Ford Bolts Japan as Trade Pact Looms
Company can't do business there, thinks Obama's TPP fails to help
After decades of trying to crack the Japanese market, Ford Motor Co. is abandoning the country, raising doubts about a looming deal that would rewrite trade rules for 12 countries.
The automaker said it could not sustain profitability in Japan or Indonesia, from which it is also withdrawing.
“After pursuing every possible option, it has become clear that there is no path to sustained profitability, nor will there be an acceptable return over time from our investments in Japan or Indonesia,” company spokeswoman Karen Hampton said in a statement. “Therefore, we will cease all operations in these markets before the end of 2016 and concentrate our resources elsewhere.”
Ford has been trying to sell cars in Japan since 1974 and had 52 dealerships there. Yet, it sold only about 5,000 cars in Japan last year, according Reuters. That was about 1.5 percent of the imported car market. Independent analysts said Ford and other U.S. automakers are hampered by a Japanese policies that stifle competition.
Tearing down such barriers is one of the aims of the Trans-Pacific Partnership, a massive trade deal negotiated by the Obama administration awaiting congressional approval. Ford’s decision to pull out of Japan evidently indicates the company does not believe those efforts would succeed.
“Anyone who believes that TPP is magically going to help open Japan’s market is self-deluded,” said Kevin Kearns, president of the United States Business and Industry Council. “Ford’s right on the money. They’ve been trying to get into Japan for years and decades.”
Kearns said experience should convince U.S. policymakers that Japan has no interest in free and fair competition. He said every time Japan responds to pressure to liberalize one aspect of its car market, it takes countermeasures elsewhere to blunt the impact.
Sen. Sherrod Brown, D-Ohio, a member of the Senate Finance Committee, said Ford’s move proves the TPP is a “sell out” of American workers.
“TPP lacks enforceable currency manipulation provisions and the agreement’s auto rules were written by Japan for Japanese automakers at the expense of American auto jobs,” Brown said in a statement. “The ink isn’t even dry and we are already seeing proof that this massive agreement will sell out American workers and roll back the remarkable recovery of our auto industry.”
While Chrysler and General Motors have remained officially neutral on the Trans-Pacific Partnership, Ford has taken a hard line against it. The company was upset that the deal does not include binding rules related to the ability of member countries to devalue their currencies, which make U.S. exports more expensive and imports cheaper.
Opponents also have criticized the deal for allowing cars to include more parts from China, which is not a party to the agreement but which is an important part of the supply chain for Japanese automakers. Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said Ford’s decision likely will give members of Congress pause as they consider whether to approve the trade pact this year.
“I guess the timing of withdrawing (from Japan) is in part key to the timing of the TPP,” he said.
Kearns said lawmakers should have no more confidence that Japan will open its market to true competition as a result of the TPP than any other trade deal.
“What makes anyone think there’s competition?” he said. “I don’t care if you had a flying car. You won’t gain market share in Japan.”
Hufbauer argued the TPP would, in a “moderate way,” over time, increase access to the Japanese market. But he warned it is no magic bullet.
“My view is the agreement is a good step forward on that,” he said. “But I’m not going to sugarcoat it.”
The Peterson Institute supports the trade deal, and Tuesday released a study projecting income and jobs gains resulting from the pact. Yet it also concluded that more than 800,000 Americans over a 15-year period would be displaced from their jobs.
Hufbauer said the Japanese government makes it difficult for foreign companies to sell cars. It does so not through visible measures like tariffs, but by erecting subtle regulatory hurdles. These measures include regulations governing safety glass requirements, crash-resistant bumpers and emissions standards. The rules for those and many other aspects of automobiles differ from those in the United States.
Hufbauer said the inspection process for incoming autos also can be lengthy and arduous. Japan and the United States have been slow to “normalize” those regulations. He predicted U.S. auto manufacturers will run into a new set of hurdles as more cars are electric or gas-electric hybrids.
“You can imagine a whole new set of regulations,” he said.