On October 8th, according to the Trans-Pacific Economic Cooperation Agreement (TPP), the US tariffs on Japanese-made auto parts will be abolished in the 15th year of the entry into force of the agreement. The tariff on the entire vehicle will also be revoked in the 25th year of the agreement's entry into force. TPP will abolish the tariffs on 99.9% of industrial products, but the United States has launched a fierce attack and defense until the final stage of negotiations. Japanese companies also plan to use Canada and Vietnam to eliminate tariffs to expand exports in the region.
In 2013, when Japan decided to participate in the TPP negotiations, Japan and the United States reached a consensus on the longest cancellation period for auto tariffs in all TPP items. This consensus is regarded as "the ticket for Japan to participate in the negotiations" (Japan Ministry of Economy, Trade and Industry). Unfavorable conditions were identified in the vehicle sector prior to the start of negotiations. For Japan, the content of the TPP agreement over the Free Trade Agreement (FTA) concluded between Korea and the United States, which competes in the field of auto parts and other industrial products, has become an important issue.
But the negotiations are deadlocked. The Congress supporting the US Democratic Party’s auto industry opposed the United States’ concessions, and the Japan-US auto agreement reached a consensus at the recent Atlanta meeting.
The content of the Japan-US consensus is that tariffs on 87.4% of the nearly 400 automotive-related parts, such as engines, brakes and transmissions, will be immediately withdrawn. Above the US and South Korea FTA's immediate cancellation tariff rate (83%), Japan reached a minimum target. The tariff for the car body that determines the maximum cancellation period in advance is actually shortened by five years from the longest cancellation period of 30 years to 25 years.
However, some of the items were strongly resisted by the United States, and the tariff cancellation period for turbochargers and other items was extended to 15 years. The script to cancel the tariff is slower than the 99% of the products in the home appliance, industrial machinery and chemical fields.
In addition, Japan will actively promote the outcome of negotiations with countries outside the United States. The 6.1% automobile tariff imposed by Canada will be cancelled within 5 years, and Vietnam’s tariff of nearly 70% on vehicles with a displacement of more than 3000cc will be cancelled within 10 years. Australia will immediately cancel the 5% new car tariff.
Japan’s exports to TPP countries accounted for 48% of total exports and auto parts accounted for 40%. In the case of a long period of tariff cancellation, the profits of Japanese companies in the medium and long term will increase. TPP is targeted at a wide range of markets from North America (USA, Canada) to Asia (Vietnam, Malaysia, etc.) and is expected to increase its importance as a production and sales market in the region.
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