According to a Ford Motor Co.-underwritten study released Tuesday by the Center for Automotive Research in Ann Arbor, Mich., allowing Japan in to the Trans-Pacific Partnership would significantly increase Japanese exports of vehicles to the U.S. However, critics like Ford have warned that Japan’s relative closure to U.S. auto exports could lead to a loss of automotive jobs at home.
Japan wants to join the free trade party
The nine-party free trade talks that make up the Trans-Pacific Partnership include the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. Canada and Mexico were invited to join the talks in June, leaving Japan as the only major nation that applied to participate but was not extended an invitation.
Enter the Ford Motor Co., which has been most vocal in blocking Japan’s path. Ford and other U.S. automakers have maintained that Japan isn’t interested in free trade, but in simply gaining a stronger foothold in which to push its exports into U.S. households. If Japan were to enter into a free trade agreement via the Trans-Pacific Partnership, tariffs on Japanese exports headed for the U.S. would drop considerably from the current level of 2.5 percent on cars and 25 percent on light trucks. This would open the floodgates, critics of the proposed agreement assert, making it all too easy for Japan to reap the economic windfall while not being required to reciprocate to any great degree by allowing in more American cars.
The money at stake is significant for Japan, the Center for Automotive Research study notes. If the 2.5 percent tariff were to be eliminated, experts predict that Japanese exports would increase 6.2 percent to about 105,000 cars, a $2.2 billion shift.
Falling US vehicle production
While Japanese exports would benefit, U.S. vehicle production would fall by 65,100 units, the study claims. The direct effect of this drop in production would lead to at least 2,600 lost U.S. automotive jobs in manufacturing, as well as an additional 9,000 jobs lost among parts suppliers and 14,900 in related fields within the U.S. automotive industry.
The Center for Automotive Research study, which is entitled “The Effects a Free Trade Agreement with Japan will have on the U.S. Auto Industry,” pays particular attention to the ways in which currency exchange rates affect the parameters of a free trade agreement between Japan and the U.S.
“The combination of a (free trade agreement) between the U.S. and Japan and a significant depreciation of the yen versus the dollar would have serious effects on production and employment in the U.S. auto industry,” said Sean McAlinden, executive vice president of research and chief economist at the center.
Democrats against Japan’s involvement
In July, 10 U.S. Democratic senators led by Carl Levin and Debbie Stabenow of Michigan petitioned the Obama administration not to allow Japan to enter into Trans-Pacific Partnership talks to create one of the world’s largest free trade zones.
“The history of U.S.-Japanese trade relations gives us little confidence that American negotiators can achieve an agreement that would create a truly level playing field between the two countries in the short time frame of (Trans-Pacific Partnership) negotiations,” reads a letter the senators addressed to the president. “We believe it would be a mistake to invite Japan to join TPP at this time.”
Democratic Senate co-signers of the letter to President Obama include Charles Schumer and Kirsten Gillibrand of New York; Sherrod Brown of Ohio; Claire McCaskill of Missouri; Bob Casey of Pennsylvania; Ben Cardin and Barbara Mikulski of Maryland; Bernie Sanders of Vermont (Independent); and Sheldon Whitehouse of Rhode Island. Corporate opposition to Japan’s entry into the Trans-Pacific Partnership was led by Ford Motor Co., led by CEO Alan Mulally.
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