UAW says U.S. should go beyond USMCA gains in any free-trade deal with Japan

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President Donald Trump met with Japanese Prime Minister Shinzo Abe in June. Photo credit: REUTERS

UPDATED: 12/10/18 16:13 ET – new story

WASHINGTON – The UAW urges the White House to go beyond the profits in the preliminary agreement between the United States and Mexico-Canada in a free trade agreement concluded with Japan.

Rules that determine how much vehicle content from Japanese and American sources must be purchased must exceed the 75 per cent regional rate that qualifies for duty free treatment in the North American trading zone and the transitional period for car manufacturers to reach the target should be shortened from three years to prevent companies in other countries from benefiting from the bilateral deal, the union said.

It also called for USMCA's minimum wage of $ 16 to be raised on a large part of each vehicle to $ 24 per hour for final assembly, engines, transmission, axles, battery cells and packages, frames and r & d, and $ 17 per hour for all other components and material handling.

The UAW's written comments were part of a series of recommendations to the American trade representative, who held a public hearing here Monday to gather more feedback as the government prepared to negotiate a free trade agreement with Japan.

& # 39; Very worried & # 39;

Japan belongs to the Trans-Pacific Partnership Agreement of which President Donald Trump withdrew days after he took office last year, with the administration preferring to conclude bilateral deals.

Automakers and the union reiterated their concern about the seriousness of Japan to open its market, saying that Japan should not receive tariff reductions until there is solid evidence that the car trade has been aligned.

"We are deeply concerned that a free trade agreement with Japan could further increase our huge car-reduction deficit and harm our domestic car industry," wrote Josh Nassar, director of the UAW. "Our preference is to exclude the car sector from the negotiations, but realize that this is unlikely to happen, and at least we should not make it easier for Japanese car manufacturers to import cars into the US until we have a truly level playing field. "

Japan, the world's third-largest car market, does not impose car fares, but US car manufacturers say they have been largely frozen by non-deterrent barriers that make it too expensive to do business there.

Japanese barriers

Nearly three-quarters of the $ 69 billion trade deficit with Japan is linked to motor vehicles and components, with the imbalance increasing over the past 15 years, although Japanese automakers produce vehicles in many American factories. Last year the US imported 1.73 million vehicles from Japan, but only 17,381 vehicles were exported, according to the Comtrade Database of the United Nations.

Barriers cited by the US car industry include:

    Unique certification procedures for imported cars & # 39; s.
    A discriminatory tax system.
    A complex and changing set of standards for safety, noise and pollution, many of which do not meet international standards and add significant development and production costs.
    A reluctance of Japanese dealers to transport foreign vehicles.
    Government incentives to buy cars made in Japan.

The American Automotive Policy Council, which represented the Detroit 3 and UAW, called for long elimination periods for US tariffs on Japanese imports (2.5 percent on cars, 25 percent on trucks). The UAW said that tariff relief should only be allowed after Japan's penetration rate was 49.2 percent from the current 6.7 percent and the US Automotive Policy Council said the elimination should be at least 25 years for car & # 39; s and 30 years for light trucks.

The administration should "avoid making concessions that further open up the American market to Japanese imports, unless and until there are indications that Japan is really committed to opening its car market to American vehicles," the American Automotive Policy Council testified President Matt Blunt. "We believe that the best way to achieve such a result is that the US only agrees with long, backward terminal tariff exits that depend on measurable increases in the import market share in the Japanese car market."

Floating quota

The Association of Global Automakers, whose members include Honda, Toyota, Nissan and Subaru, responded with a proposal to remove all vehicle fares as quickly as possible. And CEO John Bozzella said that any rules of origin must be "balanced, flexible and consistent with the tariff benefits obtained".

The UAW called on the US to impose a floating quota as part of a deal, which would follow the import percentage of US cars and car parts for the previous quarter. It said that each import from Japan above the reciprocal rate is subject to national security rates of up to 25 percent, which Trump is considering for all imported vehicles.

The union said that a free trade agreement between the US and Japan must contain strict labor standards and collective bargaining rights, and Nissan Motor Co. chosen to intimidate employees from organizing at his factory in Canton, Miss. The Japanese government must be obliged to intervene with Japanese car manufacturers to ensure international labor standards, it said.

The UAW also recommended that the government impose tariffs on lithium-ion batteries, electric motors, e-axles, battery safety and thermal systems, semiconductors, lidar and computer processing units for the automotive industry to ensure that the US loses ground in Asia and Europe in electric vehicle and component r & d and manufacturing.

Detroit 3 insisted that negotiators follow the precedent set out in USMCA and trade negotiations between the United States and Korea by fully allowing Japan to accept that US vehicle safety and environmental standards are sufficient for sale. The two countries should also work to harmonize burgeoning regulatory frameworks for automated vehicles, according to car manufacturers. Bozzella instead proposed that the nations pursue worldwide autonomous norms.