Japan and US Get Testier In Dispute Over Car Trade

Tokyo threatens to take matter to world trade body for arbitration

THE current standoff between Washington and Tokyo over the openness of the Japanese auto market could get worse before it gets better.

After months of arguments between the world's two largest economies, the US has hinted that it may invoke trade sanctions if an agreement is not reached, and the Japanese have threatened to pull out of the talks and take the matter to the newly constituted World Trade Organization for arbitration.

The two countries' top trade officials, US Trade Representative Mickey Kantor and Minister for International Trade and Industry Ryutaro Hashi-moto, are scheduled to meet next month. The meeting could yield a resolution, but the back -and-forth may drag on until the June summit meeting of the world's seven leading industrialized countries.

Two undercurrents make this particular trade bout worth watching. For one, the Japanese have been defiant in refusing to consider extending a system launched in 1992 that calls for Japanese carmakers to voluntarily increase their purchases of US auto parts. Secondly, the high value of the yen, which theoretically makes Japanese goods more expensive overseas and foreign goods cheaper in Japan, has put the US in a stronger-than-usual bargaining position.

The yen has gained about 20 percent against the dollar since the beginning of this year.

In other words, both sides are acting tough. Already, newspaper editorialists here are asking how long the two countries can maintain a close security and political relationship when their commercial ties get so tense.

''A collision scenario is becoming more realistic,'' the Mainichi newspaper said this week, adding: ''President Clinton has recently hurt Japanese people's feeling by justifying atomic bombings of Japan. Is he confident that collisions in the auto talks will not shake the bilateral alliance?''

The US is playing its traditional role of the aggrieved trade partner. The Japanese, says Washington, do not buy enough foreign-made automobiles and auto parts because of unfair business practices and regulations.

US officials point out that automobile and auto-parts trade accounts for about 60 percent of the $66-billion trade imbalance between the US and Japan.

The Japanese counter with the latest version of a theme Tokyo consistently emphasizes in trade talks: US companies don't try hard enough.

Japanese negotiators used to point out that the US ''Big Three'' carmakers did not make cars with steering wheels on the right-hand side of the car for sale in Japan, where people drive on the left. Now that Detroit is making right-hand-drive vehicles for Japanese consumers, negotiators here are stressing that US carmakers are not selling US-made cars with engine displacements of less than 2 liters, sales of which constitute 80 percent of this country's domestic market.

The US, in turn, retorts that there are 55 such models selling in Japan under Big Three labels. Most of these cars are made in Europe or Japan, US officials admit, but they insist they are more concerned with market access than with the origin of the cars.

The Japanese appear especially incensed over US insistence that the country's automakers renew a 1992 ''voluntary plan'' in which they agreed to forecast the amount they would spend on US-made auto parts in 1994. From the US perspective, this device has proved effective, since the automakers spent $19 billion on US auto parts last year, just as they forecast.

The problem, says one Japanese trade official interviewed on condition of anonymity, is that the plan was ''ill-treated.'' ''Kantor and [US Commerce Secretary Ron] Brown regarded the plan as a commitment by Japanese vehicle manufacturers and also by the Japanese government.''

In Tokyo's view, this made the US guilty of establishing a much-loathed ''numerical target'' and ''managing trade,'' two favorite epithets that Japanese negotiators use in criticizing US trade policy. ''There will be no plan this time,'' says the official.

''The voluntary plans are voluntary,'' counters a US official in Tokyo who also declined to be identified further. ''We don't tell the Japanese automakers what to do. What we're looking for is leadership. The Japanese automakers in the past have exercised tremendous leadership.''

The two sides agreed last year not to discuss the voluntary plan in the government-to-government negotiations, so US Ambassador Walter Mondale visited the leading Japanese automakers last month to see if they might want to renew and expand their purchase plans. The executives, says Osamu Watanabe, a senior Japanese trade official, ''very politely and graciously explained that they would not be able to renew their outlooks and expand their plans.''

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