The Car Dispute that has the Potential to destroy the TPP

American auto manufacturers were able to sell just 20,000 cars in Japan. That’s less than 1 percent of the total vehicles sold in the Asian country. The situation is so bad that for every American car sold in Japan, 130 Japanese cars were sold in America. This imbalance has caused nearly 70 percent U.S. trade deficit with Japan. What is the reason of fewer American car sales in Japan?

>> The Japanese Consumer

American cars are considered expensive fuel-guzzlers by Japanese consumers. Also, U.S. cars are too large for their roads. So, Japanese car buyer avoid buying car made in America.

>> European Automakers

The American automakers have failed to understand the needs of Japanese consumers whereas European automakers have succeeded in creating smaller cars. They have opened several dealerships in Japan and are spending more money on marketing. All this has resulted in higher sales.

>> Tax and other Issues

An American car becomes 20 percent costlier by the time it reaches the Japanese consumer because of the tax code that levies higher rates on car with larger engines. Also, safety and inspection regulation of new cars is undertaken by the government in Japan whereas American cars are self-inspected. According to U.S. automakers, this difference adds cost and wastes time.

The problem of fewer American car sales in Japan is creating an imbalance in the trade relations. It is also the reason for causing delays in wrapping up negotiations of Trans-Pacific Partnership (TPP).

American TPP negotiators want Japanese government to remove higher tax on large vehicles. They are also demanding that American cars should be allowed for sale in the country if they only meet American safety standards because Japanese standards are rigorous.

Many experts are predicting that the success of the agreement depends on whether USA and Japan can decide on trade rules for cars, among other things.