Suppliers Seek New Japan Accord

SEATTLE--The Auto Parts Advisory Committee (APAC), a federal trade advisory committee to the U.S. Department of Commerce, today strongly endorsed the U.S. government’s efforts to conclude a new five-year auto parts trade agreement with Japan. U.S. negotiators are meeting with their Japanese counterparts here through Thursday to discuss a proposed successor to the 1995 U.S.-Japan Automotive Framework Agreement.

The Framework Agreement expires December 31, and has not achieved its original objectives, according to APAC. Government deregulation in Japan has stalled, U.S. exports to Japan have faltered, and U.S. suppliers have yet to enjoy the “level playing field” promised in the 1995 accord, APAC said.

The U.S. auto parts trade deficit with Japan, after declining in 1996-97, the first two years of the Framework, rose 14 percent in 1998 and 1999. APAC estimates that this deficit will jump at least 15 percent this year in comparison with 1999, approaching $13 billion--the record negative level set in 1995 before the Framework agreement was in place.

“The momentum achieved in 1996-97 under the present U.S.-Japan automotive trade accord clearly has been lost,” said Ron Cutler, APAC chairman and vice president of marketing for TRW’s automotive division. “For U.S. suppliers, it is imperative that a new trade agreement be put in place, one which will significantly expand sales opportunities and market access, and greatly expand the purchase of U.S. parts by Japanese firms.”

APAC seeks a new five-year agreement that will achieve--in full--the 1995 goals of substantial and measurable improvements in U.S. suppliers’ market access and sales opportunities in Japan, as well as in markets around the world where Japanese vehicle producers have a significant presence.

“Additional deregulation, faster growth in U.S. parts exports to Japan, and new initiatives to increase Japanese vehicle assemblers’ global purchases of American products are the keys to creating a level competitive playing field for U.S. automotive suppliers,” said Cutler. “Together with recovery of Japan’s market, these steps are the only way to achieve substantial, progressive reductions in the U.S. auto parts trade deficit with Japan. Based on recent past experience, deficit reductions of 10 to15 percent per year are possible,” he added.

“We simply cannot sustain such an unhealthy level of trade imbalance. Since 1980, when the Carter Administration negotiated the first auto parts market opening agreement with Japan, the U.S. cumulative parts trade deficit with Japan has grown from $1 billion to more than $160 billion,” Cutler continued.

“Although the world automotive market is changing rapidly, APAC believes that most Japanese vehicle assemblers remain overly dependent on Japanese suppliers. Japanese vehicle producers have yet to make a global commitment to purchase American and other foreign products outside of their home market to the degree that their U.S. and European counterparts have,” Cutler added.

“U.S. suppliers in particular are well positioned around the world and from a technology and quality standpoint to help Japanese vehicle builders develop, build, and sell vehicles in distinct markets based on common platforms with a much higher number of shared components. American suppliers also are leaders in designing and supplying modular component assemblies to vehicle assemblers--a growing trend in the world automotive business,” he said.

“Our principal goal is a level playing field on which to compete openly and fairly for Japanese business worldwide. A new U.S.-Japan agreement is essential to eliminate excessive and unnecessary regulations that limit access to Japan’s automotive service industry (aftermarket). It also would help reinvigorate Japanese industry efforts to purchase more original equipment parts from competitive suppliers for use in Japan and other markets outside of North America. Finally, a new agreement would help break down remaining barriers to investment in Japan, including keiretsu affiliations and government regulations that inhibit mergers and acquisitions involving foreign partners,” Cutler said.

“APAC strongly supports open international markets for motor vehicles and auto parts, where success is achievable only through fair and open competition. The global competitiveness of the U.S. auto parts industry has made it one of the largest employment sectors, with 700,000 direct jobs, and has raised it to the stature of a strategic export sector representing nearly 7 percent of U.S. exports,” Cutler said.

“APAC members are confident that the world-class U.S. auto parts industry and its workers can successfully compete in every automotive market in the world, as long as competition is not restricted by non-market barriers or exclusionary business practices either imposed or tolerated by national governments,” Cutler said.

APAC is comprised of U.S. private sector companies, trade associations, and union representatives. Created by the U.S. Congress in 1988, and re-authorized in 1994, its mandate is to advise the Administration and Congress on auto parts trade in Japanese markets. In 1998, Congress expanded APAC’s mission to advise on barriers to parts trade in other Asian markets.

For more information, contact www.aftermarket.org, www.mema.org and www.sema.org.