One of President Barack Obama’s favorite sales pitches for his proposed trade deal with Pacific Rim nations – known as the Trans-Pacific Partnership or TPP – is that it will be a boon to the U.S. auto industry. If the TPP is passed, Obama argues, more Ford Mustangs and Chevy pick-ups will be cruising the streets of Japan.
But critics say if you check under the hood, the claim doesn’t add up.
“If you drive around Washington, there are a whole bunch of Japanese cars. You go to Tokyo and count how many Chryslers and GM and Ford cars there are. So the current situation is not working for us,” Obama said at a news conference on April 17th. “And I don’t know why it is that folks would be opposed to us opening up the Japanese market more for U.S. autos.”
Standing next to Japanese Prime Minister Shinzo Abe 11 days later, Obama returned to the same pitch.
“TPP will help level the playing field. It will be good for the workers of both our countries,” he said.
Experts in the auto industry have long said trade barriers are hardly the sole impediment to U.S. car sales in Japan where consumers would rather buy smaller, more fuel-efficient vehicles.
The Obama administration is careful not to accuse Japan of imposing tariffs on U.S. cars shipped to Japan. That’s because there aren’t any. In fact, the U.S. imposes tariffs on Japanese autos. Reducing those U.S. tariffs is one of the enticements offered in the TPP as a way of attracting Japan’s support.
The President’s trade representatives insist the TPP will address other obstacles, so-called “non-tariff barriers,” such as arbitrary standards imposed on U.S. cars that keep them out of the Japanese market.
Still, all three car companies cited by the President – GM, Ford, and Chrysler – have deep misgivings about the trade deal. The trade group representing the big three U.S. automakers argues the TPP fails to address Japan’s potential to use currency manipulation to drive up the costs of American cars.
“Several countries in the TPP negotiations have a history of using currency manipulation to gain an unfair trade advantage over their trade partners, which would undermine the expected benefits of a TPP agreement to the United States,” the American Automotive Policy Council says on its website.
Prominent TPP critics in the President’s own party would also like to see those barriers come down. But they are not buying the White House sales pitch.
“You trust but verify,” said Sen. Sherrod Brown, D-Ohio, about Obama’s TPP claims. Brown said past trade deals promising jobs to his state have failed to deliver time and again.
“I’ve seen the same promises – more jobs, higher wages,” Brown said. “The jobs don’t materialize … the promises are remade.”
Brown and Sen. Debbie Stabenow, D-Michigan, warned in a recent letter to U.S. Trade Representative Mike Froman the TPP could actually damage the U.S. auto industry, which has made huge gains since the financial crisis.
“If not negotiated properly, TPP will have substantial consequences for the American auto and auto parts industry,” the senators wrote.
Senior administration officials, who spoke about the TPP on condition of anonymity, said U.S. negotiators are actually working with their Japanese counterparts in separate talks aimed at resolving disagreements over auto exports. An agreement based on those negotiations, officials said, would later be folded into the TPP.
One official said while the TPP will “level the playing field,” as the President put it, U.S. automakers must then capitalize on the deal and sell cars Japanese consumers want to buy.
“We’re putting a premium on these non-tariff measures,” said one senior trade official. “We’re getting rid of them, addressing them. Then it’s up to the companies to take advantage of the agreement.”
The White House push on trade has stunned Democrats who see a president pursuing a traditionally Republican priority at the expense of his own party’s goals.
At an event last month with his post-campaign group “Organizing for Action,” Obama accused liberal TPP skeptics of misleading the public, comparing some of their criticisms to Sarah Palin’s use of the term “death panels” in her opposition to the Affordable Care Act.
“Look at the facts. Don’t just throw a bunch of stuff out there and see if it sticks,” Obama told his supporters.
Brown, who has spoken to the President by phone about the trade deal, complained Obama hasn’t lobbied this much since passage of the Affordable Care Act.
“I haven’t seen the President fight as hard as this on the minimum wage,” Brown said.
As for Detroit’s inability to sell cars in Japan, it may have more to do with taste than trade. One Japanese dealer who struggles to sell GM cars recently told the car trade publication, Automotive News, “there are no non-tariff barriers.”
Yanase CEO Takeyoshi Ide blamed what he described as GM’s refusal to manufacture smaller, more fuel-efficient, right-handed cars driven by Japanese motorists. “Lack of effort,” Ide told Automotive News.
An Obama administration official said the TPP would lower U.S. tariffs on Japanese autos gradually over time as Japan removes its barriers. The official added those Japanese obstacles could be toppled fairly quickly. But the goal of seeing Mustangs and pick-ups on the streets of Tokyo, ultimately, is up to Detroit, the official added.
But there is reason to believe the TPP will accomplish the President’s lofty goals for the auto sector, the administration maintains. Senior trade officials point to an uptick in U.S. auto sales in South Korea in the years following the U.S. Korea Free Trade Agreement as evidence such deals can pay dividends.