[Congressional Record Volume 141, Number 77 (Wednesday, May 10, 1995)]
[Senate]
[Pages S6433-S6435]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  UNITED STATES ACTION ON JAPAN TRADE

  Mr. BYRD. Mr. President, I thank the Chair.
  Mr. President, our United States Trade Representative, Ambassador 
Kantor, this morning announced a pair of initiatives regarding our 
trade relations with Japan for which he is to be commended and which 
deserve the strong support of this body.
  With respect to the first initiative, Ambassador Kantor has announced 
a plan to impose trade sanctions under section 301 of the Trade Act, 
pursuant to an investigation into the Japanese auto parts aftermarket. 
On this issue, this body has already spoken decisively by agreeing to a 
resolution offered on yesterday by the two leaders and myself, and the 
vote was 88-8. The Senate, thereby, decisively supports the imposition 
of such sanctions, given the complete unwillingness of the Japanese to 
address their market closing practices which block access of the United 
States parts to Japanese consumers. This has resulted in persistent, 
large trade deficits which are unfair to our industries and cost tens 
of thousands of jobs every day.
  The Trade Representative is on solid ground to publish a proposed 
retaliation list under section 301.
  Regarding the second initiative, the Trade Representative has also 
announced his intention to take a broad case against Japan's automotive 
practices before the World Trade Organization [WTO] by invoking the 
dispute settlement mechanism. As stated in his letter to the new 
Director General of the WTO, the case will be based on the fact that 
``Japan has failed to carry out its obligations under the WTO'' and 
thereby ``nullified and impaired benefits accrued to the United States 
under the WTO'', and ``impedes the attainment of important objectives 
of the GATT and the WTO.''
  As my colleagues are aware, in the debate last December over 
America's accession to the new WTO system, the question of the impact 
on United States sovereignty by creating binding decisionmaking dispute 
settlement bodies in that organization was discussed. In fact, it seems 
clear that some other nations were quick to sign up to the WTO, 
specifically in order to attack United States trade laws.
  In testimony before the Senate Finance Committee today, a former 
United States trade negotiator, Alan Wolff, stated with respect to the 
context of negotiations creating the WTO,

       Our negotiators should have begun to recognize that there 
     was something suspect about the U.S. proposal for an 
     automatically binding system when the rest of the parties to 
     the negotiation made an about face and embraced it. They 
     thought that they were curbing America's ability to act under 
     section 301.

  So, some opinion has been expressed that it would be risky to go 
before the WTO in that a dispute settlement panel could rule against 
United States 301 action in imposing new retaliatory tariffs on 
Japanese products.
  But the question is, what is in the national interest of the United 
States? Let us keep our eye on the ball. The case of Japanese 
discrimination on a very persistent and massive scale has been clear 
for many years in the automotive market as well as in other markets. No 
serious person can take issue with this.
  I commend the approach taken by Ambassador Kantor. There should be a 
good case against Japanese automotive industry barriers before the WTO 
because they are so overwhelming--Japanese practices overwhelm tariff 
schedules and make them irrelevant to the real dynamics of the market. 
If there is not a winnable case, I, for one, would suspect something 
deeply flawed with WTO decisionmaking and not the United States' case. 
Let me say that again: If there is not a winnable case, then I, for 
one, would suspect something deeply flawed with the World Trade 
Organization decisionmaking and not something flawed about the United 
States' case.
  The U.S. Trade Representative has maintained consistently that the 
operation of section 301 as a bilateral mechanism regarding specific 
barriers and practices is completely appropriate at the same time that 
we also attempt to breathe life into the new WTO dispute system. WTO 
rules do not cover the complete range of barriers that are practiced by 
the Japanese and, therefore, 301 treatment is totally appropriate in 
many instances. Furthermore, as a general matter, it certainly appears 
reasonable to believe that if Japanese practices nullify the value to 
be gained from the tariff-lowering regime of the GATT, then the United 
States should prevail in a World Trade Organization dispute.
  The Trade Representative has established a two-track approach taking 
the initiative before the WTO and exercising our bilateral rights under 
our trade law. I do not see any inconsistency in this approach. It is 
the right approach because our practices in our market are transparent 
and open, while Japan's practices are not. Thus, it is a fair challenge 
to the WTO to recognize and act on the reality of the market situation.
  Mr. President, I ask unanimous consent to have printed in the Record 
the letter sent yesterday from Ambassador Kantor to the new Director 
General of the WTO, Mr. Renato Ruggerio, which gives prefiling 
notification of the intention of the United States to initiate a WTO 
challenge against Japanese automotive discrimination. In addition, I 
also ask unanimous consent to include an op-ed piece from today's 
Washington Post by the vice chairman of the Chrysler Corp., Mr. Thomas 
G. Denomme, outlining in detail problems that Chrysler has experienced 
in attempting to break into the Japanese market.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                Executive Office of the President,


