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Automotive Trade With Japan

Automotive Trade With Japan

Congressional Record - United States Senate
May 2, 1995

Mr. BYRD. Madam President, America’s trading relationship with Japan is now reaching a historic, serious phase in what has been a long history of innumerable initiatives and negotiations to gain access for American products into her market. Strong action will very likely need to be taken by the administration, and the support of the Senate and American industry will be important.

The United States and Japan are nearing the end of over a year and a half of negotiations on automotive trade, aimed at reducing our $66 billion trade imbalance with Japan by opening major elements of her closed domestic market to our products. The issue, access to Japan’s automobile market, including to her dealerships for American cars, and to the lucrative auto parts market, is reaching a critical juncture. The issue this time involves, once again, more than the securing of commitments by the Japanese in a written agreement to try to do something to open her market. It goes to the heart of America’s strategy on how to gain the actual results of opening the Japanese market.

The question is whether we, including both the executive branch and the Congress, along with American industry are all prepared to stick to our guns and take action against Japanese imports if the auto market in Japan remains essentially closed to our cars and our spare parts. Specifically, are we willing to take retaliatory action and impose trade sanctions on her products, under section 301 of the 1974 Trade Act? I say to my colleagues that now is the time to change the paradigm in our trading relations with Japan. If we are not prepared to take retaliatory actions under the law, in a situation which is about as perfectly suited as is possible to the intent of the law as it was written, then we may be looking at a continuation of these deficits in perpetuity.

Madam President, if anyone doubts the persistence of unfair barriers in Japan to her marketplace, then they ought to take a look at the 1995 National Trade Estimate Report on Foreign Trade Barriers, which provides an annual inventory of the most important foreign barriers affecting U.S. export of goods and services, foreign direct investment, and protection of intellectual property rights. The latest report dedicates some 44 pages of material to the subject on Japan alone, far more than to any other country, far more than to the second place, the European Union, most of the important countries of Western Europe combined, which takes up 28 pages, and double that of China, with which country we run our second largest annual trade deficit—44 pages, much of it dedicated to the automobile trade.

How important is the auto trade for America’s current account balance and for the American economy? The answer is: as important as any single sector can be. America’s trade deficit with Japan in 1994 reached another record high, at $65.7 billion, up 10 percent from 1993, when it totaled $59.3 billion. Of that amount, the bilateral automotive trade deficit accounted for about $37 billion, or 56 percent of the total, so most of our deficit with Japan can be attributed to cars and to auto parts. More than that, the auto trade deficit with Japan constituted some 22 percent of our entire trade deficit with the world. The policy announced by our Trade Representative, Ambassador Kantor—according to his testimony before the Finance Committee on April 4, 1995—is that this deficit is the result of unfair Japanese practices, that it is unacceptable, that he will use every tool at his disposal to correct it, and that, in general, he will use a practical, market- based, results oriented approach to dealing with these non-market barriers. I strongly support this approach, and I believe that the Senate as a whole does as well.

As far as the impact on the American economy is concerned, a strong auto sector is crucial. Two million, two hundred thousand people in the United States are employed in the parts industry alone—such vital industries as aluminum, steel, glass, rubber, electronics, semiconductors, machine tools, and many others. This is on top of the some 700,000 people employed by the Big Three auto manufacturers themselves, the Nation’s largest manufacturing industry. Sales of cars and trucks constitute some 4.4 percent of our gross domestic product.

Negotiations with Japan have reached a crucial stage regarding the auto industry’s attempts to deregulate the Japanese auto parts market. Negotiations on access to the Japan auto business began as a result of the agreement reached by this administration with the Government of Japan in July of 1993, the so-called Framework for a New Economic Partnership. This framework established a general set of results to be used in specific negotiations, and refocused the criteria for progress away from the process of removing trade barriers to actual results in the way of real economic progress in market penetration. After 18 months of negotiations on automobile negotiations— including access to the motor vehicle market by breaking into Japan’s dealerships, the purchase of original parts by Japan’s automakers from United States suppliers, and the regulation of the auto parts aftermarket, which is repair parts—Ambassador Kantor has concluded that ‘‘there has been virtually no progress.’’ One result has been the initiation by the Trade Representative, on October 1, 1994, of a section 301 investigation of Japan’s replacement auto parts market, which is virtually closed.

