Automakers worried by free-trade agreement between Japan, European Union

Article by Christian Andrei, on April 10, 2013

Europe’s industry association ACEA said that Japanese automakers will benefit from a proposed free-trade agreement between the European Union and Japan but that this may come at the expense of Europe’s automakers. ACEA General Secretary Ivan Hodac said that the company is “supportive” of trade agreements that are equal and offer the opportunity to export.

He also said that under the current conditions, any deal was expected to favor Japanese automakers. ACEA is suggesting revisions to existing rules, one of which is a costly Japanese rule for EU-registered vehicles to be altered before they can be sold in Japan. The country doesn’t use the safety and environmental standards of the EU and instead, it follows its own. This makes it expensive for foreign automakers to get approval for their products to be sold in the market.

In addition, the organization wants European automakers to be subjected to the same tax breaks as their Japanese rivals in terms of smaller cars. For now, the ''Kei'' cars, which account for one third of Japanese sales, qualify for tax benefits for engines that don’t exceed 0.66 liters.

But majority of smaller European models don’t get tax exemptions because they don’t meet these criteria. The car market in Japan is dominated by local manufacturers. If all foreign automakers are lumped together, they won’t surpass a market share higher than 5.8% in Japan.

Bernhard Mattes, Ford's Germany chief, said that he believes that a free trade deal with Japan will lead to a “one-sided advantage” for Japanese automakers. This means that the Japanese auto industry will then export their overcapacity to Europe. He urges government officials to halt talks with Japan when it doesn't meet its pledges to dismantle non-tariff trade barriers.

Matthias Wissmann, the head of the German auto industry association (VDA), said that the European Commission has to "negotiate insistently" to guarantee that automakers and dealers are able to ably access the Japanese market. Japan is the No. 3 biggest economy in the world. It’s also the No. 7 biggest export market in the EU, accounting for the purchase of 69 billion euros ($89.68 billion) worth of European goods in 2011. Japan considers the EU to be its No. 3 largest market with shipments of 6.5 trillion yen ($68.79 billion) in 2012.

Topics: japan, europe

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