Even in a tough auto market, a bilateral trade agreement could provide opportunities for U.S. automakers to expand their market share in Japan, execs said at a trade panel.
As initial talks for a U.S.-Japan trade agreement could start in just over a week, industry executives expressed optimism on Wednesday that any final deal could expand access of U.S. automobiles to Japan’s market.
The Nikkei Asian Review on Tuesday reported that U.S. Trade Representative Robert Lighthizer and Japan’s trade minister, Toshimitsu Motegi, plan to meet to decide the scope of trade talks April 15 and 16. The Office of the U.S. Trade Representative didn’t comment.
Between 1.7 million and 1.8 million vehicles entered the U.S. market from Japan last year, while U.S. automobile exports to Japan were limited to fewer than 17,000 vehicles in 2018, even though Japan boasts a 5 million-unit market, American Automotive Policy Council Vice President of International Policy Charles Uthus said during a Washington International Trade Association event.
“This is a miniscule amount and has a lot of upside potential, and we would hope a U.S.-Japan FTA would open up that potential,” he said.
Christopher LaFleur, board chairman of the American Chamber of Commerce in Japan, said he believes a trade agreement could provide “great opportunity” for U.S. automobile companies in Japan, as a deal could facilitate next-generation automobile sales through updated regulatory standards.
“As you look at the future, the entire auto industry is going to be changing,” he said. “There are new technologies being introduced that literally will make the business models that have operated … obsolete.”
Technological advances in areas such as driverless cars, mapping services and electronic or hybrid propulsion systems will turn the automotive industry “upside-down,” LaFleur said. “New players will have new opportunities.”
Uthus said reaching an agreement on autos will take some time, as there are “entrenched” regulatory issues, some of which are “mired in the details and quite technical.”
He believes U.S. car companies can compete in the Japanese market because the U.S. exports 250,000 vehicles to Europe, 250,000 vehicles to China, about 50,000 vehicles to South Korea and a total of 2 million cars around the world yearly, while Japan is an “outlier,” as only 7 percent of its automotive market is open to imports, he said.
Overall U.S. car quality and fuel economy also have significantly improved in recent years, Uthus added.
But the threat of potential U.S. tariffs on automotive imports could impact trade talks, as President Donald Trump is due in May to make any decision about whether to impose trade remedies pursuant to Section 232.
Wendy Cutler, managing director of the Washington, D.C., office of the Asia Society Policy Institute, said the Trump administration’s Section 232 investigation into automotive imports likely played a role in getting Japan to the negotiating table for a potential trade agreement and added that she doesn’t see the administration dropping at least the threat of tariffs, which it views as leverage.
It’s foreseeable that the Trump administration will push for an import quota on Japanese automobiles, she said.
Meanwhile, the National Pork Producers Council is concerned that Japan could retaliate with higher tariffs on U.S. pork in response to any Section 232 tariffs on automobiles, said Maria Zieba, the council’s director of international affairs.
China currently is retaliating against U.S. pork in response to Section 232 tariffs on steel and aluminum, as well as Section 301 tariffs across $250 billion worth of Chinese goods in annual import value, and Mexico is retaliating against U.S. pork in response to Section 232 tariffs on steel and aluminum.
“Pork seems to always be at the top of retaliation, and we’re currently on three lists, so it’s not hard to imagine that we would end up on another one,” Zieba said.