The difference between the United States and Japanese markets in this area could not be more dramatic and more symbolic of our troubled trade relationship: A Department of Commerce study in 1991 estimated that Japanese vehicle manufacturers controlled about 80 percent of the parts market, while in the United States the situation is the reverse, and independent replacement parts producers account for 80 percent of the market. So, while the United States market is wide open, the Japanese market is closed. To make the situation more unfair to us, the Japanese closed market allows their manufacturers to run the prices up on their own consumers for repair parts. Another U.S. Government survey has concluded that their aftermarket repair parts cost, on average, some 340 percent higher than comparable parts in the United Sates.

This tremendous windfall of billions of dollars in extra profits helps subsidize the Japanese car industry, so that it can compete more effectively in the international market, subsidizing lower costs for Japanese cars here in the United States, Europe, and elsewhere. Therefore, it’s a triple whammy: Our parts manufacturers cannot sell effectively in the Japanese market; Japanese consumers get gouged; and the whole thing results in cheaper, more competitive Japanese cars worldwide. The ‘‘Karetsu’’ system of interlocking and cozy exclusive relationships among suppliers, manufacturers, and dealers serves as an effective blocking action against market penetration, and I am advised that the powerful Japanese Government bureaucracy serves to abet this exclusivity in supporting a regulatory framework not conductive to easy access. Japan’s competition law, known as the Antimonopoly Act, which prohibits unfair trade practices has, according to the 1995 Foreign Trade Barriers report, a ‘‘weak and ineffective’’ enforcement history. The Japan Fair Trade Commission, which is supposed to implement that law, has ‘‘not shown any serious inclination to use its enforcement powers to eliminate the anticompetitive practices in sectoral markets that are excluding foreign goods and services from the Japanese market.’’ This is a system totally incompatible with the principles of free international trade.

As to new American cars, it is nearly impossible for Japanese businessmen who operate dealerships and showrooms to agree to sell American cars. I understand that many of these dealers would like to do so, but they fear retribution from Japanese car manufacturers and are warned against taking American business. Hence, the marketplace for new American cars in Japan remains extremely narrow and difficult to penetrate. What are the results? While Japanese automakers hold some 22.5 percent of the American market, the share of the Japanese market held by the Big Three United States automakers is less than 1 percent.

The Japanese economy is, in many ways, a sanctuary market, closed to the world, but depending to a large extent on robust exports. Trade agreements are, more often than not, written agreements which are frustrated by a maze of business practices, Government regulations, and other hurdles for importers to jump. The problem is that other nations, particularly in Asia, are engaging in the same practices, and if the Japanese market is not pried open, these trade imbalances will be mirrored elsewhere, as they are today with China. We see the same kind of practices in Korea.

Therefore, the stakes in fair trade with Japan have worldwide ramifications and affect the very future of American participation in a trading system which enjoys access to a wide open American market. We need to demand reciprocity, which would allow our products to compete freely. If our products fail to attract buyers because they fall short on the merits, fine, then that is our fault. But this is not what is driving the large deficits with Japan, and our industries and economy will suffer as they are suffering, and as they have suffered.

I was very pleased to see the dramatic accord that was achieved by our Trade Representative with China on the matter of intellectual property rights, and I would note that it was achieved only at the 11th hour and with the certainty of definite retaliation by the United States, absent achieving an accord. Given the history of trade practices with the Japanese, I fear that only a believable threat, or actual retaliation, may be sufficient to get equitable results in the Japanese auto market. In the new world that is emerging after the collapse of the Soviet Empire, it is important to see the overall United States-Japanese relationship as one of give-and-take across the board. The United States still maintains armed forces in Japan and that relationship has been excellent, with Japan providing needed host-nation financial support. It is an excellent burden-sharing arrangement. While our security relationship has been in balance, and a close relationship remains intact, the trading situation has generated unneeded frictions.

Today, American national security and economic security go together, hand-in-hand. Japan has a deep-vested interest in the health of the American economy, and economy increasingly dependent on trade. Eleven million Americans are now employed in exportindustry jobs, a doubling of the number from just 10 years ago. It will be more and more difficult to maintain robust deployed forces in the Pacific, as we should, without a strong American economy.

Persistent massive trade deficits with Japan and other Asian nations runs counter to this, and they erode our ability to sustain the kind of a Pacific rim presence that both we and our allies in the Pacific, particularly Japan, believe is in our overall interest of stability and peace. And so it is important for the Japanese Government to make every effort to ensure that our trade relationship enjoys the same healthy substance of a two-way street. The deficit in the United States-Japanese automotive parts trade reached a record $12.8 billion in 1994, deteriorating 15 percent from 1993, at the very time that negotiations were ongoing on this matter. The Japanese sold a record $14.3 billion in auto parts in the United States, compared to a meager $1.5 billion in United States auto parts which managed to squeeze into the Japanese market. It is a major element in our deficit picture, and something has to give.

