By Megan R. Wilson - 10/20/13 11:15 AM EDT
American and Japanese automakers are looking for allies on Capitol Hill in the fight over the Trans-Pacific Partnership (TPP) trade deal.
The “Big Three” American automakers and their Japanese counterparts are seeking to influence the outcome of the talks to their own advantage. The fight increasingly centers on charges that Japan — a late entry into the TPP talks — manipulates its currency.
Japanese companies, and their U.S. subsidiaries, deny the accusations. They say that the Detroit Three misunderstand the Japanese marketplace and are losing sales because they have all but deserted it.
They also point to testimony from Federal Reserve Chairman Ben Bernanke, who did not mince words when asked about currency manipulation in July.
Bernanke said Japan is “not manipulating their exchange rate… What they are doing is engaging in strong domestic monetary policy measures, trying to break the deflation they've had for about 15 years, and a side effect of that is that the yen has weakened.”
International automakers warn the “currency discipline” provisions that U.S. companies want in the trade deal could undermine similar policies — such as quantitative easing — that are used by the Federal Reserve.
“The [Detroit Three] auto industry didn't want Japan in the agreement, they were clear about that. Now [that Japan has been included] they're trying to find arguments to muddy the water,” says a lobbyist familiar with the trade talks who has worked with Japan.
“They are throwing things against the wall to see what sticks, and the currency argument is like spaghetti.”
A lobbyist at Ford said the trade fight is not about pitting the United States against Japan.
Addressing currency manipulation in a trade agreement for the first time would be an achievement for President Obama and would send a message to the world, said Curt Magleby, Ford’s vice president of government affairs. “We want to bring countries in and move them up to be better trade partners."
“But if you’re going to bring Japan, the third largest — but most closed — auto market in the world, you have to be very careful on how these high standards are made,” he said.
For K Street, the best shot at influencing the closed-door TPP negotiations comes on Capitol Hill.
Auto lobbyists are lining up policy supporters for when the draft reaches the congressional amendment stage. Each side is leaning on help from commentators, think tanks, associations and experts to reinforce its arguments.
Domestic automakers have already seen a strong show of support from lawmakers. Bipartisan majorities in both the House and Senate singed letters over the summer that urged the Obama administration to explore currency enforcement in the TPP negotiations.
The outcome of the dueling influence efforts won’t be evident until the TPP negotiations are finished, which might not happen until 2014. But the talks are in the home stretch, spurring companies to get more aggressive.
After Japan was accepted into TPP negotiations, the Japanese Automotive Manufactures Association (JAMA) increased its lobbying expenditures exponentially. The group spent $60,000 on advocacy in the last three months — equal to the amount the group spent through the first half of 2013, according to new data.
“We’re trying to explain the true nature of Japanese auto market,” Ron Bookbinder, the general director of JAMA's Washington office, told The Hill.
Bookbinder said Japan lacks a domestic fuel source, which means almost 90 percent of the cars sold in the country must have high environmental and emissions standards and meet a strict size requirement.
The Detroit Three only offers nine models to the Japanese market and has decreased their dealerships in the country by 74 percent since 1996 — from 620 to 159, Bookbinder said.
“It's hard to sell cars without dealerships,” he said.
The American Automotive Policy Council, which represents the Detroit Three and is on pace to trump last year's lobbying expenditures, scoffs at that argument.
"I don't buy that," said former Gov. Matt Blunt, the organization's president. "We export autos all over the world."
The companies say the fact that U.S. companies represent only 0.3 percent of sales in Japan is “unassailable” proof that it is a closed market.
"Because the auto industry [has] a very thin profit/loss margin, the decisions made by the federal government can have a real impact," Blunt said.
The Association of Global Automakers, which is an opponent of including currency provisions in TPP, notes that Japan has a robust manufacturing presence in the United States.
“We want to demonstrate that [Japanese auto companies are] investing billions of dollars and hiring thousands of Americans," said Paul Ryan, its director of government affairs. The group represents the U.S. subsidiaries of foreign-owned automakers.
Seventy percent of the autos sold by Japanese automakers in the United States are produced in North America, including plants in Canada in Mexico.
Magleby of Ford says without strong currency enforcement in the trade deal, U.S. jobs and export power could be sacrificed.
“The administration has come so far in helping the auto industry to help us be globally competitive. We’ve come so far, with all the [restructuring] actions we’ve taken, we don’t want to undermine it by locking in unfair trade advantages,” he said. “If you’re against currency discipline, you must be for currency intervention — and that’s something that’s hard to stand on."
A Japan embassy official unauthorized to speak about the ongoing talks emphasized a need to keep the peace and said that country is willing to put everything on the table.
“Let’s not lose sight of the common good while we address difficulties,” he said.