Last-Minute Agreement Averts U.S.-Japan Trade War Both Sides Claim Victory In Deal Designed To Open Japanese Auto Market
Dodging imminent American sanctions, Japan promised on Wednesday to open its longshielded auto market to the United States in a sudden agreement that staved off an outright trade war between the world’s two largest economies.
The real effects of the agreement could take years to determine. But President Clinton hailed it as a breakthrough that will give the United States access to Japan’s mammoth auto market and create thousands of American jobs.
“This agreement is specific, it is measurable. It will achieve real concrete results,” Clinton said at the White House in Washington, emphasizing the U.S. demand that Japan go beyond the promises in previous trade accords that were not fulfilled.
The pact that culminated two years of negotiations came hours before Washington’s deadline to impose 100 percent tariffs on 13 Japanese luxury car models, including Toyota’s Lexus and Honda’s Acura lines. The talks had long appeared doomed.
Aware of the high domestic political stakes, both sides claimed victory. Clinton said the agreement would lead to a major increase in sales of U.S. automobiles and spare parts to Japanese companies.
The news sent the dollar soaring against the Japanese yen and U.S. bond prices higher.
The U.S. said the accord should give Chrysler Corp, Ford Motor Co. and General Motors Corp. access to 1,000 more dealerships in Japan during the next five years. Still, it will force Detroit’s automakers to prove they can build cars Japanese consumers want.
“It’s going to take more than heavy-handed politics to sell cars in Japan,” said Nick Lobaccaro, an analyst at S.G. Warburg & Co.
GM, Ford and Chrysler also will have more competition at home. Under the agreement, Toyota Motor Co. and the other Japanese automakers will boost U.S. production of their cars and trucks by half a million vehicles a year.
U.S. Trade Rep. Mickey Kantor, the chief American negotiator, said the agreement covers all three U.S. concerns in the auto dispute: increasing sales of new U.S. car parts to Japanese automakers; opening up Japan’s dealer networks to American manufacturers; and removing regulations that block sale of foreign replacement auto parts in Japan.
After resisting for months, Japan accepted the U.S. demand that the two governments endorse voluntary plans by Japan’s auto manufacturers to increase production in the U.S. and purchases of foreign auto parts.
Kantor acknowledged in a joint statement with chief Japanese trade negotiator Ryutaro Hashimoto, however, that the plans were only business forecasts and couldn’t be the basis for U.S. retaliation if they were not fulfilled.
That was the major concern of Japan’s trade bureaucrats, who didn’t want to create another precedent - such as the 1986 U.S.-Japan semiconductor agreement - that could subject Japan to sanctions.
Hashimoto said Tokyo had withdrawn its complaint against the United States before the World Trade Organization - the global trade police officer - in return for Washington dropping the sanctions threat.
“This successful agreement is a victory not just for the United States and Japan, but also for the newly created WTO and its member countries,” Hashimoto said.
Some had feared unilateral U.S. action would undermine the authority of the new international body, which is meant to help settle disputes.
A trade war would have undermined global business confidence and soured political relations.
At the heart of the auto dispute was the U.S. trade deficit with Japan, which reached $66 billion last year, more than half in the automotive sector.
“This agreement helps to close the gap,” Clinton said. “This commitment means thousands of new jobs for American workers - jobs for Americans making parts sold in Japan, jobs for Americans making parts for Japanese cars sold in the United States.”
Hashimoto said benefits of the deal would be extended to other trading partners. He said Tokyo had achieved its goals because the deal between the two governments excluded American demands to measure increases in sales of spare parts and in the numbers of dealerships.
Clinton said the deal would increase Japanese purchases of car parts by almost $9 billion in three years, a 50 percent increase.
He said the number of Japan dealerships selling non-Japanese cars would increase by 200 next year and by 1,000 over the next five years.
xxxx Who’s doing what Here is how major Japanese automakers plan to increase production and investment in the United States and use more American spare parts in vehicles assembled here: Toyota said it would raise North American production to 1.1 million vehicles in 1998 from 900,000 in 1996. It said it was considering building a new North American plant. Nissan said it would step up manufacture in North America of major auto parts and reiterated previously announced plans to build an engine plant in Tennessee. Honda said it would buy more spare parts and increase investment in North America. Mazda said it would buy more foreign parts and boost exports from Auto-Alliance International, a joint venture with Ford. Mitsubishi Motors promised to curb exports of parts and components.