April 9, 2009 at 1:00 am

Proposals to 'Buy American' cause fear

Matsunaga )

Tokyo

The Japanese government is willing to turn a blind eye to the U.S. government's efforts to save General Motors Corp. and Chrysler LLC, but "Buy American" programs being proposed by some in Congress are causing anxiety here.

Officials object to proposals for a government-funded scrappage program that would encourage Americans to replace their old clunkers with new cars and trucks if those incentives are limited to vehicles built in the United States.

"Protectionism is our biggest concern," said Akira Matsunaga, director of the powerful Ministry of Economy, Trade and Industry's automobile division. "If such regulations pass Congress, we can't survive. We are hoping it will not come to that. If it does, we may have to say something."

He said such moves could trigger a global trade war, adding that protectionism helped lay the foundation for World War II.

U.S. Rep. Candice Miller, R-Harrison Township, co-sponsored a bill last month with two Democratic colleagues that would give U.S. consumers as much as $7,500 to turn in their older models for new vehicles -- but only if they are manufactured in North America.

"Americans cannot be expected to use their tax dollars to incent purchasing foreign cars," she told The Detroit News. "However, we would welcome them to build a plant in North America so their product would qualify for vouchers under our plan. We don't want a trade war, we just want to stimulate our economy."

Japanese automakers say they have invested plenty in U.S. factories over the past two decades.

"It's alarming for the whole world," said Toshihiro Iwatake, executive director of the Japan Automobile Manufacturers Association Inc., or JAMA. "Protectionism will halt the free flow of products."

JAMA and the Japanese government also are concerned about the U.S. Department of Energy's $25 billion direct loan program to help automakers fund the development and production of more fuel-efficient vehicles. Theoretically, the program is open to all automakers, and Japan's Nissan Motor Co. has already applied for funds.

Matsunaga said his ministry may respond by offering similar loans to Japanese automakers if the program ends up only benefiting U.S. companies, but cautioned that could lead to "subsidy competition."

He also is concerned about the decision by U.S. regulators to allow GM's financial arm, GMAC Financial Services, to become a commercial bank, giving the company access to funds at a lower interest rate.

Such comments may sound ironic to Detroit insiders who have long railed against what they see as collusion between the Japanese government and its auto industry. And just last month, Toyota's lending arm asked the Japanese government for $2 billion to help fund auto loans, much of which it says will be spent in the U.S. market.

Matsunaga dismisses those allegations as misunderstandings.

"We provide some subsidies, and we encourage academia and manufacturers to work together," he said. "Your government does the same thing. As for Toyota, it's tough even for good companies to get a loan today. We just provided liquidity. The terms are commercial terms."

Japan's automakers also bristle at the idea that they are being supported by their government. JAMA's Iwatake said his members wish they could receive the kind of support the U.S. government has given to GM and Chrysler.

"We envy it. The U.S. government is so generous!" he said, adding the government has made funds available to all Japanese companies because of tight credit. "It is not a bailout of the automobile companies. They have to have matching funds from private sector banks -- and these loans are at commercial rates."

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