Auto Industry Tensions Stall TPP Talks

Negotiations on the proposed Trans Pacific Partnership (TPP) heated up over the past week during President Obama’s visit to Asia, although no major breakthroughs in the talks were announced. The negotiations slowed down during the President’s visit to Japan, as talks between the United States and Japan focused on the auto industry; the two countries have long had a rivalry in the auto sector.  Japanese car companies entered and ended the Big Three’s dominance of the US market during the 1970s. This tension has continued today, influencing the trade discussions and preventing the countries from reaching a deal during last week’s negotiations.

The major sticking point over the auto industry is access for auto companies in each country’s market. The United States has a 2.5% tariff on Japanese car imports, which Japan would like the US to drop with the TPP agreement. This has caused significant push back by the Big Three companies, who have protested Japan’s entry into the TPP talks. The Big Three have pressured President Obama to demand concessions from Japan in return for the ending of the tariff. The Big Three companies have argued that Japan’s auto market is practically closed to foreign companies, as only 5% of car sales in Japan come from foreign companies. The Big Three companies and many lawmakers in the US would like to see Japan introduce measures to increase access into the Japanese market.

Japanese officials have countered that there are no barriers to foreign car companies in place, saying that the US should not complain since Japan does not place any tariffs on US cars. Japan has also pointed out that there are no extra regulations or restrictions on imported cars, and that the US is unfairly asking for concessions in regards to the auto trade negotiations. The US has, in return, pointed to Japan’s high taxes on larger cars and trucks, saying these taxes unfairly hurt American companies who mostly manufacture these types of vehicles.

As the TPP talks continue between the United States and Japan, these disagreements in the auto sector will persist. As important as the auto industry is to both countries, officials will be wary of any agreements or concessions made, which could end up negatively affecting progress for the TPP. The issue of market access could slow down negotiations enough to push the timeline for an agreement into 2015, forcing the other 10 countries taking part in the talks to wait until the situation is resolved.