Today's date:
Summer 1995

Japan Will Not Relent on the US Push to Manage Trade

Ryutaro Hashimoto is Japan's Minister of International Trade and Industry. Though written before the US and Japan came to a last-minute agreement on June 28, this article reflects just how far the Japanese government caved into American pressure, pledging to press Japan's auto manufacturers to open up dealerships to foreigners and voluntarily purchase more American auto parts.

TOKYO - Unfortunately, Japan and the United States have not yet been able to reach agreement in their automobile and auto parts talks, despite intensive negotiations held in Canada in early May.

In those discussions, we considered dealership and aftermarket deregulation to be the important issues, while the US regarded the renewal and expansion of the "voluntary plans" of parts purchases-which are virtually purchasing quotas-as essential for agreement. The US had once agreed that "voluntary plans" were outside the scope of the Framework Talks because they are issues outside the scope of government responsibility.

However, since the US is now insisting on "voluntary plans," against our objections, we could not reach agreement. If the US had not so insisted we could have reached agreement without difficulties. Another US request for a target on the number of dealerships offering foreign brands made resolution all the more difficult.

We truly believe we have affirmatively responded to A the US requests on dealership and aftermarket deregulation - the major issues properly within the government's responsibility - within the international rules and auto safety considerations in Japan.

We are confident that the package we proposed this time will be a great help to foreign firms in entering the Japanese market. We also believe that the aftermarket deregulation proposal, such as reduction of the number of critical parts and deregulation of modification inspection requirements, Will sufficiently please not only foreign firms, but also users in Japan.

The experience of European manufacturers shows that when appropriate efforts to match the features of the Japanese market are made-including the necessity for right-hand-drive automobiles -foreign manufacturers can succeed in the Japanese market. The share of automobiles in Japan from the European Union is 4.86 percent, whereas the US share is 3.16 percent.

It is important in this context that world opinion understand that the Japan- US Framework Talks do not guarantee sales and purchasing outcomes, but contribute to creating sales and purchasing opportunities.

The US side's insistence on "voluntary plans" outside the scope of government's responsibility remains an insurmountable stumbling block to a negotiated agreement. The US request amounts to numerical targets and could lead to managed trade. A government cannot intervene in and distort private firms' business strategies.

In addition, Japanese auto companies have explicitly refused to renew their existing "voluntary plans." The Americans know that such a request amounts to nothing less than forcing Japanese companies to favor and buy US parts. That is clearly inconsistent with the World Trade Organization (WTO) agreement and a violation of the most-favored-nation principle in trade.

Sir Leon Britain of the European Union and Minister Roy MacLaren of Canada, as well as officials from Asian countries, also express great concerns about this particular US request.

Japan has no intention of ignoring the WTO agreement and adopting or encouraging such gray measures. Regrettably, on May 16, the US announced a list of proposed unilateral measures, clearly inconsistent with WTO rules, that would subject certain Japanese luxury cars to duties of 100 percent in response to the impasse in our talks. Because this action would significantly damage Japanese industry and trade, we decided to request that the US enter into consultation under the globally accepted trade rules and begin the procedure of the WTO dispute settlement.

The pursuit of unilateral action by the US will be a critical challenge to the newly established WTO trade system. Countries all over the world concur with our position on this matter.

At the same time as our request was filed with the WTO, the US also announced its request for a consultation in the WTO on the Japanese auto and auto parts markets. This shows the inconsistency of the US argument: neglecting the WTO on one hand, while requesting a WTO consultation on the other. Nevertheless, we are ready to take this opportunity to show that our automobile and auto parts markets are open and fair.

Lastly, I want to stress that those who would suffer heavily from such US action include not only Japanese auto manufacturers, but also consumers and workers in the United States. If the US unilateral measures are implemented, there will be a severely adverse impact on more than 60,000 Americans who work for Japanese auto-related companies, and about 10 percent of US auto parts exports to Japan worth nearly $250 million will come to a halt.

Japan is confident in its position and trusts that the WTO will serve as a neutral judge to resolve the matter fairly.

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