                                    U.S. Trade Representative,

                                                   Washington, DC.
     Renato Ruggiero,
     Director-General, World Trade Organization, Geneva, 
         Switzerland.
       Dear Director-General: I am writing you today to give pre-
     filing notification of the intention of the United States to 
     invoke the dispute settlement mechanism of the WTO to 
     challenge the discrimination against United States and other 
     competitive foreign products in the market for automobiles 
     and automotive parts in Japan. It is our intention to 
     officially file a case with the World Trade Organization 
     (WTO) in approximately 45 days.
       Through its actions and inactions with respect to the 
     automotive sector, Japan has failed to carry out its 
     obligations under the WTO, has nullified and impaired 
     benefits accruing to the United States under the WTO, and has 
     fostered a situation in the automotive sector that nullifies 
     and impairs such benefits, and impedes the attainment of 
     important objectives of the GATT and the WTO.
       The market access problems in the automotive sector reflect 
     problems endemic in many sectors in Japan. Relative to gross 
     domestic product, Japan imports far fewer manufactured goods 
     than any other G-7 country and maintains a persistent surplus 
     in its global trade and current accounts. Japan's imports of 
     manufactured goods are one-fifth to one-tenth the level of 
     European countries and nearly one-third the level of the 
     United States, relative to GDP. Overregulation, toleration of 
     market restrictive practices and market structures, and 
     pervasive and unwarranted intervention in the Japanese 
     economy all work together to systematically discriminate 
     against foreign competitive imports.
       The United States has focussed on the automotive sector 
     because of its central importance to the United States and 
     other economies, and its huge contribution to the U.S.-Japan 
     trade imbalance. This sector accounts for almost 5 percent of 
     the U.S. GDP, and it directly provides jobs for 2.5 million 
     Americans. The 1994 U.S.-Japan trade imbalance in the 
     automotive sector was $37 billion, nearly 60 percent of the 
     total U.S. trade deficit with Japan and nearly a quarter of 
     the entire U.S. global trade deficit.

[[Page S6434]]

