

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The reaction of the U.S. automotive industry since Japan was invited to join free-trade talks has been swift. The president of the American Automotive Policy Council–a trade association that represents Detroit’s “Big Three” automakers (NYSE:GM)(NYSE:F)(NYSE:TM)–said, “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 job.” The United Automotive Workers union said, “There absolutely should be no phase-out of any passenger car, light truck and auto parts tariffs until there is concrete, measurable progress on these critical economic issues.”

Japanese automakers are quick to point out that they build vehicles in the U.S. while U.S. automakers do not build vehicles in Japan. They also do not think U.S. automakers are providing vehicles that fit Japanese preferences. Currently however, U.S. automakers are only allowed to export up to 2,000 vehicles per vehicle type to Japan annually under a “Preferential Handling Procedure” import fast-track plan.

On Friday, Japan announced that this ceiling will be raised to 5,000 vehicles annually. In response to this, U.S. Rep. Levin said a “unilateral low-volume increase of 3,000 cars is a meaningless gesture by the Japanese, given all of the other obstacles to U.S. exports in their market. Indeed, the impenetrability from those obstacles is reflected in the fact that U.S. automakers have not even been fully utilizing the existing quota.”

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The Japan Daily Press noted that Alan Mulally–CEO of Ford Motor Co. (NYSE:F)–called Japan the most “closed automobile market in the world,” last month when questioned by reporters on the possibility of Japan joining the Trans-Pacific Partnership. He went on to say that, “They [Japan] should open up their market, they should restructure their industry, and that’s why we’re encouraging the people negotiating the free trade agreements that they deal with that.”

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