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Japan fears trade friction with U.S. after Trump pulled out of TPP pact

U.S. President Donald Trump signed an executive order formally pulling the United States out of the Trans-Pacific Partnership (TPP) on Jan. 23, dashing hopes for the 12-nation free trade deal to come into effect.

Fears have emerged that Japan could be plagued once again by trade friction with the United States as Trump expressed views that there are unfair barriers in automotive trade with Japan.

The United States had joined hands with Japan in TPP negotiations. President Trump, however, pointed the finger at Japan over trade. Before signing the executive order to withdraw Washington from the TPP free trade deal, he said in a meeting with top executives of U.S. manufacturing firms, "... they do things to us that make it impossible to sell cars in Japan."

His remarks reached Japan immediately. A senior executive of a Japanese automaker said, "We think that we have been making considerable efforts to integrate ourselves into the United States, so do we have to accept the same criticism we received 30 years ago?" The executive was reminded of the nightmare of the 1980s, where friction over automobile trade between Japan and the U.S. had escalated to the point that Japan was forced to impose voluntary restrictions on vehicle exports to the United States.

Obviously, the current situation is different from what it was in the 1980s. Japanese automakers built factories in the U.S. and produced about 3.85 million vehicles there in 2015. Of about 6.6 million Japanese vehicles sold in the U.S. in 2015, 1.6 million units were from exports from Japan -- about half the peak of 3.43 million units in 1986. Japanese automakers, including their sales outlets and the like, have about 1.5 million employees in the U.S. Toyota Motor Corp. Honorary Chairman Shoichiro Toyoda and others were inducted into the Automotive Hall of Fame for their contributions to the creation of jobs in the U.S.

Nonetheless, President Trump is apt to launch verbal attacks regardless of whether what his says is true or not. A senior Japanese government official in charge of economic affairs voiced concern, saying, "All we can do is to explain each time an incident arises to seek their understanding."

Officials with Japanese companies are having a hard time understanding the true intensions of Trump's remarks where he stated, "...they do things to us that make it impossible to sell cars in Japan." Japan does not impose any import tariffs on automobiles. Japan's hurdles for automobile imports have been lowered as Tokyo simplified procedures for safety standards and environmental regulations for imported vehicles and introduced special measures for imported cars. As for sales of imported vehicles in Japan in 2016, Mercedes-Benz of Germany sold 67,000 units and BMW sold 50,000 units. As for U.S. automakers, Ford Motor Co. sold only 2,000 units -- a mere 0.65 percent of Japan's imported vehicle market. Ford consequently withdrew from the Japanese market at the end of 2016. U.S. vehicles are hard to sell in Japan partly because of their established reputation: their fuel economy performance is bad; many of them are so big that they don't fit on Japanese roads; and they are not right-hand drive.

Meanwhile, the U.S. National Cattlemen's Beef Association (NCBA), which wants to boost global exports, issued a statement on Jan. 23, saying in part, "Fact is American cattle producers are already losing out on $400,000 in sales every day because we don't have the TPP." In response to reactions from such domestic industries, President Trump could press for negotiations on bilateral trade with Japan and demand Japan open its markets for farm products and automobiles wider than under the TPP. In a meeting with union leaders after signing the executive order to withdraw from the TPP, President Trump said the TPP was not a suitable method but one-on-one negotiations would be wonderful. In multilateral negotiations on the TPP, Japan was able to coordinate with emerging economies to seek concessions from the United States. But in one-on-one negotiations, Japan would be exposed directly to U.S. pressure. The Japanese government has shown its intention not to respond to U.S. calls for such negotiations.

Amid such concerns, Vice President Mike Pence could play a supporting role for the Japanese government and industry. He is known as pro-Japanese. He previously served as the governor of Indiana where Toyota, Honda Motor Co. and other Japanese firms have their factories. Toyota President Akio Toyoda has already met with Pence. But it is not clear to what extent autocratic Trump will listen to Pence. Some Japanese automakers tend to lose confidence, with one official saying that "political considerations" might be needed such as those similar to measures taken in the 1990s by Japanese automakers to work out self-imposed programs to buy U.S.-made car parts and Toyota sold General Motors vehicles under the Toyota brand.

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