Japan and US agreed on Free Trade Auto Exception

The two Pacific powers, Japan and US in the month of March 2013 agreed on exemptions for the auto industry in a thoughtful Pacific-wide free trade pact, with Japan showing its readiness to announce its entry into negotiations.

Both the Countries agreed in principle that the US will be able to keep tariffs on car imports — 2.5 per cent for passenger cars and 25 per cent on trucks — for at least five to 10 years under the Trans-Pacific Partnership (TPP).

But the US auto sector is opposed to Japan’s entry, claiming Tokyo maintains non-tariff barriers on autos, and says a deal would give Japanese automakers unfettered access to their market, without allowing them the same chances.

Japan’s agriculture lobby is also firmly opposed; fearing unprecedented foreign competition would devastate Japan’s small-scale farming sector and rural communities.

Tokyo and Washington agreed in preparatory talks that there would be at least a five- to 10-year delay in the removal of import tariffs on autos — the moratorium agreed in a recently-enacted US-South Korea free trade agreement.

Significance of the Free Trade Auto Exception

• The emerging pact could boost growth and set rules to govern trade in the dynamic but unwieldy region, which includes much of East Asia, as well as some American countries.
• The participation of both Japan and the US, the world’s two largest developed economies, would mean the pact covers nearly 40 per cent of the world’s economy.