       This trade imbalance reflects a lack of access for foreign 
     autos and auto parts to the Japanese market for the past 35 
     years. In Japan today, foreign automobiles have a 4.6 percent 
     share of the market. In the United States, foreign autos 
     occupy a 32.5 percent share of the market. Throughout the 
     rest of the G-7, foreign cars range from 33 to 55 percent of 
     the market. In Japan, foreign auto parts account for only 2.6 
     percent of the market. In the United States, foreign parts 
     make up 35 percent of the market. Throughout the rest of the 
     G-7, the market share of foreign parts ranges from 16 to 60 
     percent.
       While we are first and foremost concerned about the impact 
     of Japan's automotive barriers and restrictive practices on 
     the interests of U.S. companies and workers, this is a 
     general international economic problem, adversely affecting 
     the interests of many trading nations. Japan's huge trade 
     imbalances in the automotive sector contribute substantially 
     to unstable international economic conditions which undermine 
     global economic recovery and growth, and the health of the 
     international trading system.
       The Government of Japan in the past implemented measures to 
     protect the domestic automobile industry, such as 
     discriminatory allocation of capital, foreign investment 
     restrictions, high tariffs, and a range of other measures. As 
     these barriers were removed and as tariffs were reduced 
     through multilateral tariff negotiations, the Government of 
     Japan developed other measures to protect domestic producers 
     from foreign competition. Such measures included, among 
     others, excessively burdensome inspection requirements for 
     imported vehicles, discriminatory access to vehicle 
     registration data, and maintaining an unreasonably complex 
     system of motor vehicle inspection and repair regulations.
       At the same time, the Japanese automotive sector as it has 
     developed has been pervasively characterized by close 
     interlocking relationships between auto manufacturers, 
     suppliers, distributors, dealers, and those who repair and 
     inspect cars. The Government of Japan has guided or tolerated 
     the creation by industry of informal market restrictive 
     measures and market structures, which have placed a critical 
     role in excluding foreign competitive suppliers of autos and 
     auto parts from the market.
       Foreign motor vehicle manufacturers now face a situation in 
     which limited access to auto dealerships--which until 
     recently were prohibited from carrying products from 
     competing suppliers and which still fear that carrying a 
     competitor's products will damage their relationship with 
     their current supplier--
      seriously impedes market access. In addition, foreign auto 
     parts suppliers find it virtually impossible to sell high 
     value-added parts to Japanese manufacturers.
       In the auto parts aftermarket, excessive and complex 
     regulations channel most repairs to garages tied closely to 
     Japanese parts manufacturers, which results in market 
     discrimination. While we are very conscious of the need for 
     any country to establish regulations pertaining to safety and 
     the environment, the Japanese regulations in the aftermarket 
     go far beyond what is necessary to protect those interests, 
     and are applied with the effect of creating unnecessary 
     obstacles to international trade. Japan has chosen to create 
     and maintain a regulatory system which effectively locks out 
     foreign competitors and imposes extraordinary additional 
     costs on Japanese consumers. According to our estimates, 
     Japan's 34 million households would save $24 billion annually 
     from deregulation of the auto parts aftermarket.
       As you are aware, the United States and Japan have been 
     discussing measures to substantially increase access and 
     sales of foreign competitive autos and auto parts in the 
     Japanese market. After long negotiations, the United States 
     and Japan have been unable to reach agreement regarding any 
     of the three principal areas--access and sales of motor 
     vehicles, original equipment parts, and replacement parts--
     that are crucial to a meaningful solution.
       I have directed a task force of lawyers and economists to 
     ready our case for submission to the WTO. I must underline 
     the seriousness of our intentions in this matter.
           Yours sincerely,
     Michael Kantor.
                                                                    ____

