U.S. takes risk to let Japan join trade talks

November 15, 2011 http://detnews.com/article/20111115/OPINION03/111150326

U.S. takes risk to let Japan join trade talks

DANIEL HOWES

Team Obama spent $85 billion in taxpayer money to rescue the American auto industry from collapse, forcing restructurings that spawned newly competitive automakers in the heart of the industrial Midwest.

The president is running for re-election on the auto bailouts. His amen corners in the commentariat hail the workouts as evidence of bailouts done right. The resurgence of Detroit’s collective bottom line, coupled with the cooperation of powerful labor interests, show Americans can compete with the best, create new jobs and build strong balance sheets.

Then why is an archly partisan, labor-friendly administration well into re-election mode potentially imperiling the American automotive revival and the president’s support in the politically vital Midwest by welcoming Japan into the Trans-Pacific Partnership trade talks? Was China unavailable?

There are all sorts of geopolitical reasons to welcome Japan to the free-trade party — security bulwark in northeast Asia against China, leading foreign holder of American debt, shared democratic values, opening closed export markets for U.S.-made products, starting with the cars, trucks and the agricultural goods that come from states like Michigan.

And you could argue that Detroit’s re-engineered and recapitalized automakers today are far better equipped to, say, relinquish a 25-percent tariff on Japanese-made trucks and compete with their rivals head-to-head on a leveled free-trade field. The trouble is in the doing and determining which side ends up possessing the leverage.

Whatever the reach of corporate Japan into global markets, the island nation repeatedly proves to be notoriously resistant to opening itself to foreign trade as practiced in the 21st century. For every 200 cars Japan’s automotive giants export to the United States, to cite one example from the American Automotive Policy Council, American rivals can import only one into Japan.

Politicians from the American Midwest, Republican and Democrat, know this. Labor leaders know this. Auto executives who compete around the world with varying degrees of success know this. So do average people whose livelihoods depend on it.

“Japan has long sheltered its domestic market from meaningful competition,” Rep. Dave Camp, R-Midland, and Rep. Sander Levin, D-Royal Oak, the chairman and ranking member, respectively, of the House Ways and Means Committee, wrote in a letter to Ron Kirk, the president’s U.S. trade representative. Citing the latest National Trade Estimate Report, the lawmakers say “a large number of U.S. goods and services face serious market access barriers in Japan.”

They include autos, agricultural products, pharmaceuticals and medical devices. “Many of these barriers are deeply imbedded in Japan’s economy,” the lawmakers continue in the letter also signed by the chair and ranking member of the Senate Finance Committee, “and, to date, have persisted notwithstanding existing trade rules and years of bilateral engagement.”

Ohio’s Democratic senator, Sherrod Brown, laments Japan’s policy of “preventing U.S. and foreign autos and auto parts (from entering) the Japanese market.” Michigan’s Republican governor, Rick Snyder, in a letter echoed by counterparts from Illinois and Missouri, urged the Obama administration to push for greater U.S. access to Japanese markets as a condition of Japan’s entry into the Trans-Pacific Partnership.

Meaning whatever is good about Team Obama’s long-term strategic rationale for including Japan in the Pacific trade talks is bad politics in Midwest battleground states as well as in crucial congressional committees whose support is crucial to any trade deal moving forward.

Bottom line: Leaders from both parties in the jobs-hungry Midwest aren’t at all convinced giving Japan a seat at the Trans-Pacific table occupied by Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam will grow jobs back home unless automakers and auto parts suppliers get a clearer shot at the Japanese market.

Officially, the Obama administration is saying the right things. Over last weekend, Kirk welcomed Japan’s arrival into the trade talks, saying, “Japan must be prepared to meet … high standards for liberalizing trade and to address specific issues … regarding barriers to agriculture, services and manufacturing trade.”

Unofficially, Japan’s leaders appear to be using the trade talks to prod their companies into a revolutionary transformation born of natural disaster: Protect home-grown companies from the ravages of earthquakes and tsunamis by developing and producing more autos, parts, pharmaceuticals, insurance and other products and services outside the country.

Would that create more jobs in the United States and elsewhere? In theory. Would it be a radical change for Japan’s entrenched, mercantilist business culture? Yes, which is why the prospect engenders so much skepticism born of experience.

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