Japanese car tariff under scrutiny as U.S. negotiates free trade

A visitor inspect a Toyota SUV during the A visitor inspect a Toyota SUV during the 83rd Geneva International Motor Show. (March 6, 2013) Photo Credit: Getty Images

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WASHINGTON - A group of Democratic lawmakers on Thursday urged President Barack Obama to insist on keeping a 2.5 percent tariff on Japanese autos and a 25 percent tariff on Japanese trucks if the United States and Japan enter into free trade negotiations.

The plea came one day before Japanese Prime Minister ShinzoAbe is expected to announce Japans interest in joining talks onthe Trans-Pacific Partnership (TPP), a proposed free trade dealbetween the United States and 10 countries.

That prospect worries Ford Motor Co. and otherDetroit-based automakers, which fear losing more sales toJapanese imports and worry their concerns could be ignored inthe push to get a final TPP deal by the end of this year.

"In an industry with razor-thin profit margins, theelimination of the 2.5 percent car tariff (as well as the 25percent truck tariff) would be a major benefit to Japan withoutany gain for a vital American industry, leading to more Japaneseimports, less American production and fewer American jobs," thelawmakers said in a letter to Obama.

The group included Representative Sander Levin, the topDemocrat on the House of Representatives Ways and MeansCommittee. He is from Michigan and one of the fiercest defendersof the U.S. auto industry in Congress.

His brother, Senator Carl Levin, another Michigan Democratwho chairs the Senate Armed Services Committee, also signed theletter, along with seven other senators and more than 30 membersof the House.

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"What the letter does is sound an alarm about Japansparticipation" in the TPP, Sander Levin said in an interview.

He said he was skeptical that negotiations could tear downregulatory and other non-tariff barriers that he said have longkept American autos out of Japans market.

Levin has a history of voting for most free trade agreementsand played a major role in persuading the Obama administrationto renegotiate auto provisions of a free trade pact with SouthKorea.

The revised pact, which went into force one year ago,allowed the United States to keep its 2.5 percent tariff onSouth Korean autos until the fifth year and to keep its 25percent tariff on South Korean light trucks until the eighthyear, when it will begin to be phased out.

But Levin and the other lawmakers argued in their letter thesame approach could not be taken with Japan.

"While some have compared this challenge to the one we faced
with Korea, the Japanese auto market is more impenetrable, thehistory of formidable barriers and imbalanced trade is longer,and the magnitude of the problem is far greater than withKorea," the group said.

"Despite being the third-largest auto market in the world,Japan ranks last among OECD (Organization for EconomicCooperation and Development) members in terms of auto marketimport penetration, at 5.9 percent in 2012," they said.

The lawmakers blame those low import numbers on a web ofbarriers including currency manipulation, discriminatory taxes,onerous and costly certification procedures for foreign cars andunwillingness by Japanese auto dealers to sell foreign cars.

Meanwhile, Japan is concerned about being pressured in theTPP talks to open its long-protected markets for rice and otherpolitically sensitive farm products.

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In the aftermath of Abes recent visit to Washington, therehave been rumors the two sides have already struck a deal thatwould let the United States keep its auto tariffs in exchangefor Japans protecting some agricultural products.

Levin said he had not heard anything from the administrationto confirm that. "We have no indication from the administrationthere is any such deal," Levin said.

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