Detroit Three urge 30-year tariff phase-out on Japan cars

WASHINGTON Tue Jul 2, 2013 3:56pm EDT

WASHINGTON (Reuters) - Detroit automakers, following a failed effort to keep Japan out of regional free trade talks, outlined their fallback position on Tuesday, including a demand that U.S. auto tariffs be phased out in no less than 25 to 30 years.

The pact also must include "strong and enforceable provisions to prevent Japan from intervening in currency markets to depress the value of the yen," Matt Blunt, president of the American Automotive Policy Council, said.

Japan is formally joining negotiations on the proposed Trans-Pacific Partnership (TPP) agreement next month in Malaysia, just as the 11 currently participating countries are grappling with a number of hard issues they need to resolve to strike a deal by the current goal of the end of this year.

A U.S. government panel led by the Trade Representative's Office held a hearing on Tuesday to get advice from business, labor and other groups on negotiating objectives for Japan.

Blunt's group, which represents Ford Motor Co (F.N), General Motors Co (GM.N) and Chrysler Group FIA.MI, lobbied hard to keep Tokyo out of the talks, saying it did not believe U.S. negotiators would be able to tear down a number of "non-tariff barriers" that Detroit-based automakers blame for their low sales in Japan.

Now that Japan is part of the negotiations, the group is trying to hold on to the current 2.5 percent tariff on Japanese cars and the 25 percent tariff on Japanese trucks for as long as it can. It also is insisting the U.S. government address concerns about Japan's currency practice in the pact.

Blunt accused the Japanese government of driving down the value of the yen over the past ten months to give its automakers a $5,000 price advantage.

However, President Barack Obama's administration has so far resisted calls to add currency rules to the TPP, which would make the negotiations even harder and jeopardize the already ambitious goal of finishing this year.

MUCH SHORTER PHASE-OUT IN SOUTH KOREA DEAL

Japan has already agreed in principle that the phase-out period for U.S. auto tariffs would be the same as the longest phase-out for any other product in the pact.

However, Blunt's demand for a 25-to-30-year phase-out goes far beyond what was agreed in a U.S. free trade pact with South Korea, which eliminates the 2.5 percent U.S. car tariff after four years and the 25 percent U.S. truck tariff after 10 years.

U.S. union groups echoed Blunt's call for long U.S. auto tariff phase-outs and enforceable rules against currency manipulation in the agreement.

Thea Lee, deputy chief of staff for the AFL-CIO labor federation, said eliminating the 2.5 percent duty on Japanese cars would gut the Detroit automakers' profit margins, especially for small- to medium-sized cars.

Getting rid of the 25 percent truck tariff would eliminate the incentive for Japanese companies to build trucks in the United States, putting U.S. jobs at risk, she said.

Japanese automakers told the panel they have invested more than $35 billion in U.S. manufacturing plants since the early 1980s, directly employ about 81,000 American workers and are committed to keeping production in the United States.

Paul Ryan, director of government affairs for the Association of Global Automakers, urged U.S. negotiators to eliminate U.S. car and truck tariffs as quickly as possible and to immediately eliminate tariffs on auto parts.

U.S. negotiators also should "maintain a focus on trade concerns, avoiding monetary and currency policy matters in the TPP," Ryan said.

Ronald Bookbinder, general manager of the Japan Automobile Manufacturers Association, said his group was prepared to help eliminate any "specific" non-tariff barriers the United States can identify in Japan.

However, the main reason U.S. automakers perform so badly in the market is "Japanese consumers overwhelmingly prefer very small cars" and Detroit-based automakers offer only five models in that segment while European automakers offer 87, he said.

(Editing by Matthew Lewis)

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