Clinton Administration Releases Semi-Annual Report on the U.s.-Japan Auto Agreement


Yesterday the Clinton Administration released its fifth semi-annual report on the U.S.-Japan Automotive Agreement which calls on Japan to "take concrete steps to further open and deregulate its automotive sector."

The report, which was drafted jointly by USTR and the Department of Commerce, states that Japan's recession has amplified market access concerns for U.S. automotive exporters. While it acknowledges Japan's economic difficulties, the report nevertheless urges Japan to commit to market opening to "revitalize the Japanese economy." USTR Charlene Barshefsky remarked that "excessive regulation and barriers to competition block U.S. exports and hurt Japan's own efforts to restore growth and prosperity. We are making some progress under the Agreement, but it is critical that Japan take further steps to open and deregulate its automotive market to achieve the goals of our Agreement and to strengthen its own economy."

The report states that Japan's economic slowdown has had a disproportionate impact on foreign automobile manufacturers. Furthermore, it notes that the financial situation has exacerbated the difficulties U.S. automakers confront in establishing high quality dealerships, although many commentators now suggest the target set in the 1995 agreement for new dealerships are no longer relevant given the current economic downswing. While exports of U.S. auto parts have grown, the report finds deregulation in the auto parts aftermarket to be "haltingly slow."

Despite calls for accelerated deregulation in the automotive sector, the report lacks the biting criticism that characterized some of the past reports. Some analysts attribute this to the fact that Japan's auto market is already competitive and open. As evidence they point to sales of European auto manufacturers, whose exports to Japan are significantly higher than those of U.S. manufacturers.

While the Administration's report lacks the accusatory rhetoric of the past, Members of the U.S. House of Representatives have threatened to request the Clinton Administration to impose sanctions on Japan to rectify the "serious deficit in the automobile sector." In an earlier letter to U.S. Ambassador to Japan Thomas Foley, thirty-eight members indicated that the United States may need to take unilateral measures to "counteract the unfair trade practices which keep U.S. products out of the Japanese market."

According to a USTR official, the U.S. government will be consulting with industry to develop proposals to enhance deregulation and competition in the Japanese market. Preliminary discussions on these proposals will likely occur when U.S. and Japanese officials hold meetings next month in preparation for October's scheduled annual automotive consultations.