It is precisely in this situation that the 301 law is available to the Trade Representative, and I certainly expect that he will probably have to use it and he should have no compunction against using it. This means that when the section 301 investigation of unfair practices in the auto parts market is concluded— at the latest by October 1, 1995—if the current stalemate continues, the United States should not hesitate to retaliate. According to a New York Times article of April 13, 1995, an administration ‘‘task force has already been established to draw up a list of Japanese products that would be subject to 100-percent tariffs unless Japan takes what one senior official today called ‘enormous leaps’ during meetings scheduled over the next several weeks.’’ These officials indicated such a list would be announced this month. I note that the next round of negotiations with the Japanese is scheduled to take place this week, on tomorrow, Wednesday, May 3, 1995, and I hope that our negotiator there, Ambassador- designate Ira Shapiro, will tell the Japanese that stonewalling will result in retaliatory action, with strong Senate action, if needed, to follow up on the retaliatory measures that might be announced by the administration.

I point out, Madam President, that there is extensive support across the board in American industry for the strong action that might be required against Japanese products in the event that the results sought by the administration are not obtained. I include in the RECORD a list of 27 major United States companies and associations that deal with Japan which support our negotiations on this matter. It includes the Business Roundtable, the major auto companies, and associations representing those manufacturers who have a stake in the health of the auto and auto parts industries, such as glass, iron and steel, and electronics. It includes the major labor organizations, including the United Auto Workers and the AFL–CIO. There is obviously very broad consensus across American business and labor organizations that the time for action is past; so we have only now left to us.

It is clear that, while there may be every good intention on the part of Japanese policymakers and other sectors of Japanese society and business to open the Japanese market to American automobiles and products, what really counts in the long run are results, and actions to do so. Performance, not promises, is only what we are seeking, and one must be prepared to take strong action to encourage such performance.

Madam President, automobiles and parts have been the central problem in Japan’s trading relations with the rest of the world for many years. If we can solve the problem, and break the ‘‘keiretsu’’ psychology and practices which close Japan’s markets, a new era between our two nations will emerge. If we fail, our relationship will continue to deteriorate.

Mr. President, I ask unanimous consent that a group of supporting documents be printed in the RECORD. There being no objection, the material was ordered to be printed in the RECORD, as follows:

Aluminum Association.
American Automobile Manufacturers Association.
American Electronics Association.
American Federation of Labor Congress of Industrial Organizations.
American Forest and Paper Association.
American Iron and Steel Institute.
American Textile Manufacturers Association.
Association of Manufacturing Technology.
Automotive Parts and Accessories Association.
Business Roundtable.
Chrysler Corporation.
Copper and Brass Fabricators Association.
Ford Motor Company.
General Motors.
Guardian Industries.
International Insurance Council.
Joint Automotive Supplier Government Action Council.
Motion Picture Association.
Motor Equipment Manufacturers Association.
National Association of Manufacturers.
National Glass Association.
Pharmaceutical Research and Manufacturers Association.
Semiconductor Industry Association.
Specialty Equipment Market Association.
United Auto Workers.
United States Business and Industrial Council.
US-Japan Business Council.

Washington, DC, April 25, 1995.
The White House, Washington, DC.
DEAR MR. PRESIDENT: On behalf of the National Consumers League, I want to express our support for the Administration’s position in the Framework negotiations with Japan and our interest in opening the Japanese market to competitive American automotive products. The vehicles and parts made in this country meet a wide variety of safety and environmental standards. The production facilities in which they are made meet standards for their operation as well. The workers in these plants benefit from protective health and safety laws and many have won further protection through union representation. All of these conditions contribute to beneficial results for Americans who are consumers of the products made by the industry and consumers of its environmental impacts.

The companies that meet these conditions should be able to supply markets abroad on the same terms as foreign companies find in this market. All foreign producers of vehicles and auto parts have unrestricted access to the U.S. market. We understand that the Clinton Administration is seeking just such access to the Japanese market for U.S. automotive products and we fully support that objective.

