Japan’s Trade Barriers Stir Congress to Anger : Analysts See Return to Free Market in Cars
Claiming that the move represents a serious effort to extend its curbs on automobile exports, Japanese trade officials formally announced Thursday that the Tokyo government will permit the number of Japanese cars shipped to the United States to rise by 24%, once four years of stringent “voluntary” restraints end on Sunday.
But U.S. auto industry analysts immediately labeled the decision a return to the free market, saying it shows that the Japanese intend to ship as many cars here as they can sell.
Permitting car exports to grow by 450,000 to 2.3 million units this year imposes real restrictions on Japan’s auto makers, government officials in Tokyo said. They argued that the companies had the capacity to increase exports by an additional 300,000 to 500,000 units if the government had not intervened. Under the final year of import restraints, Japanese car shipments have been limited to 1.85 million units.
“The 24% increase is one level of magnitude lower than the producers wanted to export,” Naoki Kuroda, chief of the Ministry of International Trade and Industry’s automotive section, told reporters in Tokyo. “No firm will be able to carry out (its export plans) to the full 100% extent of its desires.”
MITI Minister Keijiro Murata said in a statement that the 2.3-million limit will ensure “moderation” in exports, adding that the new restrictions will apply for one year only.
But U.S. industry analysts said the new ceiling will not keep U.S. sales of Japanese cars below what they would be in an unrestricted market. Although the Japanese auto makers have the manufacturing capacity to increase exports to the United States to nearly 3 million units a year, their American dealer networks are still not large enough to handle more than 2.3 or 2.4 million units per year, analysts said.
‘Just a Smoke Screen’
“What this turns out to be is just the free market level, and calling it a continuation of restraints is just a smoke screen,” said John Hammond, an analyst with Data Resources Inc., a Lexington, Mass., economic forecasting firm.
“I would say (the 2.3-million) level is really not much restraint,” added John Reynolds, an analyst at Chase Econometrics, in Bala Cynwyd, Pa. “That’s about all their dealers can handle.”
The Japanese action to dramatically expand exports comes after repeated predictions by American economists--as well as promises from Japanese industry executives--that Japan would not flood the U.S. market when quotas were removed. Many analysts had predicted last year that Japanese imports would only rise by about 10%, or about 200,000 units, from the level in the final year of quotas. Japanese industry executives also said earlier this year that exports would rise by only 10% or 15%.
Japan Blames Chrysler, GM
But, in the wake of Thursday’s announcement, some analysts are now forecasting that Japanese sales will rise even further next year to 2.4 million units, giving Japan about 23.5% of the domestic car market.
Sensitive to charges that they are becoming too aggressive in their export strategy, Japanese trade officials Thursday blamed part of the increase on plans by General Motors Corp. and Chrysler Corp. to import more cars from their Japanese affiliates.
GM, which under the quota program imported a limited number of subcompacts from its two Japanese partners, hopes to expand its import program as soon as quotas are lifted. Eventually, it plans to import up to 200,000 small cars a year from Isuzu Motors Ltd. and an additional 80,000 minicars from Suzuki Motor Co. GM currently imports just 17,000 cars from Suzuki and 29,500 from Isuzu per year.
Meanwhile, Chrysler announced earlier this month that it plans to more than triple its imports of small cars from its Japanese partner, Mitsubishi Motors Corp., from 87,500 to 287,500 per year as soon as possible after quotas end.
‘A Special Circumstance’
Japanese officials said the import plans by Detroit-based auto makers constituted “a special circumstance” that Japan took into consideration in setting the 2.3-million limit for the April 1, 1985-March 31, 1986, period, which is Japan’s 1985 fiscal year.
But they did not say exactly how much of the increase would go to GM and Chrysler, adding that the trade ministry will set quotas for all eight of Japan’s exporting auto firms later. Officials at GM and Chrysler said they have not been told by the Japanese how many more cars they will be able to import this year.
Ministry officials acknowledged that the 450,000-unit increase would add between $2.5 billion and $2.6 billion to America’s trade deficit with Japan, which reached $36.9 billion last year. But Japanese trade officials also predicted that the prices American consumers pay for Japanese cars will fall--at least by the amount of the premiums over sticker prices now charged by many import dealers with short supplies.
Murata also said Japan’s decision to continue auto export “restraints” will not affect its intention to open its own domestic markets to U.S. products. He added that he sent a letter to outgoing U.S. Trade Representative William E. Brock III, informing him that Japan does not consider the decision to be a trade-off for allowing Japan to avoid more concessions in other areas of trade.
Loss of American Jobs
The Japanese decision was condemned both in Japan and in the United States. Officials at Ford Motor Co., Chrysler and the United Auto Workers charged that the increased imports would cost thousands of American jobs and worsen the trade deficit. UAW President Owen Bieber said the increase would cost 90,000 jobs in the auto industry and in related sectors of the economy.
“Holding down imports to a 24% increase is no cause for celebration,” said Ford Vice President David N. McCammon. “The net result will be a flood of Japanese shipments to the United States.”
But GM, which hasn’t been able to import as many cars as it wants under quotas, claimed that no restraints should have been imposed at all. In a highly unusual move, GM Chairman Roger B. Smith sent cables to Prime Minister Yasuhiro Nakasone, as well as the foreign minister, the minister of international trade and industry, and the chairman of a ruling Liberal Democratic Party trade committee, criticizing the decision as “extremely unfair” to GM and its affiliates in Japan.
‘Unacceptable’ to GM
Smith reportedly described himself as “astounded” that the trade ministry had decided to impose further export restraints after President Reagan “decided to abolish” them last month. He called the new restraints “unacceptable” to GM.
Takashi Ishihara, Nissan Motor Corp. president, also called the decision “truly regrettable,” and said the ministry should have allowed each Japanese firm to make its own export decisions based on “each auto maker’s own judgment, based on its own good conscience.”
He also said he feared “the restraints will risk spreading protectionism on a global level and may even undermine the free trade system.”
