. . . But a threat to Europe, too

Marianne Githens

July 16, 1991|By Marianne Githens

THE THREAT of a Japanese-dominated automobile market is not just an American phenomenon. Allegations of unfair trade practices -- for example, when the Japanese sell minivans at below production cost to grab market share -- are not restricted to the United States. Neither is the specter of domestic auto workers being laid off because of Japanese imports.

Last month, European nations debated the future of the car industry. The starting point was a report drafted by Carole Tongue, a member of the European Parliament whose district includes a British Ford automobile factory.

The report recommends that the European Community take immediate steps to protect itself by setting up an industrial strategy for automobile trade. It calls on the European Community to negotiate with Japan for a transitional period of four to seven years, during which the Japanese would voluntarily restrain their share of the EC car market to no more than 15 to 17 percent and for Japan to drop all barriers to selling European cars there.

With the establishment of a single economic market in the European Community in 1992, it will be extremely difficult for the giant, powerhouse auto industries of Britain, France, Germany and Italy to protect themselves from Japanese cars flooding their markets. Starting then, all trade restrictions and tariffs among the 12 member nations will be abolished. Although the creation of a single market will create the wealthiest trading bloc ever, the number of Japanese cars either imported or made in EC countries is expected to increase.

European car makers are particularly worried. Just as in the U.S., Japanese cars and vans are being dumped in the European Community nations which have not imposed restrictive quotas. In Britain for example, the Land Rover and the Range Rover are facing tough competition from the Mitsubishi Shogun.

Targeting special European markets and then designing cars for them is now a favorite strategy of Japanese auto makers. Nissan recently launched a massive offensive to increase its share of the European market with a larger car designed for the family. Nissan hopes this car will position it as a major competitor and grab sales from British, French and Italian car makers.

The Japanese also have sought to invade the luxury car market. As the head of Mercedes Benz recently commented, "Our enemy is not BMW in Munich, but on the other side of the world."

The opening of Japanese car manufacturing companies in European Community countries has made the current situation even more complicated and volatile. In anticipation of 1992 and any restrictions which the single market may impose on non-EC countries, the Japanese stepped up their efforts to open production plants in Europe, particularly in Great Britain. The Japanese goal of gaining an edge in the European market after 1992 was often aided by the desire of individual European nations to attract foreign investment and revitalize their industrial bases. For example, the British government encouraged firms like Toyota and Honda to set up operations in Britain. Now the big question facing the European Community is when a Toyota or a Honda is no longer Japanese.

Despite the French auto makers' objections that too many concessions have been made, the European Community undoubtedly will reject any demand for complete protection for the European automobile industry and instead endorse the report's call for a transitional period and the negotiation of voluntary Japanese restraint.

Any negotiation with Japan which entails easing the barriers to importing European cars is of great importance to the U.S. Given the Japanese attitudes toward imports in general, it is very likely that any agreement with the European Community means less opportunity for American car exports there. Japanese perceptions of the future benefit of the European Community to its own economy may well result in more conciliatory behavior toward Europe and sharpen existing tensions between the U.S. and Japan over trade.

Marianne Githens is chair of the Department of Politics at Goucher Colleges.

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