Washington — The Obama administration’s top trade negotiator says Detroit’s Big Three automakers should take advantage of a new 12-nation free trade deal that it says will allow them new access to Japan’s largely closed market.
In a recent Detroit News interview, U.S. Trade Representative Mike Froman says the Trans-Pacific Partnership will allow U.S. automakers new opportunities — giving them tools to sell more vehicles in Japan. But he says it is up to automakers to compete with Japanese automakers in the world’s third largest auto market.
“By opening these markets, by creating these binding enforceable rules with Japan, by being sensitive on the import side — both in terms of autos and auto parts in terms of the tariff (phase out) — I think it is a very good package. We have confidence that the American worker can compete globally,” Froman said in an interview in his office.
The pact basically preserves the status quo on trucks in the United States, the most profitable part of the market, for three decades. The 25 percent tariff on imported trucks has forced foreign carmakers to build truck and SUV plants in the United States, and kept some would-be competitors out of the truck market that is dominated by the Big Three.
That tariff will remain in force for 30 years and then be eliminated, while the 2.5 percent tariff on cars will be phased out starting after 15 years and eliminated completely in 25 years. .
“They have 30 years basically — a head start — of getting into Japan’s market before anything changes here,” Froman said.
The agreement makes it easier for Detroit’s Big Three to export vehicles to Japan. But it doesn’t include rules, which the automakers have long sought, against currency manipulation that could make their vehicles too pricey for many foreign buyers — and it make it easier for foreign automakers to undercut them here.
Of 5.6 million cars and trucks sold in Japan last year, only about 330,000 were exported from around the world. Of those, about 19,000 came from the United States — and less than 10,000 were built by Detroit’s Big Three. By contrast, Japan sent the United States 1.58 million cars — resulting in nearly a $50 billion auto trade deficit.
Ford Motor Co. for years has led opposition to the agreement insisting that the Obama administration must address currency manipulation. It quickly opposed the agreement after it was announced early last month.
“The U.S. surrendered on rules prohibiting currency manipulation, locking in a $1.5 trillion auto trade deficit with Japan, and that is not good for American auto manufacturing or American workers,” said Stephen Biegun, Ford’s point person on trade who is vice president for international governmental affairs. “Without currency, it does absolutely nothing for the American auto industry.”
Biegun says the agreement will do nothing to change the current $50 billion a year auto trade deficit the United States has with Japan — and argues the deal won’t result in U.S. automakers exporting significantly more vehicles.
The deal was unveiled among the United States, Japan, Canada, Mexico and eight other nations. Eight years of negotiations came to a close after nearly a week of talks resolved final disputes over dairy products, pharmaceutical drugs and automobile export rules. The deal encompasses 40 percent of the world’s economy and a third of all global trade.
The administration is expected to unveil the text as early as Thursday. Congress then has at least 90 days to review the deal and then must to approve or reject the agreement without amendments.
Sen. Debbie Stabenow, D-Lansing, said Wednesday she was “skeptical” that the deal would boost U.S. automakers, but says she will review the text when released. She said the administration should have focused on currency manipulation to address the root issue.
The tariffs on auto parts, ranging from 2.5 percent to 5 percent, have a more complicated phaseout schedule, with those on some “green energy” parts like lithium-ion batteries being phased out over 15 years — but many will see tariffs dropped immediately.
The UAW and Steelworkers union raised concerns about some critical parts — and the U.S. won longer phaseouts of tariffs for them. “We tried to protect the parts that they saw as a key part of their future,” Froman said.
Japan has no tariffs on cars and trucks from the United States, but U.S. automakers claim it has effectively kept most American cars out through other non-financial barriers
As part of the agreement, Japan — which imports among the fewest vehicles of any major auto market — agreed to steps that would make it easier for U.S. automakers to export a limited number of vehicles there annually and will have a joint committee with the U.S. to address motor vehicle issues. Japan agreed to more transparency on how it sets rules.