Japan to Impose Quotas on Car Exports to U.S. for Seventh Year

Seeking to “quiet down voices calling for protectionism in the U.S. Congress,” Hajime Tamura, minister of international trade and industry, announced Tuesday that Japan will extend its government-enforced quotas on passenger car exports to the United States for a seventh year, beginning April 1. The limit will remain at 2.3 million cars for the third straight year, Tamura said.

American auto industry, labor and government leaders in both Detroit and Washington immediately criticized the Japanese for not imposing stricter quotas to reduce Japanese imports, as many in Congress and the domestic auto industry have demanded.

“The Japanese want business as usual, meaning that they will take $60 billion or more out of this country this year, half of it in automobile trade, without any consideration for America’s deficit problems,” Chrysler Chairman Lee A. Iacocca complained. With this announcement, “we expect Japan’s trade surplus with the U.S. to grow and more American jobs to be lost,” Iacocca added.

Ford Motor Co., which had earlier asked the Japanese to keep imports below the 2-million unit level, added: “We are disappointed that Japan passed by a major opportunity to take positive action to reduce their out-of-control trade surplus with the United States.”

In Tokyo, Tamura said his ministry is aware of the calls in the United States for a reduction in exports from Japan but added: “We don’t need to listen to the U.S. industry claims. We are not a vassal state or a colony of the United States.”

For its part, General Motors, which has become a major importer of Japanese subcompacts, sounded a more conciliatory note. The company said in a statement that the Japanese had made “an understandable decision in light of the current trade situation.”

Owen Bieber, president of the United Auto Workers, called for limits on auto parts from Japan. Without a reduction in the quotas covering fully built cars, new limits should be placed on shipments of Japanese auto parts to the U.S. assembly operations of the Japanese auto makers, to reduce the dollar value of Japanese automotive exports to the United States.

In fact, the flood of Japanese auto parts into the American market could soon become a key issue in U.S.-Japanese trade talks. Indeed, the rapid development of Japanese assembly operations in the United States--plants where cars are assembled almost entirely with Japanese parts--now threatens to make a mockery of the quota system.

“The Japanese show no signs of wanting to slow the car or dollar value of their imports, even as their U.S. production increases,” said Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee and a strong supporter of the U.S. auto industry.

U.S. Trade Representative Clayton K. Yeutter added that the Reagan Administration did not put any pressure on the Japanese. “This was their decision alone,” Yeutter said.

The decision to extend restraints, Tamura said, represents a sacrifice by Japan that U.S. members of Congress should appreciate. By depriving Japanese auto makers of export growth for three consecutive years, the share of auto exports to the United States in Japan’s gross national product and in the volume of its overall exports will diminish, he said. The new decision, “in effect, amounts to a cutback, in real terms,” he added.

Against a background of a slowdown in Japan’s economy, dwindling export profits caused by the rising value of the yen and an overall dip in global auto exports last year, “to us, this decision is an unpleasant affair,” he said.

Concern Voiced

Both the Reagan Administration and congressional leaders on trade matters voiced concern over that Japanese attitude. They said the Japanese shouldn’t believe that they can avoid increasing imports of American goods just by limiting their exports.

“What we need is to see them increase their imports of all manufactured goods,” said Sen. Lloyd Bentsen, (D-Tex.), chairman of the Senate Finance Committee, which deals with many trade-related issues in the Senate.

“Export restraints are not the answer to our bilateral trade problems,” Yeutter added.”The only real answer is for Japan to open its markets further to U.S. products.”

A prepared statement that Tamura read contained no reference to limiting the extension in restraints to a single year, unlike announcements in earlier years. In response to a question, the minister said “the decision to be made next year will be made next year.”

Like last year, no mention was made of a need to help U.S. auto firms recover--the reason cited back in 1981 when Japan began the “voluntary restraints” at the Reagan Administration’s request.

Excluding auto parts but including trucks, which are not subject to the quotas, the value of Japan’s automobile exports to the United States was rising at an rate of nearly 40% in Japan’s fiscal 1987, which ends March 31, the expiration date for the current restraints.

In fiscal 1985, when Japan raised the limit on its exports to the United States to 2.3 million cars from 1.85 million, automobile exports amounted to $16.8 billion. In fiscal 1986, exports were running at an annual rate of $23.4 billion.

In the April-November period, the first eight months of fiscal 1986 for which statistics were available, car exports were valued at $15.6 billion, a 32% increase compared to the same period a year earlier, a Ministry of International Trade and Industry official said.

In yen terms, however, Japanese auto exporters earned 9.5% less from exports to the United States between April and November last year, compared to the same period a year earlier, the official added.

Exports of automotive parts to the United States were estimated at more than $6 billion last year.

Reaction to the decision by Japanese auto industry officials was far calmer than in previous years, mainly because they had feared that MITI was considering a reduction in the quota limit.

Shoichiro Toyoda, president of Toyota Motor, called the decision “unfortunate but unavoidable” in view of trade frictions. Yutaka Kume, president of Nissan, called it “a realistic choice.”