NEWS ANALYSIS : Clinton Must Strike Delicate Balance With Car Sanctions : Trade: The goal is to punish Japan while minimizing the damage to U.S. auto makers.
As the Clinton Administration prepares to announce trade sanctions against Japan this week, industry officials said Monday that the penalties must be chosen with great care to minimize their impact on auto makers in the United States.
The sanctions must walk a thin line that punishes Japan for alleged trade transgressions while not severely damaging the Japanese transplant operations that build cars in several states, including California.
The situation is also complicated by the relationships now common in an auto industry that is increasingly global in nature. General Motors Corp., Ford Motor Co. and Chrysler Corp. all have close ties to Japanese auto makers, often sharing the same parts and building similar vehicles on the same lines.
With trade talks on autos and auto parts at an impasse, President Clinton is expected this week to release a preliminary list of sanctions aimed at pressuring Japan to open its markets to U.S. automobiles and auto parts.
The most likely actions are the imposition of 100% tariffs on some auto parts, such as imported transmissions, and on luxury cars and minivans, industry officials said.
The Japanese export about $36 billion worth of autos and auto parts to the United States, while the Big Three import about $4 billion in Japanese parts for cars and trucks sold in the United States.
In order to avoid harm to the Big Three, industry officials said, Clinton is likely to impose tariffs on auto parts very selectively. For example, transmissions are considered a likely target for tariffs because a large number are imported by Japanese auto makers for use in their U.S.-built cars.
“They will have to be very selective so they don’t hurt the Big Three,” said Jim Olson, vice president of Toyota Motor Sales U.S.A.
The auto business has become so interrelated that engines made in Japan are imported here for assembly in domestic vehicles. For instance, Ford imports some Mazda engines for use in its smaller vehicles and provides some engines for Mazda’s larger models. Chrysler has a similar arrangement with Mitsubishi.
Japanese auto makers said that until they know the exact nature of the proposed sanctions, it’s difficult to determine the precise impact they would have on their U.S. operations and sales.
The Japanese transplants operate nine U.S. assembly plants and employ more than 36,000 people. They also have numerous auto parts and research and development facilities and operate more than 6,400 dealerships.
Jeffrey Smith, a spokesman for American Honda Motor Co. in Washington, said that while any sanctions will hurt his company’s operations, the ultimate loser will be the U.S. consumer.
“Any sort of tariff will hurt consumers,” Smith said. “Prices will go up. Consumer choice and quality will go down.”
Japanese auto makers in the United States are also worried that punitive tariffs will trim sales and ultimately result in U.S. job losses.
“There is no question it could impact quite a bit of U.S. jobs,” said William Duncan, general director of the Japanese Automobile Manufacturers Assn. “Not only in the manufacturing plants but in dealerships and elsewhere.”
Of particular concern to Japanese auto makers is the possibility that the Administration will impose a 100% tariff on luxury cars. Together, Toyota’s Lexus division, Honda’s Acura and Nissan’s Infiniti sold more than 250,000 luxury cars last year in the United States, most of them imported.
A doubling of the price would almost certainly put these dealerships out of business immediately. “It would devastate us and our 171 Lexus dealers,” Olson said.
Ford spokesman Al Chambers said his company supports a luxury car tariff because of the belief that Japanese auto makers have been dumping the upscale vehicles--that is, selling them for under cost in the United States. He said the prices of Japanese luxury cars do not reflect the dramatic appreciation of the yen in recent months and years.
“They are able to do this because their home market is a sanctuary market with little outside competition,” Chambers said.
The Japanese auto makers denied that they are dumping autos in the United States and said it is not a major issue in the current negotiations, which have been deadlocked for about 18 months. But they are concerned with the strident tone of recent talks and the prospect of sanctions.
“This is the closest we have ever been to a trade war,” Olson said. “Both countries are out on a limb, and there may be a collision.”