American industries that contribute to the social and economic well-being of the nation, as does the automotive industry by meeting a variety of legal and regulatory standards and affording workers a voice in their work lives, deserve the support of the U.S. government in gaining the ability to sell their products internationally. American consumers and Japanese consumers would benefit from the elimination of Japanese barriers to access to that market for the quality products made by American workers.


April 7, 1995.
The White House, Washington, DC.
DEAR PRESIDENT CLINTON: I’m writing as Chairman of the U.S.-Japan Business Council which represents the interests of leading U.S. manufacturing and service firms. The purpose of my letter is to commend your Administration for the aggressive leadership it’s providing on behalf of U.S. automobile and auto parts producers as they attempt to compete in the Japanese marketplace. As your trade negotiators have recognized, the fundamental problem in the U.S.-Japan economic relationship is that Japan’s markets in a host of industrial and service sectors remain more restrictive than those in the United States and other major economies. It’s equally clear that the U.S. trade deficit with Japan will persist—despite sharp appreciations of the yen and a sizable reduction in the U.S. budget deficit—until Japan reforms its regulatory and market entry practices.

Your Administration has managed to negotiate several results-oriented trade agreements with Japan in such areas as government procurement of medical and telecommunications equipment, insurance, flat glass, and financial services under the U.S.- Japan Framework Agreement. The members of the U.S.-Japan Business Council, many of whom will benefit once these agreements are implemented, commend your trade team for this achievement.

But the fact that no agreement has been reached in one of the most important sectors of our trading relationship with Japan— autos and auto parts—is troublesome . . . especially given the broad range of industries and jobs involved in the automotive sector . . . electronics, semiconductors, steel, chemicals, and machine tools.
Although U.S. auto and auto parts companies are now competitive and committed to the Japanese market, they and other foreign producers continue to be denied full and comparable access to the Japanese automobile distribution system, as well as markets for original equipment and replacement parts.

Meanwhile, the bilateral trade imbalance in motor vehicles and parts, which typically accounts for some 60 percent of the U.S. trade deficit with Japan, hit a record high of $36.7 billion in 1994. Forecasts suggest even greater deficits in this sector in 1995. On behalf of the U.S.-Japan Business Council, I urge your Administration to continue working toward a comprehensive agreement that will result in increased access and sales opportunities for U.S. automobile manufacturers and parts producers in the original equipment and replacement parts markets in Japan and the United States.



The NAM’s membership has a clear and substantial interest in a U.S.-Japan relationship characterized by a two-way free flow of goods, services and investment. The NAM thus supports the ‘‘framework for a new economic partnership’’ between Japan and the United States. As part of this framework, it is appropriate that Japan has committed to implement policies ‘‘intended to achieve a highly significant reduction’’ in its persistent and large trade surplus with the United States. The framework addresses both structural imbalances between the U.S. and Japanese economies as well as those sectors of the Japanese economy where market forces have, in the past, clearly not been allowed to operate freely.

The NAM recognizes the importance of successfully resolving the current bilateral automotive negotiations by ensuring significant and sustained market access and sales opportunities for foreign vehicles and parts in the Japanese market. The NAM thus supports the efforts of the U.S. and the Japanese Governments to reach speedy agreement to achieve such access.
The NAM also urges the U.S. Government to reassert that the full implementation of all previously negotiated agreements with Japan in other sectors remains a priority objective.

Washington, DC, April 13, 1995.
Office of the U.S. Trade Representative, Washington, DC.

DEAR AMBASSADOR KANTOR. As you know, The Business Roundtable has long been a major supporter of the efforts of the U.S. government to open foreign markets to international trade and investment. In this connection, U.S./Japan trade policy developments have been of particular concern to us. The difficulties that U.S. business has had in expanding its sales and investments in Japan have been a continuing frustration. While progress has been achieved in some sectors, such as semiconductors, other areas have seen insufficient improvements. In particular, the automotive sector has experienced significant difficulty penetrating the Japan market, and the trade imbalance in this sector alone represents nearly 60% of the total trade deficit between the U.S. and Japan. The Roundtable believes that a successful auto negotiation with the Japanese will have ramifications beyond Japan and could help to facilitate further market opening initiatives in other Asian countries.

