September 18, 1996 in Nation/World

Verdict Still Out On Impact Of Auto Agreement Between U.S., Japan Sales Of American Cars Have Increased, But Other Factors May Account For Rise

Janet L. Fix Knight-Ridder

President Clinton calls it historic, but a trade pact designed to open Japan’s auto market to American cars and parts has been nothing for the history books.

As the deal goes in for its one-year checkup this week, evidence suggests that modest gains in sales of U.S. mufflers, spark plugs and cars in Japan may have had little to do with the deal President Clinton wrested from the Japanese under threat of a 100 percent import tax on their luxury cars.

“My guess is U.S. automakers would be where we are in Japan if there had been no auto agreement at all,” said Dave Cole, director of the Transportation Research Institute at the University of Michigan.

Others are even blunter.

Claims of the auto pact’s progress “are bogus and purely political for Clinton and the auto industry,” said Frank Lavin, who is a trade economist with the Asia Pacific Policy Center and directed Asia operations at the Commerce Department under former President Bush.

“Clinton talked tough to the Japanese, so the average voter says, ‘Gee he’s tough,”’ Lavin said. “And the auto industry has an alibi for its past lack of success in Japan. It can say ‘Gee, we’ve only been able to sell in Japan since the deal.”’

The Japanese market is clearly an important target for American automakers and for Clinton.

Japanese consumers buy about 6 million autos a year, about half the number sold in the United States. The United States now has just 2 percent of that promising market.

The Big Three American car makers - General Motors Corp., Ford Motor Co. and Chrysler Corp. - are aiming for 5 percent, or total sales of 300,000, by the year 2000. Clinton boasts of having reached 200 trade agreements in three years to lower barriers to U.S. goods, but brags most often about the auto pact.

The debate over how Clinton really did with last year’s car deal is expected to intensify this week, as U.S. and Japanese trade experts meet privately in a hotel on San Francisco’s Fisherman’s Wharf to review the pact.

“It’s an important meeting because we want to keep the pressure on Japan,” said one trade official who didn’t want to be identified.

The Clinton administration plans to release a progress report after the session, but a blizzard of sales numbers, hype and political spinning is expected before then.

This much is certain: Sales of U.S. autos and auto parts are up in Japan. Auto sales by the Big Three rose 32 percent in the first eight months this year, the auto industry announced Tuesday.

While seemingly a big increase, that’s only 20,000 more cars - or an average of 2,500 cars a month, bringing the total of American vehicles sold this year to 82,500.

Exactly why sales of American cars have climbed in Japan is far from clear.

It is clear that some of the gains Clinton and the Big Three will tout this week were the fruits of efforts made by Detroit long before the auto pact was signed. For example, many of the dealership agreements were in the works before the pact was signed.

It is also clear that the surge in U.S. auto sales falls short of the surge in sales in Japan by European auto makers, who don’t have an historic trade pact working for them.

Clinton’s auto pact is a bilateral deal between Japan and the United States. However, the White House argues it has helped open Japan’s market to Europe, Australia and others, as well as to the United States.

Even the auto industry concedes it can’t decide how much gain came from the deal and how much from other factors.

“No one factor that is helping to change the status quo in Japan,” said Marie Kissel, trade expert for the American Automobile Manufacturers Association. “But this is a good agreement, and it should lead to market openings in Japan.”

Many economic factors affect car sales in Japan, maybe more than the trade pact. Among them: the yen-dollar exchange rate, the pace of the economic recovery and car buying in Japan, and the Japanese consumers, who favor European auto imports over U.S. models.

When the deal was signed last summer, a relatively strong yen made U.S. products more competitive in Japan. Since then, the value of the yen has weakened against the dollar by about 30 percent.

This means the real test of the auto pact is ahead.

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