2/85 AUTOMOBILE TRADE

The US Administration appears to be increasingly leaning towards dropping controls on Japanese auto imports. The US Commerce Department estimates that without the controls imports from Japan would rise by 300-350,000 units, while total new car sales in 1985 are expected to rise by 500,000 units. US automakers are thought to have made $10- 11 billion in profits in 1984. The Auto International Association estimates that the restrictions have raised auto prices in the US by $2000 per car. US Trade Representative Brock in February said that President Reagan had not yet made a decision although the controls run out at the end of March. US Ambassador to Japan Mansfield has reportedly said that the controls may be extended another year but on an expanded basis. The United Autoworkers Union however has sent a letter to Susumu Nikaido, vice chairman of the ruling Liberal Democratic Party, disputing his charge that the Japanese Industry did not have the capacity to export more than 2.5 million cars to the US, the union says the Japanese have much greater capacity. Ford Chairman Caldewell has expressed opposition to dropping the controls. He said that in 1984 the US had a $130 billion trade deficit. Of that $38 billion was with Japan of which 1/3 was in auto trade. US Senate Foreign Relations Committee Chairman Lugar (Indiana) has also said he would favor maintaining controls as the strong dollar made it difficult for firms to complete. MITI has expressed its intentions not to renew the controls, noting Detroits record breaking profits. It said some measures would be imposed to prevent a massive surge if controls are dropped.

Another matter that the US government has brought up in auto trade relations, is why all Japanese auto exports to the US are made on Japanese ships only. The US government wants US ships to be used also. In this relation, due to the restraints on exports to the US and sluggish domestic sales in Japan, for the first time in five years the US topped Japan in car production with 7.77 million produced in the US compared to 7.07 million in Japan. Nevertheless in total motor vehicle production Japan remained number one for the fifth straight year with production of 11.46 million. Automotive News estimates that the US and Japan will be locked in competition for top place in car production at 8.1-8.2 million per year for the rest of the decade.

THE JAPAN LAWLETTER. February 1985. By Roderick Seeman