EU car manufacturers worry about an FTA with Japan

The European Automobile Manufacturers’ Association (ACEA), had expressed reserves over the EU Council and Commission initiative to start negotiations with Japan in order the two sides to conclude a far reaching Free Trade Agreement (FTA). ACEA was founded in 1991 and represents authentically the interests of the fifteen major European car, truck and bus manufacturers at EU level. After the European Union officially opened the negotiations with Tokyo this week over an FTA, the ACEA came back in force and issued a Press release, with which it doubts the willingness and the ability of Japan, while stating prepared to create a level play field for European car sales in its internal market. ACEA’s fears must be based on the idea that Japan would never abolish the many and serious non-tariff impediments to European car sales in its internal market. This is so, simply because its own automotive industry is immensely powerful and plays a crucial role in terms of employment and incomes. On top of that the entire internal Japanese economy and its sectorial and local markets are so rigidly structured according to traditions, special rules and unwritten practices, that in reality it is impossible for foreigners to penetrate without the ‘permission’ in not the active and profitable participation of locals ‘lords’. In such an environment the prospects of European car sales in the internal Japanese market, must be considered a priori as a lost case. For the same reasons plus a number of other disincentives, it is out of question for EU manufactures to produce cars locally in significant quantities. As for the EU market, the automotive sector of the European Union is quite open not only to sales of Japanese cars but also to huge investments by almost all the major producers of this country. Given that, Tokyo cannot hope for anything better than already exists, in terms of EU market access. In such a case, Japan has no incentives at all to facilitate the penetration of its own internal market. Exchange it with what? One proof that the EU market is quite open to foreign manufactures is the fact, that out of the fifteen members of ACEA, four are non-European firms producing locally. Given all that ACEA issued yesterday a Press release saying that:” European automobile manufacturers respect the decision taken last year by the Council of the European Union to give the Commission a mandate to open trade negotiations with Japan…However we still have some reservations about an FTA with Japan. We question its potential to create sufficient opportunities for European exporters to counterbalance the greater access to the EU which Japanese manufacturers will gain as a result of tariff reductions.” The truth is that Japan currently retains unique national requirements, which add to the cost of imports, without bringing benefits to the consumer. ACEA stresses also the need for Japan to accelerate the harmonisation of its vehicle standards with UN Regulations. The announcement concludes with a statement by Ivan Hodac, ACEA’s Secretary General, who stressed that, “European cars are amongst the safest and cleanest in the world, so there is no reason why a car that is suitable for EU consumers should not be suitable for Japanese consumers.” In any case European car manufactures seem reassured by the fact that the EU Regulations determining the frame of the negotiations for this FTA contain an important clause, demanding for “an effective elimination of non-tariff barriers in the car sector”. The Commission is authorised by the Council, after twelve months to assess whether Japan’s progress in this regard is fully satisfactory. If this is not the case the Commission will call off the entire negotiation for this EU-Japan FTA.