Washington — President Barack Obama has "serious concern" about Japan's auto trade policy, a senior administration official said Tuesday. Acting U.S. Trade Representative Demetrios Marantis told the Senate Finance Committee that the administration wants to see Japan make more progress on auto issues.
Last week, Japan asked to join the Trans-Pacific Partnership free trade talks, a group of 11 nations led by the U.S.
Detroit's Big Three automakers, many members of Congress and the United Auto Workers union oppose letting Japan join the talks, known as TPP, that have been going on since November 2011.
"We have a long history with Japan on automotive issues. It's a serious concern to the president and we are working very hard to ensure that should Japan join the TPP that we are able to address the long-standing issues that we have in the auto sector," Marantis said. "We've made progress with Japan but our work continues."
Sen. Debbie Stabenow, D-Lansing, said the Japanese market has been essentially closed to U.S. companies "for 80 years." She said for every 120 vehicles Japanese automakers export to the United States, Detroit's Big Three sell one vehicle in Japan.
"We can't allow them to have more access to our market without also having access to their market in the major areas which they export to us, which is automobiles," Stabenow told Marantis. "This is very serious. This is the number one issue that our American automobile industry is concerned about."
Stabenow spoke with Ford Motor Co. President and Chief Executive Alan Mulally about the issue Monday, her office and the company confirmed Tuesday. Ford has taken a prominent position in raising concerns about the impact of Japan's joining the TPP.
She said Japan's central bank's efforts to weaken the Japanese yen amounts to an unfair advantage for Japan.
"Talking to one of our major CEOs yesterday, he indicated that (currency manipulation) adds as much as $2,500 to the price of a vehicle which a big deal in terms of unfair competitive advantage," she said at the hearing.
The Obama administration faces heavy pressure from Detroit's Big Three automakers and the United Auto Workers union, who fear that dropping U.S. tariffs could lead to the loss of thousands of jobs if Japan doesn't do more to open its market to imports. They point to trade agreements reached with Japan that haven't led to a dramatic increase in exports.
"President Reagan tried to fix it in the '80s, President Clinton tried to fix it in the '90s. It's still there," Stabenow said.
UAW President Bob King reiterated Monday that the union opposes Japan's entry into the Trans-Pacific Partnership "because their inclusion would undermine our nation's ongoing economic recovery. Japan's inclusion in the TPP would cost the loss of tens of thousands of automotive manufacturing jobs in the United States because of long-standing closed markets."
The Japan Automobile Manufacturers Association strongly supports Japan's decision to join the talks.
The group's chairman, Akio Toyoda, who is Toyota's president, said the "establishment of high-level economic partnership would, among other benefits, promote free trade and provide common rules across a variety of sectors such as investment, trade facilitation and intellectual property rights which generally advance business opportunities in the region."
Last week, 48 members of Congress including nine senators said allowing Japan to join free-trade talks with 10 other nations could lead to more Japanese auto imports and fewer American auto jobs.
The United States and 11 other nations — including Canada and Mexico — have been in talks since 2011 aimed at creating a massive free trade zone that would eliminate all tariffs and barriers among the nations. Japan has stayed out of the talks.
Japanese Prime Minister Shinzo Abe's ruling Liberal Democratic Party approved letting Japan join if the world's third-largest economy can keep in place tariffs on key agriculture products, including rice, wheat, beef and sugar.
"We have our own sensitivities," Marantis said. "We have issues of concern with Japan in the area of autos, insurance and others."
In response to a question from Sen. Orrin Hatch, R-Utah, Marantis said if Japan joins the talks it will commit to a goal of reaching a broad deal "that includes putting all goods on the table."
Last week Michigan Sens. Carl Levin and Stabenow, and Reps. Sander Levin, John Dingell, John Conyers, Dan Kildee and Gary Peters raised concerns about allowing Japan to take part, but stopped short of formally calling on him not to let Japan into the talks.
"American automobile companies and workers — those at the forefront of today's economic recovery — have been forced to compete for decades on a fundamentally unlevel playing field," their letter said. "A flawed, one-way trade agreement that benefits Japan at the expense of the United States businesses and workers will not help strengthen this vital relationship."
The letter noted that if the U.S. agreed to drop car and truck tariffs on Japanese exports under a free trade deal, it "would be a major benefit to Japan without any gain for a vital American industry, leading to more Japanese imports, less American production and fewer American jobs."
Japanese automakers note the auto imports to Japan have been rising and question whether U.S. automakers are offering the right types of vehicles to meet Japanese consumer preferences.
Some point to the Korean Free Trade Deal as evidence to support new deals. The U.S. trade deficit with Korea was $16.6 billion in 2012, up from $13.2 billion in 2011 and up from $10 billion in 2010. The Korea deal took effect in March 2012.
Marantis noted that U.S. export increases occurred in the transportation sector, which experienced a 24 percent increase to $5 billion; sales of cars by Detroit automakers in Korea increased 18 percent, and overall U.S. passenger vehicle exports to Korea increased 48 percent.
"Imported cars are up almost $2 billion from the year before," Sen. Sherrod Brown, D-Ohio.