In the new NAFTA, Japan is particularly wary of the “quantitative restrictions” that set a ceiling on auto exports to the United States. There is a chance that the restrictions are in violation of World Trade Organization (WTO) rules, and the Japanese government is taking the position that they are “entirely unacceptable.” It looks, however, like this will be a major focus of the Japan-U.S. negotiations that will start next January.
If the United States imposes high tariffs on imported cars, Canada and Mexico will each be able to send up to 2.6 million vehicles annually to the U.S. market without incurring tariffs. Duty-free auto parts exports will be limited to $32.4 billion for Canada and $108 billion for Mexico per annum. Because these quotas are above current export figures, the Mexican government can claim that “we left room for increasing exports.”
Unlike Canada and Mexico, however, Japan is not home to U.S. automakers’ factories. Some Japanese automakers are concerned that “the U.S. may demand strict quantitative restrictions that are below actual exports in the case of Japan,” in the words of a person connected to the Japanese auto industry. Even if figures above actual exports are set, the Japanese government is becoming more wary that “once export quotas are introduced, we will not know when the U.S. might demand they be lowered for the convenience of the moment.”