The purpose of this letter is not to provide you with the specifics of the auto sector trade problem faced by U.S. exporters; the U.S. auto and auto parts industries can do this far more effectively than we can. Rather, it is to underscore the importance of negotiations in this sector. We are also not the ones to advise you on the precise shape of a successful agreement on auto sector trade with Japan. That said, we believe that fundamental to any successful negotiation is the need for agreements to include a basis on which the results can be evaluated. Without an acceptable basis to gauge the impact of an auto sector trade agreement, there will be a significant risk that subsequent activities/ discussions to any agreement will devolve into continuous argument regarding implementation process rather than achieving actual results.

We know that the auto sector negotiations with Japan have been, and will continue to be, difficult. For this reason, we think that it is important for you to know that The Business Roundtable fully supports the pursuit of U.S. rights under the rules of the World Trade Organization, aggressive use of U.S. trade laws and whatever other action may be necessary to achieve meaningful access to the Japanese market in this critical sector.

In closing, thank you for your tireless efforts to open foreign markets to U.S. exports, and we encourage your continued resolve in these negotiations.

Chairman, President & CEO, Texas Instruments,
Chairman, The Business Roundtable International Trade and Investment Task Force.

Washington, DC, April 18, 1995.
U.S. Trade Representatives, Washington, DC.

DEAR AMBASSADOR KANTOR: I am writing to urge the Administration to continue its efforts to reach a results-oriented agreement with Japan on autos and auto parts. The discrimination and inequity present in the existing trading relationship can no longer be papered over.

American workers in a wide range of industries and occupations would benefit from the reduction of the U.S. deficit in automotive trade with Japan and the elimination of discriminatory practices by Japanese companies directed at U.S. firms. Union members in the rubber, glass, steel, aluminum, textile, machine tool, chemical, electrical, electronics and other industries would directly benefit from increased access to the Japanese auto market for competitive American products. Unionized workers in other industries, including entertainment, telecommunications, construction, aerospace, paper and even-more, would gain additional jobs if the Japanese market were truly open and discrimination against U.S. producers was ended.

The AFL–CIO believes that international trade can benefit American workers, but that trade must be fair and equitable. That is not the case with U.S. auto trade with Japan today. During the past nine years, the U.S. deficit in auto trades with Japan nearly hit $300 billion. If that deficit could be reduced substantially, the Clinton Administration’s effort to establish equity in that trading relationship through the Framework negotiations could lead to the creation of many thousands of American jobs. We will judge the success of the Framework’s auto talks by their impact on the jobs of American workers, not by the quantity of words in any agreement. Under a good agreement, we expect the U.S. automotive trade deficit with Japan to decline rapidly.

The commitment of the Clinton Administration to ‘‘result-oriented’’ negotiations must be fulfilled either through effective, verifiable agreements or reciprocal treatment of U.S. imports from Japan. If an acceptable agreement cannot be reached in the next few months, the U.S. must impose sanctions on imports from Japan that are commensurate with the damage to American workers caused by Japan’s barriers to U.S. products. It is time to demonstrate the Administration’s commitment to settling this long-running trade disaster.


WASHINGTON, D.C., April 13, 1995.—The Aluminum Association announced today its strong support for a swift and positive conclusion to the U.S.-Japan automotive trade negotiations. The aluminum industry, longtime advocates of free trade, urged the removal of barriers and the opening of Japan’s parts and vehicle market to foreign cars and parts.

U.S. aluminum companies are historic free-traders. They produce 19 billion pounds of metal each year, making them the world’s largest aluminum industry. The U.S. aluminum market is the world’s largest, most sophisticated and most open, yet major barriers to market access in Japan remain. The aluminum industry strongly supports the U.S. Government’s efforts to remedy this persistent problem.

The auto and auto parts industry and its unhindered access to Japanese markets and manufacturers is extremely important to our industry. In 1993, the aluminum industry shipped about 4.2 billion pounds of aluminum to the transportation market. This makes it the industry’s second largest market. Aluminum Association President David N. Parker, called for an effective, results-oriented agreement on the negotiations and remarked that the ‘‘talks mirror our industry’s long time efforts to achieve open markets for aluminum.’’

Aluminum represents over 200 pounds of an average vehicle, a growth of over 55 percent in the last decade. Aluminum plays a significant role in lightweighting both domestic and foreign vehicles. Industry experts expect its percentage of the average car to increase rapidly as demand for fuel efficient vehicles which retain size, safety, and environmental friendliness grows. Select cars have already shown that as much as 500–1,000 pounds of aluminum can be used successfully to achieve high performance or fuel efficiency. The Aluminum Association represents primary and secondary producers of aluminum, as well as semi-fabricated products. Member companies operate approximately 300 plants in 40 states.


