---

Statement of William C. Duncan, Ph.D., General Director, Japan Automobile Manufacturers Association, U.S. Office, December 18, 2000

18 December 2000

Statement of William C. Duncan, Ph.D., General Director, Japan Automobile Manufacturers Association, U.S. Office, December 18, 2000

    WASHINGTON, Dec. 18 The following is a statement by
William C. Duncan, Ph.D., General Director, of the Japan Automobile
Manufacturers Association, U.S. Office:

    "As the year 2000 draws to a close so too does the U.S.-Japan Auto
Framework, a five-year-old agreement born out of one of the most intense trade
disputes of the last two decades.  The agreement is set to expire on December
31. As discussions regarding the future of the agreement proceed, some in the
U.S. parts industry are demanding that the U.S. government resurrect
mechanisms of market manipulation that led to the confrontation in the first
place.
    "In June 1995, the United States and Japan were poised on the brink of a
trade war.  At issue was a U.S. demand that Japanese auto companies agree to
U.S. auto parts purchasing targets.   The Japanese refused and the U.S.
threatened to shut out luxury vehicle imports from Japan.   The conflict was
resolved through difficult negotiations that rejected the concept of targets
and instead established an understanding designed to expand sales
opportunities in Japan by letting the market work.
    "The agreement was successful on two counts.  First, it prevented a trade
war that would have had wrenching economic consequences for both countries.
Second, in combination with notable structural change in the Japanese auto
industry, it helped to identify and develop new opportunities for U.S.
companies in Japan's market.
    "The trade council representing GM, Ford, and Chrysler recently stated:
'It is clear that the Japanese automobile industry has entered a period of
significant change which is altering the type and degree of participation of
foreign auto and auto parts companies in that market.'
    "Among these changes are the capital participation of U.S. companies in
the Japanese industry, the growing investment by U.S. auto parts companies in
Japan, the global parts purchasing of Japanese auto firms, and new vehicle
distribution methods in Japan.
    "These positive trends confirm the wise decision to abandon targets and
other market distorting mechanisms aimed at arbitrarily reducing trade
deficits. As a result the automobile industry whether in America, Canada,
Europe or Japan has moved far beyond the national boundaries that defined it
even five years ago.
    "The fundamental challenge for the industry will be to build vehicles that
meet the increasing demands to protect the consumer and the environment while
at the same time providing the performance, convenience and quality that
consumers expect.  This will be accomplished on a global base with companies
relying on markets as the final arbiter and with governments seeking the best
balance between local environmental needs and the efficiency found in common
regulatory practices.   Negotiated targets and mandates, on the other hand,
could interfere with this dynamic to the detriment of both the consumer and
the environment."