NEWS ANALYSIS : U.S.-Japan Deal Takes Shape : Trade: Officially, there’s pessimism on both sides. But a possible way out of the dispute over autos and parts is emerging.
The broad outline of a possible compromise in the U.S.-Japan dispute over auto trade is becoming increasingly clear, although it remains far from certain that a deal can be struck before a June 28 deadline for U.S. sanctions.
The key sticking point in the contentious talks has been a demand by Washington that Japanese auto makers agree to “voluntary” plans for increased purchases of foreign auto parts.
Previous plans have focused mainly on purchases by Japanese “transplant” factories in the United States but also have called for increased imports to Japan for use in making cars here.
Although Japanese makers issued such plans in 1992 and again last year, they have said repeatedly in recent months that they do not wish to do so again. The Japanese government has denounced such plans as “managed trade” and insists that they lie beyond the scope of government authority.
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Officially, trade officials in both countries remained pessimistic Monday as they prepared for another set of talks on the auto standoff, scheduled for Thursday and Friday in Geneva.
“There are no signs whatsoever that would imply that the U.S. side will present any new proposals which would form a compromise,” Japan’s negotiator, Vice Trade Minister Yoshihiro Sakamoto, told reporters during a visit to Brussels. “Pessimism would represent my honest feeling at the moment.”
A possible way out of the deadlock, however, has been reported in the Japanese media over the last several days.
The basic compromise would be that Washington does not insist on dollar figures for the amount of foreign parts to be purchased, and that Japanese manufacturers respond by announcing plans to increase production in overseas plants, including those in North America. They would also express an intent to gradually increase the percentage of local content in the automobiles made in those overseas factories.
Such plans would basically fit with trends that already are underway in the Japanese auto industry, as it boosts overseas production both to ensure access to foreign markets and to cope with the strong yen, which makes Japanese exports more expensive.
Mainichi Shimbun, one of Japan’s leading newspapers, reported Monday that such a compromise now has support within the government and apparently would be acceptable to at least some Japanese auto makers. Nikkei Shimbun, Japan’s leading financial newspaper, and the Kyodo News Service also reported movement in this direction over the weekend.
Even if an attempt is made to reach a compromise along these lines, hard bargaining would still be needed over how large a boost in overseas production and local parts procurement would be enough to satisfy the U.S. side.
Both sides have indicated that a solution to the auto components issue would clear the way on other key issues in the negotiations, such as access for foreign manufacturers to Japanese dealer networks and relaxation of rules on inspection of imported cars and parts.
The Clinton Administration has said it will impose $5.9 billion worth of taxes--a punitive 100% tariff--on 13 imported Japanese luxury car models unless agreement is reached by June 28.
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Public movement here toward breaking the deadlock began with a recent article by U.S. Embassy official John Penfold in the English-language Japan Times.
The article stressed that “if voluntary plans as done in the past cannot be extended or enhanced, we have said that there are other ways of reaching the same goal.”
Penfold cited examples of positive steps that Japanese manufacturers could take, such as “increased auto production in the U.S., increased re-export of U.S.-built autos to Japan and other markets, increased purchases or production of key components in the U.S., increased local content for autos produced in the U.S. and increased foreign content for autos produced in Japan.”
In the last few days, Japanese media--which typically reflect government viewpoints--have suddenly carried reports from abroad describing the basic positions outlined by Penfold as a serious American step toward compromise.
The view outlined in Penfold’s article “has been pretty constant all along,” a U.S. Embassy official said Monday. “The fact that all of a sudden this becomes a big story is kind of surprising. What does it mean? Maybe it means Japan is more serious.”