WASHINGTON, D.C.—The American Iron and Steel Institute (AISI) today issued the following policy statement in strong support of U.S. government efforts to achieve a prompt, ‘‘results-oriented’’ resolution of the U.S.- Japan bilateral automotive negotiations.

‘‘Steel producers in North America have an important, direct stake in—and indeed, have contributed substantially to—the renewed competitiveness of North America’s auto industry in recent years. That was a main reason steel producers throughout North America strongly supported NAFTA—because we saw it benefiting our major customers in the North American auto industry.

Given the auto industry’s continued importance to the North American economy (4.6 percent of total U.S. GDP). AISI’s U.S., Canadian and Mexican member companies remain deeply concerned by North America’s large and persistent trade deficit with Japan in the automotive sector.

The fact is, as competitive as the North American auto industry has become, it still requires free and open markets and fair and reciprocal market access worldwide to reap the full benefits of its restored status as a world class industry. Unfortunately, North America’s producers of motor vehicles and auto parts do not have such equality of market access currently with respect to Japan.

It is therefore essential that the ongoing U.S.-Japan bilateral automotive negotiations produce a successful and timely resolution of this critical problem by achieving significant and sustained market access and sales opportunities in Japan for North American and other non-Japanese producers of vehicles and parts. Thus, AISI strongly supports the U.S. government’s ‘‘results-oriented’’ efforts to reach agreement as quickly as possible on meaningful market access in Japan for this vital North American industry. As part of the U.S.-Japan ‘‘framework agreement’’—under which the automotive talks are occurring—Japan has committed to implement policies ‘‘intended to achieve a highly significant reduction’’ in its trade surplus with the United States, which exceeded $65 billion last year.

This enormous and unsustainable trade imbalance, two-thirds of which is in the automotive sector, requires prompt corrective action—by achieving measurable results in the auto sector as soon as possible, and ensuring full implementation of all previously negotiated agreements with Japan in other sectors.’’


The American Textile Manufacturers Institute (ATMI) strongly supports the Clinton administration’s efforts to open the Japanese market to U.S. automobile and automobile parts. ATMI is the national trade association for the domestic textile industry. ATMI member companies operate in more than 30 states and account for over 80 percent of all textile fibers consumed by U.S. mills.

The American textile industry is a major supplier to the U.S. automobile industry. Textile goods produced for use in automobiles include not only upholstery and floor coverings, but sidewalls (the interior sides of cars), head linings (the interior roof material), hood linings (material on the underside of the hood), trunk linings, convertible tops and vinyl hardtops, tire reinforcement, hose fabric and transmission belts. In fact, the average truck contains 18 square yards of textile fabric, while the average car contains 29 square yards.

In 1993, automobiles and trucks accounted for more than 1.2 billion square yards of fabric consumption in the United States, or 1.2 billion pounds of fiber. By weight, this represents nearly 10 percent of the total fiber consumption in the U.S. Clearly, the auto industry is an important customer of the American textile industry.

The opening of foreign markets to U.S. textile products and to items containing U.S. textile products is a vital part of our industry’s global competitiveness strategy. In this light, ATMI endorses the efforts of Ambassador Kantor to open Japan’s market to U.S. autos and auto parts and urges the administration to continue to seek adequate market access in the current negotiations with the government of Japan.


WASHINGTON, D.C.—A diverse group of the nation’s largest industries joined together today to call on the Japanese government to open its market to reduce its record $66 billion merchandise trade surplus with the U.S. ‘‘Japan’s chronic trade surplus is choking its economy and playing havoc with the world’s currency markets,’’ said Andrew H. Card, Jr., President and CEO of the American Automobile Manufacturers Association (AAMA). ‘‘After more than 25 years of footdragging, it’s time for the Japanese government to join with other industrialized nations to practice free trade in its own market.’’ Autos and auto parts accounted for $36.8 billion of the U.S. trade deficit with Japan last year and is predicted to reach $39 billion in 1995.

The latest round of U.S.-Japan trade negotiations is scheduled to conclude in Washington on Tuesday.

Nearly twenty industry representatives— from aluminum and steel producers to pharmaceutical manufacturers—joined Card in calling for greater access to Japan’s ‘‘sanctuary’’ markets.

