Report: U.S. drops bid to end Japanese import rules

David Shepardson
Detroit News Washington Bureau

Washington — The Obama administration declined to comment on a report Monday that U.S. trade negotiators will end their bid to convince Japan to lift tough requirements on car imports after Japan agreed to expand a tariff-free quota for imported U.S. rice.

Nikkei Asian Review reported the U.S. Trade Representative Michael Froman's office will end efforts to convince Japan to drop standards on car imports in exchange for Japan's agreement to import an additional 10,000 tons of U.S. rice. The report said talks will begin in Washington on Wednesday aimed at working out the details — and a deal means it is more likely a final deal on a 12-nation Trans-Pacific Partnership could be reached by spring.

Trevor Kinkaid, a spokesman for Froman, said the office had no comment on the report. Froman is set to testify Tuesday in front of the Senate Finance Committee. It comes as the Obama administration is pushing Congress to quickly approve "fast track" trade legislation that would guarantee any trade deal gets a yes or no vote without amendments from Congress.

In April 2013, Japan announced it would more than double the number of motor vehicles eligible for import under its fast-track rules. Detroit's Big Three automakers are now be allowed to export up to 5,000 vehicles annually of each vehicle type under the program, compared with the prior ceiling of 2,000 vehicles per vehicle type.

The U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free trade zone comprising 40 percent of the world's economy for more than four years. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are part of the talks.

Automakers have been pushing for at least three years to convince the Obama administration to include provisions in the agreement barring the countries from currency manipulation, but Treasury Secretary Jacob Lew and Froman have repeatedly shown no interest in doing so, arguing such issues are better addressed by global forums like the World Trade Organization.

Automakers worry that foreign governments — like Japan — will be able to weaken their currency to undercut U.S. vehicle production.

The administration may be dropping efforts on the auto provision because automakers have taken a hard line in only seeking currency changes.

"We can compete against anyone anywhere — but we can't compete against the Bank of Japan," said Ziad S. Ojakli, Ford Motor Co.'s group vice president, government and community relations.

Asked if Ford would accept any other provisions in lieu of currency in a 12-nation free trade deal, Ojakli said no. "We need to have strong enforceable disciplines in any thing that moves — whether it is trade promotion authority or TPP. ... All we're looking for is the internationally accepted principles (on currency)."

Ojakli said the agreement must put "teeth" in those rules that are part of other international agreements. "Let's enforce the rules that we've all agreed to worldwide. How crazy is that?" Ojakli said.

A group of Democratic lawmakers from Michigan are among those strongly opposed to a deal without currency changes.

Rep. Dan Kildee, D-Flint, is a strong opponent of a free trade deal without currency. He notes that Flint once had 79,000 manufacturing jobs, and now has less than 10,000.

"(Automakers) are going to have a difficult time signing off on an agreement that does not include a currency provision," Kildee said in a Detroit News interview. "They're in the same position that a lot of us are in: trying to make a bad deal as good as we can knowing that in the end absent a big turnaround — which would be to begin to negotiate on currency — it's not going to be something we can support."

Rep. Brenda Lawrence, D-Southfield, said Michigan had been devastated by prior trade agreements that had sent thousands of jobs abroad. "When you are in an environment like Michigan and watch factories, watch people lose their homes, this is real and this is about jobs." Lawrence said.

Rep. Debbie Dingell, D-Dearborn, said a bad deal "could do real damage to the middle class." Fast-track trade legislation "does not allow Congress to address countries that manipulate their currency to gain an unfair advantage, which is the mother of all trade barriers," she said. "This is unfair, and it puts U.S. jobs at risk."

The proposed trade pact is facing strong opposition from U.S. automakers and the United Auto Workers, which are worried a deal will be reached that doesn't do enough to open the Japanese auto sector to American products. Japan has historically imported very few foreign automobiles, but the number has been rising significantly in recent years — especially among European vehicles.

The auto sector accounts for more than 70 percent of the U.S. trade deficit with Japan.

American automakers fear if Japan intervenes to weaken its currency, its automakers eventually will be able to dramatically undercut them, especially when U.S. tariffs are phased out — 25 percent on light trucks and 2.5 percent on cars. Automakers want the tariffs kept in place for at least 25 years or more. And China could seek to enter the free trade agreement under the same rules down the road.