You are here

Auto parts 'critical issue' in trade talks

auto.jpg
The main focus in the automobile field regarding the Japan-US TPP talks is whether Japan can manage to make the United States promise to immediately abolish tariffs on Japanese auto parts.

[TOKYO] The main focus in the automobile field regarding the Japan-US TPP talks is whether Japan can manage to make the United States promise to immediately abolish tariffs on Japanese auto parts.

Most of the tariff rates currently stand at 2.5 per cent.

The development of talks in the automobile field will also affect discussions over farm product tariffs that started Monday in Washington.

The annual value of passenger car exports from Japan to the United States totaled about 3.56 trillion yen (US$30 billion) in 2014.

sentifi.com

Market voices on:

But a 2013 Japan-US accord, which allowed Japan to join TPP talks, stipulates that the United States will abolish tariffs on Japanese cars "through gradual reductions over the longest possible period of time" as part of the TPP agreement.

For example, if the period is 10 years or longer, the United States has until the end of the term to complete the abolition of the tariffs. There is almost no room for negotiation regarding this point.

A source involved with negotiations therefore believes auto parts will be a "critical issue" for Japan.

The total annual value of auto parts exports from Japan to the United States stood at about 880 billion yen in 2014. The Japanese are therefore demanding that auto parts tariffs be abolished immediately when the TPP agreement comes into effect.

Since Toyota and other domestic automakers manufacturing cars inside the United States also import auto parts from Japan, the outcome is expected to have a significant impact.

The Japanese side is insisting that the abolition of tariffs will also benefit the United States, as Japanese-made auto parts are used by US makers, including General Motors.

But the US automobile industry wields strong influence over the US government and Congress, thus straining opinion coordination over the issue.

The US side has demanded approval of US standards of safety and environmental regulations in Japan to increase US exports of cars to the nation, but the point remains inconclusive.

In exchange for abolishing tariffs on auto parts, the US side is demanding that Japan make further tariff cuts on farm products.

Sources say the talks are treading a tightrope, but that the two sides are inching closer toward a possible compromise.

In April last year, the two countries effectively agreed that tariffs on beef and pork will largely be lowered, and rice and dairy products will be given more special import quotas - meaning the products can be imported to Japan tariff-free or at lower tariff rates.

For example, the tariff rate on beef, which is now 38.5 per cent, will gradually be lowered to "over 9 per cent" within about 10 years.

During subsequent talks, disputes arose over the conditions under which Japan can invoke a so-called safeguard measure, allowing the nation to raise tariffs again if beef and pork imports from the United States rapidly increase.

Sources claim the two sides are approaching an agreement that maximum tariff rates, which would be raised under the safeguard measure, will gradually be lowered in 10 to 15 years.

Negotiations have yet to tackle issues involving rice. The Japanese side has begun considering the expansion of rice imports from the United States for consumption as a staple food item.

But a source involved with the talks says rice is a "political issue." A conclusion will likely be reached at a ministerial meeting between Japan and the United States.

WP

grab

Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at btsub.sg/promo

Powered by GET.comGetCom