‘‘The whole world is watching the outcome of these negotiations. If Japan fails to undertake decisive reform to open its automotive sector, there are numerous developing economies waiting in the wings—China, Korea, Indonesia, Vietnam—which will be tempted to follow Japan’s sanctuary market as a model, rather than to adopt a free and open model which provides benefits to all participants in the world open-trading system,’’ Card said. Other groups joining AAMA at the press conference include the: Aluminum Association, American Electronics Association, American Forest and Paper Association, American Iron and Steel Institute, Automobile Parts and Accessories Association, Copper and Brass Fabricators Association, Pharmaceutical Research and Manufacturers of America, Association of Manufacturing Technology, International Insurance Council, Motor and Equipment Manufacturers Association, Specialty Equipment Manufacturers Association and the United Auto Workers Union.

Other groups calling on Japan to open its markets include the: American Textile Manufacturers Institute, Joint automotive Supplier Government Action council, Motion Picture Association of America, National Association of Manufacturers, National Glass Association and U.S.-Japan Business Council.

During the press conference, Card pointed to a new report by the American Chamber of Commerce in Japan which outlines trade barriers across 35 industrial sectors. With regard to autos, the ACCJ report concluded that the Japanese manufacturers intend to continue discouraging dealers from franchise agreements with U.S. automakers.

The ACCJ report recommends that the Japanese Government: Open Japan’s auto market; provide free access to Japanese dealers; simplify regulations and procedures; and open Japan’s parts market to foreign suppliers. AAMA is the trade association headquartered in Washington, D.C. whose members are Chrysler, Ford and General Motors.

San Jose, CA, April 19, 1995.
U.S. Trade Representative,
Washington, DC.
Secretary of Commerce, Department of Commerce, Washington, DC.

DEAR AMBASSADOR KANTOR AND SECRETARY BROWN: The Semiconductor Industry Association strongly supports your efforts to achieve a substantial measurable increase in imports into Japan’s automotive and automotive parts markets. These efforts are both necessary and appropriate. There can be no acceptable alternative to having outcomes in the Japanese market reflect the competitiveness of American auto and auto parts producers. This has not yet been allowed to occur.

Your efforts serve not only the broad national interest but are of real economic interest to our industry as well. Semiconductors are a key component in modern automobiles, with applications including engine controllers, air bags, and antilock brakes. There is a direct impact on U.S. chip companies from both the very low levels of U.S. automobile exports to Japan and the reluctance of Japan automobile companies to use American components.

In 1994 over $1.7 billion of semiconductors were used in American automobiles. This figure could have been substantially higher if it were not for the fact that of the 10 million vehicles produced by the three American firms in the U.S., only 33,000 were exported to Japan.

U.S. firms have been working for years to increase their share of the $1.3 billion Japanese automotive chip market through the U.S.-Japan Semiconductor Agreement. The foreign automotive semiconductor share in Japan of about 10 percent, while much higher than five years ago, remains well below the dominant shares that U.S. firms have achieved in other world markets. The limited foreign penetration to Japan’s auto semiconductor market is also in contrast to the significant progress which is being made in a number of other electronics sectors in Japan.

The implementation of market access agreements with Japan requires extraordinary efforts on the part of both American suppliers and Japanese purchasers, and by both governments, but the benefits can also be extraordinary. The U.S.-Japan Semiconductor Agreement has led to an additional $2.5 billion in annual U.S. sales in Japan and to unprecedented cooperation between American and Japanese companies and industries. While SIA intends to continue to work through the U.S.-Japan Semiconductor Agreement to further programs in semiconductor market access, an agreement on auto parts is fully complementary and very much in the interest of not only the U.S. economy, but of harmonious relations between the United States and Japan.

We wish you well in this vital endeavor. A successful autos and auto parts agreements would promote the change in attitudes towards imported components that is required for success in increasing access to the Japanese market. SIA fully supports your efforts to quickly achieve an effective results-oriented agreement with the Government of Japan on auto and auto parts.

A. A. PROCENSINI, President.
Washington, DC, April 11, 1995.
General Counsel, Office of the U.S. Trade Representative,
Washington, DC.

DEAR IRA: The American Forest & Paper Association, on behalf of the U.S. forest products industry, is highly supportive of your efforts to open the Japanese market to U.S. suppliers of autos and auto parts. The long-standing problems of market access in this sector—including kieretsu relationships between auto producers and suppliers, denial of access to the producer-owner distribution network, and the use of government standards to exclude imports—are alltoo- familiar features of our own problems in penetrating the Japanese market. We believe that a comprehensive, negotiated solution to the auto/auto parts problems will have important implications for the resolution of similar problems in other sectors, such as ours, where the same pattern of exclusion is evident.

