Michigan Lawmakers Oppose U.S. Pact With Japan on Autos

Lawmakers from states with auto factories and an association of U.S. carmakers expressed opposition to a deal with Japan to reduce vehicle tariffs and enable the Asian nation to join Pacific-region trade talks.

The U.S. and Japan, the world’s first- and third-largest economies, yesterday announced the deal, a step toward Japan joining 11 nations forging the Trans-Pacific Partnership free- trade region. With Japan included, it would create a trading area worth about $26 trillion, the largest in history.

“This package is not at all adequate as a basis for Japan’s entry,” Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, which oversees trade legislation, said yesterday on a conference call with reporters. He said the agreement doesn’t offer enough specific measurements to show that Japan will open its auto market further to foreign competitors.

The deal affects a U.S. industry that posted higher sales last year as automakers recover from the financial woes that led to a government bailout of General Motors Co. (GM) and Chrysler Group LLC in 2009. Unemployment in Michigan, where U.S. carmakers have many factories, was 8.8 percent in February, exceeding the U.S. rate of 7.7 percent, according to the Bureau of Labor Statistics.

‘Risks Unraveling’

An industry group representing Ford Motor Co. (F) of Dearborn, Michigan, Detroit-based GM and Chrysler, now a unit of Turin, Italy-based Fiat SpA (F), said Japan’s policies to restrict auto imports and devalue its currency give it an unfair trading advantage.

“This is why allowing Japan to join the TPP at this time risks unraveling the entire free-trade agreement and will certainly delay its completion,” Matt Blunt, a former Republican governor of Missouri and president of the group, the Washington-based American Automotive Policy Council, said in a statement.

“We take the concerns of the U.S. auto industry extremely seriously,” Michael Froman, President Barack Obama’s deputy national security adviser for international economic affairs, said on a conference call with reporters. “We think they are well founded.”

While the agreement is an “important step forward,” U.S. negotiators will need to make sure they consider the auto industry’s concerns, he said.

Raising Limits

If a Pacific trade pact is created, the U.S. and Japan agreed to phase out U.S. tariffs on Japanese autos, and Japan would expedite certification of American vehicles it accepts. U.S. automakers will be allowed to export 5,000 autos of each vehicle type, up from the current limit of 2,000, according to a fact sheet from the U.S. Trade Representative’s office.

“The administration can’t allow Japan’s entry to the Trans-Pacific Partnership to undermine the impressive gains made by the American auto industry,” Senator Sherrod Brown, an Ohio Democrat who counts autoworkers among his constituents, said in a statement.

Michigan lawmakers, long allies of the state’s automakers, cast doubt on the ability to finish negotiations swiftly.

“I will not support Japan’s entry into TPP unless we obtain airtight assurances that Japan’s participation in the TPP negotiations will neither diminish the comprehensive and ambitious nature of these negotiations nor delay the goal of concluding the negotiations this year,” Republican Representative Dave Camp, chairman of the Ways and Means Committee, said in a statement.

Insurance, Agriculture

Democratic Senator Debbie Stabenow of Michigan said in a statement if Japan doesn’t agree to “stop blocking American companies from its markets,” she will fight ratification of the trade agreement.

The two nations also announced yesterday that they would work toward resolution of trade issues in the insurance and agricultural sectors. The U.S. trade-in-goods deficit with Japan in 2012 widened 21 percent to $76.3 billion from the previous year, according to the U.S. Census Bureau.

The agreement announced yesterday doesn’t let Japan join the TPP negotiations. The 11 nations that are now drafting the accord must agree to formally invite Japan, and the U.S. Congress has 90 days to weigh in before official talks can begin.

“It’s premature to really speculate about timing,” acting U.S. Trade Representative Demetrios Marantis said on the conference call.

11 Nations

The U.S., which endorsed Japan’s entry, accounts for almost 75 percent of the current TPP nations’ economic output. Other governments in the talks are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Japan and the U.S. will also discuss non-tariff auto issues including regulations, distribution and new vehicle technology during talks that will take place alongside the TPP discussions, according to the USTR.

U.S. negotiators won’t conclude their TPP talks with Japan until they complete separate talks on autos and non-tariff trade barriers, Marantis said. For the first time, there will be a dispute-settlement mechanism allowing the two sides to resolve their trade differences, he said.

“More work remains to be done before Japan’s full participation in these talks, but today’s announcement should lay the groundwork for the eventual addition of a strong U.S. ally,” Senator Bob Corker, a Tennessee Republican, said in a statement. Toyota Motor Corp. (7203) of Aichi, Japan, the world’s largest automaker, operates a plant in Tennessee.

Japanese automakers want the talks to “dispel any unfounded misunderstandings on the U.S. side” regarding the Asian nation’s auto market, Akio Toyoda, chairman of the Tokyo- based Japan Automobile Manufacturers Association Inc., said in a statement. He is also Toyota’s chairman.

“We believe it is critical to start taking part in these talks at the earliest possible time,” Toyoda said.

To contact the reporter on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.