Imports of Japanese automobiles in the United States have been a major contributor to the annual U.S. trade deficit. U.S. automobiles and auto parts have not sold very well in Japan either. Access to the Japanese market by U.S. manufacturers has been a key U.S–Japan trade issue for the past several decades. Members of the U.S. auto industry maintain that the Japanese government has not done enough to reduce tariff barriers and to encourage the import of U.S. goods. They further argue that Japan is manipulating the value of its currency to keep it at artificially low levels, making U.S. imports in Japan unfairly expensive. They also argue that Japan’s keiretsu system of business relationships
has resulted in a highly integrated vertical distribution system. Keiretsu is the Japanese practice of having interlocking directorships, joint ownership, and other linkages between Japanese companies. Keiretsu companies share corporate directors and develop long-term contractual relationships that favor other keiretsu members, thus keeping U.S. firms from many business opportunities. The Japanese government has responded by saying that U.S. cars are simply not in demand by Japanese consumers. In a major “trade war” of the mid-1990s, the United States threatened to place 100 percent import duties on Japanese luxury car imports. A 1995 agreement resulted in Japan agreeing to some voluntary goals for U.S. auto imports. In the end, U.S. public opinion saw the Clinton administration as being “tough on Japan.” On the other hand, the opinion of many commentators and of the world trade community was that the Japanese commitment was an empty promise. The United States was criticized for resorting to threats and intimidation. What have been the key issues affecting trade between the United States and Japan, particularly trade in automobiles and auto parts? How has their relationship been affected by political considerations? What has happened since 1995? Has the U.S. trade deficit in the automobile trade increased or decreased since then? Have there been any further agreements between the United States and Japan over automobiles? What are the current arguments of the U.S. industry against Japan regarding market access for automobiles? Do you think that the United States has been guilty of “Japan-bashing” in the automotive trade? Where would you find information on the current position of the Japanese government on this issue? Where would you find information on the U.S. auto industry’s position?