Ford Motor Company’s vice president for international governmental affairs, Stephen Biegun, is accusing the Japanese government of attempting to discourage the importation of automobiles. Biegun points to the decision to exclude imported vehicles for participation in Japan’s cash-for-clunkers program as just one example the country’s protectionist policies which, he says, can no longer be tolerated by the United States.
In a letter sent last week to U.S. trade officials, Detroit’s Big Three automakers complained about provisions in Japan’s fleet renewal program which they claim prohibits them from participating. Japanese automakers were among the top beneficiaries of the U.S. CARS program last summer with Toyota outselling all other brands.
According to the American Automotive Policy Council, "Despite being the world’s largest exporter of vehicles, with over 2.1 million exported to the U.S. alone last year, Japan remains the most closed auto market in the industrialized world, with less than 5 percent import participation." The Council also states, "A renewal of Japan’s scrappage program that allows no benefits to U.S. imports strongly confirms the view that Japan maintains an auto market closed to imports."
Japan’s current cash-for-clunkers program provides tax cuts of $2,830 for buyers who trade in autos 13-years-old or older when they purchase a new vehicle that exceeds the government’s 2010 emissions standards. Just as with the U.S. CARS program, the Japanese program requires that trade-ins be scrapped. However, the program also offers a $1,130 incentive to new car buyers who choose not to trade in their old vehicle. The program is scheduled to run through September 2010.
According to The Financial Times, foreign automakers are not prohibited from participation in Japan’s cash-for-clunkers program simply by virtue of their country of origin, but rather due to the way the Japanese government has set its emission standards. Those standards measure tailpipe emissions that are generated at low driving speed and stop-and-go driving conditions, and the majority of Japanese-made vehicles are designed with those standards in mind. American and European automakers, however, typically design their vehicles to achieve maximum efficiency and minimum emissions when driven at highway speeds. The result is that only two European- and no American-built vehicles qualify for participation in the program.
According to Japanese consular Satoshi Miura, who handles automotive issues through the Japanese embassy in Washington, D.C., any U.S. or European automaker whose vehicles meet the emissions requirements may participate in the program. He said, "The short answer is Japan believes that our program is fair. We have our cash-for-clunkers program, but this is not only about stimulus but also for environmental policy."
Ford’s Biegun claims that the problem is much broader than what he claims are inequities in Japan’s cash-for-clunkers program.
Biegun says, "This is about frankly a bigger issue than the Japanese scrappage program. This is about them starting to deliver the kind of market opportunities that their companies have taken advantage around the world for so long."
According to Carlo Guthrie, who serves as the U.S. Trade Representative’s spokesperson, the Obama administration is also concerned. She said, "USTR is continuing to raise this issue with the Japanese government. Our position remains that changes are necessary to give U.S. vehicles greater opportunity to qualify under Japan’s program."
In 2008, the U.S. imported $41.5 billion worth of Japanese passenger vehicles, but only exported $534 million worth of American-made vehicles to Japan.
U.S. automakers claimed in their joint letter that their exclusion from Japan’s scrappage program is due to the so-called "preferential handling protocol" which is a less costly alternative to testing requirements that American automakers have employed since the 1990s.
Biegun said, "We’re not going to sit by while the Japanese continue to keep their market closed through actions like this. So we’re going to put pressure on them. We want them to open their market."
Ford and Chrysler have also pushed for changes in the current trade agreement with South Korea to make it friendlier to U.S. automakers. Biegun said, "I don’t expect the Koreans to go easily because they’re tough negotiators, but if they want increased access or enhanced access to the largest consumer market in the world they’re going to have to open their market."
South Korea’s president, Lee Myung Bak, has said that his country is open to discussing U.S. automaker’s concerns over the automotive provisions included in the trade agreement which was ratified in 2007.
In 2008, South Korea imported $370 million worth of American-made passenger vehicles and exported approximately $7.5 billion worth of vehicles to the U.S.