                      Japan: One-Way Trade Tactics

       U.S. Trade Ambassador Mickey Kantor is currently toe to toe 
     with the Japanese in the most contentious trade negotiations 
     to date. The aim is to open Japan to American vehicles and 
     parts. Agreements have been reached in theory to open Japan 
     to foreign insurance, medical equipment, telecommunications 
     equipment and glass. But the toughest and most important 
     sector--automotive--remains unresolved.
       The total American trade deficit with Japan last year was 
     $66 billion, and 60 percent of that--more than $36 billion--
     was in auto trade alone. We can't fix the trade gap with 
     Japan unless we fix the auto sector. And make no mistake, the 
     Japanese domestic industry is virtually closed to foreigners 
     and will remain closed unless we, as a nation, force them to 
     open it. Here are just a few facts:
       American companies have sold 400,000 vehicles in Japan in 
     the past 25 years. Japanese companies have sold 40 million in 
     this country. Japanese consumers bought 6.5 million vehicles 
     last year. Only 301,391 were imported--less than 5 percent of 
     the market. We project that Big Three sales in Japan will 
     increase this year by about 12,000 vehicles. Japan ships that 
     many to the United States every three days. The Japanese auto 
     parts market is worth $107 billion per year. America's world-
     class suppliers have less than 2 percent of that business, 
     even with the weakest dollar since World War II.
       Japan does not play by the same rule book as Western 
     nations. It is a closed, mercantilistic society with 
     government and business working hand in hand to prevent any 
     serious foreign competition in the home market, while waging 
     an economic war of conquest in overseas markets. With the 
     second-largest economy in the world, Japan is simply too big 
     and too important for such behavior to be tolerated. It also 
     sends the wrong message to newly developing economies that 
     one-way trade is an acceptable model to follow. It is time 
     for the Japanese traders to grow up and act like responsible 
     economic adults in the world trading system. That system is 
     based on reciprocity. You can sell to us if we can sell to 
     you.
       Totally free trade has always been a textbook theory. It 
     has never existed in reality. However, when a major trading 
     nation consistently and egregiously violates the rules of 
     reciprocity to beggar its neighbors, it can ultimately lead 
     to the collapse of world trade. Other nations eventually find 
     the costs of such violations to their own producers to be too 
     great, and a major trade war develops.
       The Japanese or their apologists continually protest that 
     their auto markets are not closed to imports. It's just that 
     we don't try hard enough, or that our vehicles are too big or 
     that the steering wheel is on the wrong side.
       It all boils down to an argument that Japanese roads and 
     drivers are unique and unsuited to ``foreign'' vehicles and 
     parts--just as a Japanese baseball was unique and unsuitable 
     for ``foreign'' bats, and Japanese snow was unique and 
     unsuitable for ``foreign'' skis and just as (for 23 years) 
     Japanese stomachs were unique and unsuitable for ``foreign'' 
     apples. The list is endless, and the arguments are all bunk.
       All of the U.S. companies have right-hand-drive vehicles. 
     Chrysler was the first of the Big Three to export a right-
     hand-drive vehicle from the United States to Japan with the 
     Jeep Cherokee. The sport utility segment is an increasingly 
     popular segment of the Japanese market, just as it is in the 
     United States and Europe. Last year, 197,877 sport utility 
     vehicles were sold in Japan. Chrysler sold 13,208 vehicles in 
     Japan; 12,701 of them were Jeep vehicles. That is an 
     improvement over 1993, but it is still not a level we would 
     expect in an open market. Japanese officials contend that our 
     sales are going through the ceiling. If so, it's a very low 
     ceiling. Those 12,701 Jeep vehicles represented only 6.4 
     percent of the sport utility market in Japan.
       In the United Kingdom, a market we have only recently 
     entered, we captured a 30 percent share of the gasoline-
     powered sport utility market. Both markets are right-hand 
     drive. Both have domestic sport utility manufacturers. If we 
     had achieved a 30 percent share in Japan, our sales would 
     have totaled 59,363 vehicles in 1994.
       Chrysler projects sales in Japan of 20,000 vehicles in 
     1995. This increase can be attributed to a number of things--
     favorable exchange rates, competitive pricing on our vehicles 
     (we just lowered our Jeep prices by 10 percent), the 
     popularity of the sport utility segment and, certainly, the 
     current negotiations and pressure by the Clinton 
     administration. History shows that Japan doesn't liberalize 
     entry unless there is a reason to do so.
       Last year, Chrysler opened a new office in Tokyo and 
     expanded our staff there. In early 1996 we will introduce a 
     right-hand-drive Grand Cherokee in Japan, followed by a 
     right-hand-drive Neon and, in early 1997, a right-hand-drive 
     version of our new minivan. We are making these substantial 
     commitments of money, time and engineering talent because we 
     are counting on the continued efforts of the U.S. government 
     to expand entry into the Japanese market and other auto 
     markets around the world.
       Chrysler is committed to breaking into the Japanese market 
     and will continue to expand our presence there with more 
     products and staff support and by testing the Japanese auto 
     manufacturers' latest message: that Japanese dealers are free 
     to sell whatever vehicles they choose. We will be knocking on 
     dealers' doors, trying to establish broader distribution 
     opportunities for our products. We will provide Japanese 
     dealers with more products and profits. And we will offer the 
     Japanese consumer a wider choice of vehicles.
       A trade agreement that provides real access to Japan's 
     vehicle and parts markets is critical, not only to the Big 
     Three and our employees, but to all of the related industries 
     that supply the industry: semiconductors, electronics, steel, 
     aluminum, chemicals, rubber, machine tools and many others. 
     All told, about 1.5 million employees of America's automakers 
     and their suppliers are waiting for Japan to remove its ``do 
     not enter'' sign.
       Regardless of successes in other sectors, the U.S.-Japan 
     framework negotiations will fail both the American producers 
     and the Japanese consumers if the automobile sector is not 
     opened to U.S. vehicles and parts.

  Mr. BYRD. Mr. President, I yield the floor.
  I suggest the absence of a quorum.
  [[Page S6435]] The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SMITH. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________