Ford Demands Ultimate Sacrifice From Japan: Kill Some Car Factories, Then We Talk

Imagine what happened if the representative of a large Japanese or Chinese car company would demand that America should close some car factories before easier access to foreign markets would be contemplated. All hell would break loose, and the Seventh Fleet would steam in the direction of the loose cannon – if it is not already there. What happens if the representative of Ford says that Japan should be required to reduce the size of its auto industry before being allowed into regional free trade talks with the United States and eight other countries in the Asia Pacific? Business as usual.

Steve Biegun, Ford’s vice president for international government affairs, showed symptoms of severe disorientation when he gave an interview to Reuters. Not only did the former foreign policy adviser to Sarah Palin require that Japan shutters some car plants before the country is admitted into the proposed Trans-Pacific Partnership (TPP) pact. Biegun also claims that Japan is “the most protected automotive market in the developed world.”

This is a perplexing claim. The U.S. has one of the lowest tariffs on auto imports, 2.5 percent. It is outdone by Japan, which has the world’s lowest tariff: Zero.

Says Reuters:

“But Ford contends the Japanese government maintains a number of regulatory and other “non-tariff barriers” to keep out most foreign cars and also intervenes heavily in currency markets to help its auto companies export cars.”

William Duncan, director of the Japanese Automobile Manufacturers Association’s office in Washington, says Biegun’s arguments are “rather bizarre,” and I agree.

Biegun’s claim that Japan manipulates its currency must be based on hallucinations, or drugs that trigger same. A look at a chart shows that the Japanese Yen is close to its all-time-high against the dollar, a fact that shunts Japanese exports more effectively than any trade policy. Claims that Japan manipulates its currency usually trigger a psychiatric evaluation, but don’t seem to be out of character for a Sarah Palin advisor.

Biegun repeats the old “non-tariff-barrier” talking points, but cannot name specifics. On that, Biegun and his colleagues are sitting in the glass house. The U.S. market is surrounded by one of the highest non-tariff barriers in the world, the Federal Motor Vehicle Safety Standards, which are largely incompatible with the rest of the world that is more or less aligned behind UNECE standards or is derivatives.

A large part of the American cars that come into Japan don’t even have to adhere to Japan’s standard type approval. They are coming in under the Preferential Handling Procedure (PHP), a certification option for low-volume imported vehicles of less than 2,000 vehicles per vehicle type. Under this procedure, cars can be brought into Japan with minimum paperwork, not even a test vehicle is required. Successful importers to Japan, such as Volkswagen, BMW or Daimler, have to contend with much more red tape than the Detroit whiners.

The Preferential Handling Procedure was, says the Japanese manufacturer association JAMA, established in “1986 at the request of the United States Government to ease the burden on importers.” The U.S. did not reciprocate and provides no such loophole for small volume imports.

Most of all, half of America’s automobile market, and the most profitable half, is surrounded by a tariff barrier as formidable as the Chinese Wall: Since the early 60s, there is a 25 percent tariff on light trucks imported to the U.S., which pretty much stopped imports of light trucks to the U.S.

One continues to wonder what makes Ford and its Detroit friends resort to lies and distortions. More than 70 percent of all Japanese cars sold in the U.S. are already made there. With the yen being obscenely high (Sarah Palin won’t know, she rarely travels), exports from Japan get smaller by the day.

The moaning about being shut out of the Japanese market is ridiculous. American cars are largely unsalable in Japan. They are doing worse in Europe. GM exported a total of 109 cars from the US to Europe in the first three months of 2012, says ACEA. In the same period, GM exported 819 cars to Japan, says the Japan Automobile Importers Association.

Observers are scratching their heads when the U.S. car industry is going into hysterics about Japan and the TPP. Japan’s high yen is a much more formidable barrier to entry than America’s 2.5 percent duty. Two possibilities: Detroit wants to maintain the chicken tax. A silly exercise, given that even made-in-the-U.S.A. Japanese trucks are not taking the world by storm. Or, more plausible, the U.S. wants to keep Japan at a disadvantage when it comes to the emerging markets that are part of the TPP.