At the same time, we believe that the firm stand which USTR has taken in these negotiations sends a very clear signal to the Government of Japan that the Administration will take the steps necessary to ensure compliance with existing agreements. With both the wood and paper agreements designated to a Super 301 watchlist, we anticipate that the result of your efforts in the auto sector will be to heighten Japanese awareness of the need to refocus its ‘‘encouragement’’ of imports in a direction which leads to concrete results.

Vice President, International.

Mr. HOLLINGS. Madam President, let me commend our distinguished senior Senator, former leader and President pro tempore of the body. Senator BYRD’s words are music to this Senator’s ears, because in all of the almost 5 months now of the so-called ‘‘contract,’’ not one word has been stated until Senator BYRD has spoken about competitive trade policy. That is exactly what we need. Right to the point, as the distinguished Senator has pointed out, the Japanese are subsidizing their sales—what we call ‘‘loss leaders,’’ in the retail business. They subsidize and sell automobiles there for less than it costs them back in Japan.

I could not get the updated figures right now to be accurate, but I remember over a year ago a Toyota Cressida that sells for $21,800 in Washington, DC, sells for $31,800 back in Tokyo. We had other comparable prices, and I would be glad to bring us up to date. The point is, in the year 1994 just passed, Business Week reported that, once again, Japan had taken over a larger share of the American domestic automobile market. Specifically, they had inched up another 1.2 percent in spite of the competitiveness and quality production of the American automobile industry. We have all been bragging. Detroit is finally putting out real cars, quality production, and we are now demanding, instead of foreign cars, American cars for a change. But with it all, Japan has still taken over more of the market.

Five years ago, I had the vice presidents of Chrysler, Ford, and General Motors orchestrated almost to bring an antidumping case against Japan. While I had the agreement of Chrysler tentatively and Ford tentatively, General Motors bugged out. They said it was not good for business. They better wake up and understand what is good for business.

Yes, our leader here is making a very cogent observation, but we will have to go back to another colleague of ours who adopted the expression, ‘‘Where’s the beef?’’ Our Vice President. We have been talking for years— years on end. I testified 35 years ago with similar language about the textile industry. In 1980, 15 years ago, the deficit in the balance of textile trade of the entire European market with Japan was some $4 billion—not with just Japan but with the Pacific rim. We had a deficit, also, in the balance of textile trade of $4 billion. In the ensuing 15 years now the Europeans have shown they know how to deal with Japan. They do not have this weeping and wailing about fair trade and level the playing field and whining and crying and moaning and groaning— business is business. Through the enforcement of their antidumping laws, they have reduced it to less than $1 billion. And our deficit in the balance of textile trade has gone from $4 billion to $32 billion. Add in that $28 billion in textile manufacture, and we have millions of jobs.

Politicians are running all over the Hill talking about jobs, jobs, create jobs, jobs, jobs. We are exporting them as fast as we possibly can.

A fundamental is involved, Madam President. They use the Friedrich List or German model, which Alexander Hamilton initiated in the founding days of this Republic whereby the wealth of a nation is measured not by what it can buy but by what it can produce. The decisions are made on the basis of whether or not it strengthens the Japanese economy or weakens the Japanese economy. The Japanese use government, along with trade policies and private sector to take over—in this instance, market share. That is why year upon year, end upon end, we send over our trade representatives. They moan, they groan, they whine, they cry. We continue to keep our markets open.

The only time anybody made any progress at all was under the voluntary restraints agreement, and we slowed it down somewhat. However, we still have not really denied them access to our market.

Adam Smith, free trade is strictly passe in the global competition. Forget it. Forget it. We have little Boy Scouts, and the Golden Rule, do unto others as they do unto you. That does not apply in global competition.

I can say here and now we have to protect the economic backbone, the manufacturing capacity and capability of our Nation or, as Akio Morita said years ago, that power that loses its manufacturing power ceases to be a world power.

That is the road that we are on in this country of ours. I am glad the distinguished Senator from West Virginia is emphasizing this. It is well stated, and I hope we can get an administration that will answer the question of our former Vice President Mondale, ‘‘Where’s the beef?″

If they begin to put in some beef like they did with China, then we can get an agreement like we did with China. If we put some beef behind the words of the distinguished leader from West Virginia, we will get a result. Business is business and it is not politics, and we have got to begin to understand that.

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