Trade War Watch 9: SECSTATE Disses Japanese C4C

The nerve, the nerve: U.S. Secretary of State Hillary Clinton told Japanese Foreign Minister Katsuya Okada when they met – halfway in Hawaii, so that both had to travel – on Tuesday “that concerns are rising in the U.S. Congress” about Japan’s cash for clunkers incentive scheme, Reuters reports.

As if there aren’t other pressing problems. Such as the economy, global warming, saving the whales, or saving the Marines on Okinawa. (Well, they discussed the Marines. Inconclusively.)

Under the belated Japanese C4C scheme, consumers get up to $2,800 if they trade in their 13 year or older car for new vehicle that meets the 2010 fuel economy standard of 35.5 mpg. So far, so good.

Except that the Japanese shaken inspection system sees to it that there are very few cars in Japan that are older than 13 years. If they exist, they are usually in the loving hands of vintage-otaku aficionados who’d rather sink a few thousand more into their collectors items than trade them in for a new one. Well, they don’t have to. Buy a new qualifying vehicle without trading in a clunker, and the Japanese government will give you $1,132.

Last week, U.S. Congresswoman Betty Sutton had the nerve to introduce a resolution calling for the U.S. Trade Representative to start talks with Tokyo and urged Washington to bring a WTO case against Japan if it does not open up its program to American cars.

As reported by TTAC, Ford, GM, and Chrysler had complained to U.S. Trade Representative Ron Kirk in December that Japan’s fleet renewal program effectively barred U.S. firms from participating.

At the Hawaii meeting, a Japanese trade official said to Reuters that there is nothing discriminatory in the program. Japanese consumers can apply for the incentives with any car as long as it meets the standards. With the usual Japanese cynicism wrapped into unnerving politeness, the official added that cars made Daimler, BMW, and Volkswagen have no problem complying with the standard.

Hillary Clinton and Betty Sutton should have read TTAC before setting off another trade war about nothing. Here is what Ed Niedermeyer had explained in December:

The problem, in a nutshell, is that American automakers have sold a combined 7,901 vehicles in Japan this year. Because those numbers are so low, the Detroit firms are allowed to import vehicles under a program where their fuel efficiency does not have to be rated by the Japanese government. Because it doesn’t have official efficiency data on the low-volume models that use this program, the Japanese government has made them ineligible for the program. If we’re not mistaken though, this importation program isn’t mandated by the Japanese government, but automakers choose to use it anyway. Presumably, if Detroit had any models that could really compete in a 35.5 mpg market, they’d import them through normal channels. But with fewer than 8k units sold YTD, the Japanese market can’t possibly be worth the trouble.

If Detroit wants to partake in the Nipponese C4C bonanza, all they have to do is to submit their cars for testing that certifies that they get 35.5 mpg or better. Never mind. Let’s start a trade war instead.

And wasn’t the short-lived American cash for clunkers program heavily stacked in favor of pickup trucks, the only segment where domestics reign supreme? Did Japan report the USA to the WTO? They didn’t have to. According to official DOT numbers, 5 of the top 10 cars bought under the U.S. C4C program were Japanese brands, no pickups. According to Edmunds, 2 out of the top 10 had Japanese nameplates, 2 were American trucks. Anyway, even a $4,500 voucher for a truck that got just 2 MPG more than the old one did not save American truck sales. Why complain about nothing? A concept Betty and Hillary don’t seem to understand.

Ah, when Betty Sutton proposed the “Cash for Clunkers” program, she wanted to limit the program to cars produced in North America., the Wall Street Journal can’t help to remark. After loud complaints, she relented. Payback time?