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Japan opens ‘cash for clunkers’ to Detroit’s Big Three

January 20, 2010

Japan opens ‘cash for clunkers’ to Detroit’s Big Three

Detroit News Washington Bureau

Washington — Under heavy U.S. pressure, the Japanese government agreed Tuesday to open its "cash for clunkers" program to Detroit’s Big Three automakers.

The move will likely add only hundreds of new sales in Japan for U.S. automakers, which sold fewer than 9,000 vehicles there last year.

But it’s the first win in a larger war being waged by Detroit to pry open Japan’s stubbornly closed auto market, and to convince Congress to do more to help give domestic automakers a level playing field abroad.

Automakers also want changes to the Korea Free Trade agreement, arguing that market also is largely closed to imports.

U.S. automakers were blocked from taking part in Japan’s $3.7 billion "clunkers" program because Detroit’s Big Three use special import rules that don’t require emissions testing in Japan. Now, they will be able to use U.S. Environmental Protection Agency emissions results to win eligibility for the Japanese "clunkers" program, though not all U.S. vehicles will qualify.

Japan is providing a tax cut of up to $2,830 for scrapping a car at least 13 years old with the purchase of a new vehicle that meets Japan’s 2010 fuel efficiency requirements; the incentive is $1,130 for new vehicle purchasers who do not scrap a vehicle. The program is set to expire on March 31, but the government plans to extend it.

Congress, the White House and U.S. automakers praised the move by the Japanese government.

"Japan still remains the most closed automotive market in the world," Detroit’s automakers said in a joint statement. "We hope Japan’s willingness to address this issue is a sign of future cooperation to remove additional non-tariff barriers, including currency manipulation."

Satoshi Miura, a consular official in the Japanese Embassy in Washington who handles auto issues, said the government had heard the U.S. protests before changing its "clunkers" program. But he said the decision to open the program wasn’t the result of U.S. pressure. "We decided that we wanted to make the procedures easier and quicker," he said.

Miura noted that U.S. manufacturers could have participated previously if they followed the same import rules as other automakers.

Nearly half of the U.S. government’s $3 billion "clunkers" program went toward buying Japanese cars and trucks. Japanese brands claimed 319,300 sales out of a total 677,000 vehicle sales in the monthlong U.S. program.

U.S. Trade Representative Ron Kirk said his office was reviewing Japan’s announcement. His office vowed "to ensure that American automakers and workers receive fair treatment in Japan and around the world."

Japan is the world’s No. 3 auto market, but U.S. automakers barely make a dent in it. Detroit’s Big Three sold 8,707 vehicles in Japan in 2009 out of 178,500 total sold by foreign automakers, as total Japanese auto sales fell 9 percent to 4.6 million vehicles.

Over the last month Congress, the U.S. Chamber of Commerce and others have expressed anger that the U.S. program was open to all automakers, with Japanese firms getting a big sales boost as a result. A Congressional hearing this week on the issue was postponed after Tuesday’s announcement. A second hearing is scheduled for next week.

The Chamber also fought "Buy America" provisions in the original U.S. "clunkers" program that would have limited it to North American-built vehicles.

At a closed-door meeting of House Democrats last week, Rep. Ron Klein, D-Fla., asked President Barack Obama about the Japanese clunkers program and urged him to talk to the Japanese ambassador. Obama was noncommittal, Klein said, but also said he was working on the issue.

"I support free trade, but it’s got to be on equal terms," Klein said Tuesday.

"If Japanese consumers aren’t persuaded that we have a good competitive car, that’s a different story."

Sen. Debbie Stabenow, D-Lansing, praised Japan’s decision.

"For too long, Japan’s ‘cash for clunkers’ program discriminated against our automakers, hurting American jobs," she said. "Now, after excluding our vehicles for months, Japan is finally doing what is fair."

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