April 12 (Bloomberg) -- Michigan lawmakers and an association of U.S. automakers expressed doubts about a deal with Japan to reduce vehicle tariffs and pave the way for the Asian nation to join talks aimed at a Pacific free-trade accord.
The U.S. and Japan, the world’s first- and third-largest economies, today announced the deal, an important step toward Japan joining 11 nations forging the Trans-Pacific Partnership free-trade region. With Japan’s inclusion, 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 into TPP,” Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, which oversees trade legislation, said today 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.
An industry group representing U.S. automakers Ford Motor Co. and General Motors Co. 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 today in a statement.
In addition to Ford, of Dearborn, Michigan, and Detroit-based GM, the organization includes Chrysler Group LLC, a unit of Fiat SpA of Turin, Italy.
“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 today on a conference call with reporters. 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.
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.
Michigan lawmakers, long allies of the state’s automakers, immediately weighed in, casting 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 House Ways and Means Committee that deals with trade issues, said in a statement.
Democratic Senator Debbie Stabenow of Michigan said in a statement if 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 today 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 today 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.
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. 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.
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