As Abe leans toward TPP, car, insurance sacrifices possible

by Hiroko Nakata

Staff Writer

With Prime Minister Shinzo Abe determined to join negotiations for the Trans-Pacific Partnership free-trade pact, the focus has now shifted to how much deregulation Tokyo would have to sacrifice to Washington in the automobile and insurance sectors in exchange for the protection of Japan’s politically sensitive farm products, experts say.

Japan is set to work on a priority list of rice and other farm produce it wants to treat as exceptions from the U.S.-led free-trade pact and chances are slim that Tokyo will demand deregulation from Washington, they say.

“So far, the fields of focus are agriculture, automobiles and insurance,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

After strong calls from long-protected farmers and lawmakers who derive the bulk of their political support from the rural vote, Abe confirmed in his first meeting with U.S. President Barack Obama on Feb. 22 in Washington that Japan will not have to eliminate all trade tariffs to join the TPP talks.

“Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States . . . it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations,” a statement released after the Feb. 22 meeting said.

Despite vocal opposition from his own Liberal Democratic Party, Abe is expected to make a formal announcement to join the negotiations later this month.

According to experts, the Obama administration is apparently giving Tokyo cover on joining the talks as it seeks protection for some farm products because the U.S. also intends to maintain its own 2.5 percent tariff on Japanese automobiles. Tokyo has no tariff on U.S. cars imported to Japan.

The U.S. is also expected to call for Japan to deregulate its insurance and auto sectors in the TPP negotiations.

Washington has long urged Tokyo to open up its insurance market, which has been dominated by state-owned “kampo” life insurance firm.

The U.S. has also claimed that Japan’s low-tax treatment for “kei” minivehicles has hampered sales of larger U.S.-made cars. Kei cars have engine displacements of 660cc or less and are mostly produced by Japanese automakers.

Suzuki Motor Corp. President and Chairman Osamu Suzuki has taken exception to those claims, saying the special tax treatment for minivehicles should be dealt with separately from Japan joining the TPP talks.

Suzuki’s comment appear to point to the belief that Japan’s auto sector is, in fact, open and that U.S. automakers are simply not producing enough minivehicles to be competitive.

Masamichi Hasebe, chief researcher at Daiwa Institute of Research’s national policy proposal and planning office, terms Japan’s negotiating tactics poor.

“It is a very bad way of negotiating when Japan appears to think it’s enough that it can protect just rice (and other farm products),” Hasebe said, suggesting Tokyo should press for further deregulation from the U.S.

Kumano, of Dai-ichi Life, noted that the value of U.S. farm goods imported to Japan that face tariffs is much smaller than that of Japan’s tariffed car exports to the U.S.

2010 figures by the Ministry of Economy, Trade and Industry show Japan’s auto exports to the U.S. that face tariffs accounted for 32.2 percent of its ¥8.6 trillion in total exports to the U.S., while U.S. agricultural exports to Japan accounted for just 12.5 percent of its overall ¥5.4 trillion in exports to Japan, he said.

The government is reportedly considering rice and sugar as priority goods to maintain tariffs on. Other items on the list include wheat, dairy goods and beef.

So far, Japan does not seem inclined to demand further deregulation of other U.S. sectors, including the marine transportation and finance and investment areas that are listed in a 2012 METI report detailing unfair trade practices, Hasebe said.

Japan should demand further deregulation when it joins the TPP talks, Hasebe said.

  • chris collord

    Japanese people have to pay high prices for food and have limited food choices due to the high food protection tariffs that only benefit the farmer at the expense of the rest of the population’s pocketbook and nutritional needs. Very idiotic cronyism.

    • http://www.facebook.com/jeff.takada Jeff Takada

      It seems to me that the Japanese, who are not calling for wholesale reductions in food prices, have made a collective decision to “invest” in food security to the extent possible. There is serious historical precedent for this decision that that cannot be merely dismissed as cronyism. Furthermore, as an avid food shopper, I have not seen any indication whatsoever that Japan has limited food choices. Almost inversely, I consider it a major agricultural achievement that they are able of grow so many exotic fruits and vegetables off-season without resorting to farm-destroying levels of trade. Japanese produce is of a uniformly high-quality and the Japanese, contrary to your statement, have some of the best met nutritional needs of any country on earth. It seems that if there is a higher sticker price for that, the Japanese seem happy to pay it.

      • Christopher-trier

        I have done a fair amount of grocery shopping in Germany, the UK, Japan, and the USA. The USA by far has the most expensive foods. Japan is more expensive than Germany and about the same as the UK.

        As you say, the quality of the produce is uniformly high.

        I have also been pleasantly surprised by the amount of diversity in products available in Japan for still reasonable prices. Similar things in the USA are infinitely more expensive.

        Japan needs to support its food-independence. Moreover, any country that has dropped regulations on US food imports (including seeds) have had to deal with the concomitant legal ramifications of major US agricultural firms crushing all competition.

      • blimp

        Jeff,
        The TPP and any other FTA will not force consumers to change their buying behaviour, if we will want to buy Japanese butter which is more expensive than imported butter (excluding the current tariff) we can still do that, Just as we may choose to continue to buy Japanese rice even if it is more expensive. Any FTA will give consumers and companies more choices.

        Perhaps due to the high quality as you say, Japanese produce will still be in high demand even after the TPP or an agreement with EU.

  • blimp

    The other car manufacturers (Nissan, Toyota, Honda and Mazda) need to show that they have no interest in kei cars, and that the special conditions for kei cars should be removed or amended, if they (again Nissan, Toyota, Mazda and Honda) want to see the removal of 2.5 % import tariff in the US.

    The Japanese private insurance companies should also better show that they are in favour of what the foreig insurance companies are asking for (Japan Post Insurance, Kyosai, Bank channel sales etc). The GOJ also needs to better explain that the social security system including the health insurance will not be discussed.

    • http://www.facebook.com/jeff.takada Jeff Takada

      So just so that I understand clearly your position on kei cars, the Japanese manufacturers should abandon a successful and environmentally sound business policy and the Japanese government, presiding over a gasoline starved nation, should rescind it’s support for gas saving legislation so that said manufacturers do business in a country where they already dominate the auto market? Seems like a nonstarter.

      • Christopher-trier

        Never mind that European countries also give tax incentives for people to buy similar vehicles. Never mind that US states such as California give incentives to consumers to buy smaller, fuel-efficient vehicles. The tariff is also largely irrelevant as most Japanese car manufacturers assemble their vehicles intended for sale in the USA in the USA or in Canada or Mexico, fellow signatories to NAFTA.

      • blimp

        The problem with the kei definition is not necessarily that it promotes more environmentally friendly cars as it only put requirements on the size of the car and the engine. It means that a diesel car that could and often is much more environmentally friendly than a kei car can not receive the same benefits extended to the kei car.

        Many European countries have tax breaks and what not to environmentally friendly and/.or fuel efficient car, and perhaps US has the same. However, the requirements are not tied to a particular size of the car but rather to the actual fuel efficiency or emission levels.