President Bush's business delegation to the Far East shows U.S. commitment to compete in open markets - includes related article on accomplishments of mission

Business America, Feb 10, 1992 by J. Michael Farren

Autos and Auto Parts

Automotive trade with Japan in 1991 comprised an estimated 70 percent of the overall bilateral trade deficit. Comparatively speaking, in 1987 (the peak deficit year) automotive trade was 56 percent of the bilateral trade deficit. The 1991 U.S.-Japan automotive trade imbalance accounted for about 45 percent of the worldwide U.S. merchandise trade deficit.

Both U.S. auto parts and vehicle manufacturers have less than one percent of the Japanese market while maintaining significant market shares in other foreign countries--even those which possess indigenous, competitive automotive industries. Indeed, excluding trade with Japan, we estimate the United States would show a $5 billion surplus in auto parts in 1991. Ford and GM sold over 3 million cars in the highly competitive European market last year. Japanese vehicle manufacturers have been reluctant to procure U.S.-made parts although the products are of high quality and are competitively priced. The U.S.-Japan auto parts price survey conducted in the spring of 1991 showed that auto parts sold in the U.S., both installed and uninstalled, are in many cases 200 to 300 percent less expensive than those sold in Japan.

In the vehicle sector, access to the distribution system in Japan has been a significant barrier to market access. During the visit, each of the five major Japanese automotive manufacturers indicated their intention to provide access to their dealership network for U.S. auto manufacturers through company-to-company arrangements. These actions build on earlier announcements by Japanese automotive manufacturers to no longer require prior notification or consultation from their dealerships before the dealers undertake dual dealership arrangements.

Outstanding standards and certification issues identified by U.S. industry have also been significant impediments preventing U.S. firms from gaining further access to the Japanese market. Several issues have been in existence for more than a decade. Combined with both the contractual restrictions effectively preventing Japanese auto dealers from "dualing," i.e., carrying a competing manufacturer's product, and with exorbitant land prices in Japan (which effectively preclude the establishment of independent distribution networks), U.S. manufacturers have not had effective distribution opportunities.

* Resolution was reached on a majority of standards issues. Twelve of the 14 outstanding issues have been resolved completely. The remaining two will be resolved shortly.

* Specifically, the expedited method for importing vehicles into Japan, known as the "preferential handling procedure," now has a potential higher unit cap of 3,000 units per model. Previously, the limit had been 1,000 units. Also, Japan agreed to accept U.S. auto emission test data (U.S. vehicles are still tested to Japanese standards), reciprocating U.S. practice.

* MITI has announced tax and financial incentives under the Business Global Partnership, and the joint MITI-DOC vehicle trade opportunity study is progressing. The contractual relationship between dealers and auto manufacturers has been revised and now no longer includes a clause requiring dealers to hold consultations with the manufacturer prior to handling competing products. The Japan Fair Trade Commission (JFTC) also announced its intention to initiate a survey of competition in the automobile and auto parts sectors before the end of March 1992.