Japan May OK Auto Export Quotas
Japanese auto makers have lined up against extending restraints on passenger car exports to the United States beyond the scheduled cutoff date of March 31, but there are signs that the government of Prime Minister Yasuhiro Nakasone may be receptive to a request for an extension.
Shoichiro Toyoda, president of Toyota Motor Co., said Thursday at a reception for foreign correspondents that there are officials in the Foreign Ministry and the Ministry of International Trade and Industry who would be receptive to any U.S. government request for another year of restraints.
He did not spell out the reasons for this, but a hoped-for trade-off on other points of friction, more politically sensitive in Japan than the prospering auto industry, was clearly the major factor. And if the restraints are extended, the politics of last year’s $33-billion-plus U.S. trade deficit with Japan--and the prospects for a $40-billion deficit this year--are likely to figure more prominently in the decision than economic logic.
Toyoda made it clear at a press conference before the reception that Japan’s No. 1 auto maker wants an end to the restraints.
“These voluntary restraints” he said, “were a political decision made in May, 1981, as an emergency measure for two years--three years at the most--to help the American auto industry readjust itself. Although they were supposed to end after three years, the restraints were extended, for a maximum of one year, nominally as an interim measure.”
Citing record profits of $6 billion in 1983 and an estimated $10 billion in 1984 by Detroit’s Big Three auto makers, and the return to work by 220,000 of the 270,000 American workers who had been laid off in 1982, Toyoda added:
“No one can doubt that the Big Three have recovered and that they have increased their international competitiveness. . . . There is absolutely no reason for the voluntary restraints to be continued.”
Toyoda said that extending the restraints, now pegged at 1.85 million units a year, would be “extremely unfair” to Japan and would “discourage efforts to improve corporate management” in the United States.
His statement was the most impassioned of several by leaders of Japanese auto firms and put both of Japan’s Big Two, Toyota and Nissan, on record as favoring an end to the curbs. The two firms, which hold the largest fixed quotas on exports to the United States because of their past performance, had been regarded as the least opposed to continuance of the restraint program.
Last Friday, Takashi Ishihara, president of Nissan and chairman of the Japan Automobile Manufacturers Assn., also advocated ending the restraints on March 31.
Facing rising U.S. complaints about the snowballing deficit in bilateral trade, Nakasone’s government appears at the moment to be looking at the restraint program as a relatively easy way to hold down Japan’s trade surplus with the United States.
Leading politicians of the ruling Liberal Democratic Party also have made known their willingness to continue the program. Last May, Susumu Nikaido, vice president of the ruling party, told visiting Vice President George Bush that Japan was willing to continue the curbs.
Masayuki Fujio, chairman of the Liberal Democrats’ policy board, backed Nikaido by urging Japanese auto makers to accept a continuation of restraints “even if the American government decides that a fifth year is unnecessary.”
‘Cars for Cows’
The agreement to extend the restraint program for a fourth year was widely regarded as a “cars for cows” trade-off: Japan accepted a curb on car exports in exchange for an American retreat on the more politically sensitive issue--in Japan--of Japan’s quotas on imports of American beef.
This year, American pressure is focusing on high Japanese tariffs imposed on imports of paper and pulp products, another domestic sore spot for Nakasone. Ruling party politicians, many of whom act as lobbyists for domestic industries, were considered amenable to a “cars for cardboard” trade-off this time.
Almost simultaneously with last May’s Japanese expressions of willingness to continue the curbs, William E. Brock, the U.S. trade representative who is scheduled to visit Japan early next month, lashed out at “unbelievable new management bonuses” that the Big Three gave their executives in 1984. If the auto industry was strong enough to pay such bonuses, he asked, “then why does it need protection?”
On Wednesday, Brock said in Washington that an end to the restraint program would cause no “overwhelming surge” in Japanese car exports to the United States. He said he continues “to question the value of restraints.” His statements were widely interpreted here as a hint that the Reagan Administration favors an end to the restrictions.
Brock also said the Administration does not intend to make up its mind “at least for a few weeks” on whether to ask for a fifth year of restraints. When he visits next month, Brock is expected to have at least informal conversations on the subject with Keijiro Murata, the minister of international trade and industry.
Leading Japanese auto makers do expect an increase in exports if the restraints are lifted.
Nissan’s Ishihara predicted Jan. 18 that exports would go up by 10% or 15% “at the most,” if the restraint program ends on schedule. Kenichi Yamamoto, Mazda president, forecast Wednesday that exports would rise by 10%.
Toyoda refused to make a forecast, but in saying that “exports won’t grow in torrential proportions,” he, too, acknowledged that he foresees some increase.
The willingness that has been expressed here to extend the restraints carries with it an implicit understanding that some increase will be approved as part of any extension beyond April 1.
For the fourth year of restraints, the Ministry of International Trade and Industry approved a 10.1% increase in the quotas it assigned to each of the seven firms authorized to export to the United States.
The forecast by Ishihara and Yamamoto for at least a 10% increase if the restraints are abolished indicates that any extension of the curbs would be merely a cosmetic measure if the new program did not restrain export growth to less than 10%.
Toyoda and the other leading Japanese auto executives have argued that American consumers would benefit from lower prices if the restraints are ended. Although the tight supplies in the American market created by the restraints drove up prices of Toyota products--and increased Toyota’s profits--Toyoda insisted that his firm wants to sell cars at lower prices in the United States.
“You can’t maintain a good, long-term relationship with your customers by continuing to supply them with high-priced products,” he said.
American auto makers, for the most part, continue to urge that the restraints be kept in place to protect them from price-cutting by their Japanese competitors. Industry analysts argue that Japanese makers produce subcompacts for about $1,500 less than equivalent Big Three products. And Chrysler Vice Chairman Gerald Greenfield said Wednesday that an end to restraints would kill small-car manufacturing in the United States at the cost of 750,000 jobs, 30,000 of them in California.
Undervalued Yen
Undervaluation of the Japanese currency, which reduces the dollar cost of Japanese products sold in the United States, is cited as the chief reason for keeping the restraints in place.
The Japanese concede that the yen is undervalued, but they put the blame on American budget deficits, which have driven up U.S. interest rates to a point 5 percentage points higher than in Japan, thus attracting huge amounts of Japanese investment in American bonds. The outflow of Japanese capital creates more demand for dollars and further weakens the yen.
Owen Bieber, president of the United Auto Workers, who continues to advocate congressional passage of a local-content bill that would force American and foreign manufacturers to produce cars for the American market in the United States, is also on record as favoring extension of the restraints as a job-preserving measure.
Ford and Chrysler have both demanded that the restraint program be continued, but General Motors, which wants to import more small cars from Japan, has taken a different position.
GM Chairman Roger B. Smith said last Oct. 29 in South Korea that the restraint program “has to end.” But he added that, when it did, the United States “should get something in return.”
“What I’d like to see,” he said, “is access to the Japanese market.”
