Why a free-trade deal would be an important milestone for carmakers in Europe and Japan
Uniting the world’s largest and fourth largest economies in a wide-ranging and comprehensive economic integrated agreement (EIA) would spur growth both in Europe, which is still feeling the effects of the financial crisis, and in Japan, where last year’s natural disaster dealt another blow to the Japanese economy. The European Commission has said that recent joint political and economic scoping exercises, which gauged and set the level of ambition on both sides for an EIA, were the most far-reaching ever conducted. Japanese automakers have already invested heavily in Europe, setting up state-of-the-art facilities – 13 production plants and 12 research and development (R&D) centres – across the EU. Directly or indirectly, 164,000 people are employed in those and related activities, and last year our members purchased parts from the EU worth €11.75 billion. Automobile manufacturing is, of course, only one part of the picture: 3,300 Japanese companies employ over 440,000 people across the EU. This reflects a wider trend. Since 2004, imports of Japanese cars in the EU have fallen by 50% and local production has steadily increased, to reach 71% today, even though the value of the Japanese yen against the euro fell by 60% between 2000 through 2007. Indeed, a Japanese car purchased in Europe may incorporate design by Irish engineers and R&D from Germany, before being assembled by British workers using components from across the EU. A Japanese-branded model does not roll off a ship from Japan, but, rather, is rolled out of a European car plant, made by European workers with a majority of European components. These brands are thoroughly European in the most important sense: economically. Concern that an EIA would encourage manufacturers to transfer production back to Japan is misplaced. Once a production base is established overseas, the production process, including design and procurement, is transferred too. It is therefore not a matter of simple recalibration, by shifting production back to Japan when the currency rate is unfavourable or, as would be the case with an EU-Japan EIA, because tariffs no longer apply. An EIA would instead consolidate and deepen the contribution of Japanese carmakers to Europe. We believe that we are important stakeholders in the region and are committed to our role there. Meanwhile, European-brand cars enjoy a significantly larger share of Japan’s market than Japanese brands have of the European market. The market share of imported EU cars in Japan was 5.5% in 2011, while the figure for imported Japanese cars in Europe stood at 3.9%. From January through September 2012, European brands increased their sales in Japan by 18.1% year on year. We recognise that non-tariff measures are one of the key areas of interest for the EU, and that progress on these issues is essential for the success of EU-Japan EIA negotiations. Non-tariff measures are being addressed in Japan, and the automotive sector is participating actively in that process. It should be emphasised that there are no cases whatsoever in which Japanese industry, including the auto sector, is asking the government for regulations and non-tariff measures for the sake of protecting the home market. There are cases, however, where Japanese regulations targeting environmental protection and safety are viewed as non-tariff measures by the European industry. In many of those cases, the Japanese auto industry also wants deregulation. It has, in fact, on numerous occasions asked Japanese government for deregulation, in order to improve the business environment. The progress we make in this regard will therefore be positive for both European and Japanese carmakers. Partnerships between European and Japanese automakers help strengthen our industry’s overall competitiveness by, among other things, speeding up and enhancing innovation. We have high expectations that, with an EIA, the European and Japanese automobile industries would together play a leading role in advancing the industry worldwide and in achieving sustainable mobility. Kazuhito Asakawa is director-general of the Europe office of the Japanese Automobile Manufacturers Association. Source: European Voice