Is Japan’s Auto Market Protectionist, Or Are U.S. Automakers Playing Politics?

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Stephen Biegun, Ford Motor Company’s V.P. of international governmental affairs (and, interestingly enough, former executive secretary of the National Security Counsel during the G.W. Bush administration), has made the national news by accusing the Japanese government of protectionism.

Is Japan's Cash For Clunkers program protectionist?

Is Japan's Cash For Clunkers program protectionist?

In a nut shell, Biegun and the American Automotive Policy Council (a lobbying group funded by GM, Chrysler, and Ford) are accusing the Japanese government of unfair trade practices because cars built in America don’t qualify for a rebate under Japan’s “Cash for Clunkers” program. Unfortunately, this is an oversimplification.

Japan’s Cash For Clunkers Program Excludes Most Imports

Here are the details of Japan’s Cash For Clunkers program:

Japanese consumers will receive up to 250,000 Yen [about $2800] if they scrap a vehicle that’s 13 years or older while purchasing a new vehicle that meets a specific set of emissions requirements1.

Japan’s Clunkers program emphasizes a very strict set of emissions requirements because the Japanese government is trying to emphasize fuel economy and the environment. Unfortunately, not one U.S. made vehicle is eligible for government cash under Japan’s Clunkers program.

The trouble is, the American C.A.R.S. program was practically a gift for Toyota and Honda. GM, Chrysler, and Ford collected only half of the “Cash For Clunkers” dollars. It would seem then that since the U.S. government was willing to allow Japanese automakers to participate in the C.A.R.S. program, the Japanese government should follow suit.

While the U.S. auto industry hammers away at this seeming unfairness, Japanese government officials point out their policy isn’t intended to discriminate against any particular automaker2. Rather, Japanese government officials state their Cash For Clunkers program is designed to improve the environment and reduce CO2.

This official explanation makes sense considering that one-half of the vehicles available for sale in Japan do not qualify for this program3 (whether they are made in Japan or otherwise). Based on this fact alone, it would seem that Japan’s government isn’t trying to hurt U.S. automakers or “protect” their auto market.

Japan’s Preferential Handing Protocol

The main reason that we should disregard these claims of protectionism is that U.S. automakers are exporting vehicles to Japan without participating in the normal Japanese government inspection process. U.S. automakers, in an effort to save money, are allowed to sell cars in Japan without undergoing the formal government vehicle inspection process, which includes emissions testing3. This is called the “preferential handling protocol,” and U.S. automakers have been taking advantage of it since the 1990’s4.

To be clear, U.S. automakers have the opportunity to test and certify their vehicles, but they chose not to. Instead, they take advantage of a special exemption and bypass a complicated and expensive inspection process, saving millions of dollars in the process.

This point can’t be emphasized enoughU.S. automakers are selling vehicles in Japan without emissions certification. As a result, buying one of these non-emission certified cars doesn’t entitle the buyer to a cash voucher in Japan’s Cash For Clunkers emissions reducing program. This seems obviously fair.

U.S. Automakers Playing A Public Relations Game

U.S. automakers have a history of complaining about unfair business practices in Japan. In years past, the American Automotive Policy Council railed against an unfair exchange rate (in 2003 and in 2007, for example). Now that the U.S. – Yen exchange rate is actually in America’s favor – and hurting Japanese automakers (see how exchange rates effect the auto industry) – lobbyists have shifted their focus to protectionism.

Bottom Line: Considering that corporate lobbyists and a Washington insider are the driving force behind these allegations of protectionism, they deserve a high degree of skepticism. Japan’s Cash for Clunkers program is designed to reduce emissions, and because U.S. automakers bypass Japan’s emissions inspection process, they’re ineligible to participate.


1. “Japan Jumps on the Cash For Clunkers Bandwagon,” Hemmings Auto Blog

2. “Japan’s Auto Barriers Need to End, Ford Exec Says,” Automotive News

3. “US Protests at Japans Clunkers Scheme,” The Financial Times

4. “Interview – Japan Auto Barriers Need To End – Ford Executive,” Forbes

Filed Under: Auto News

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  1. I Feel that only cars made in America should have qualified for the original US Cash for clunkers Program. Irrelivant of brand. If your vehicle was made in the US, it qualifies, if you made your vehicle in MExico, Japan, or Canada, No joy.

    If your country is giving away free money, I think think they get to make the rules. They are trying to stimulate their economy and paying people to buy cars that fail to accomplish that is stupid.

  2. Joshua says:

    Last time I check doesn’t Japan own Japan? It does not sound that way! “This point can

  3. Joshua says:

    Jeremy- great idea then no automobile will able to be sold. There is not a truly made in the U.S.A vehicle out there. No matter what it is there is always some part from a foreign part. Could be anything down to a circuit board. So it comes down to buy american. It shows you buy american brands and the money stays here. It funny how people say BIG 3 are made in Mexico and Canada. The F-series is more american the a Tundra and still would not qualify for your idea. The GM’s where made side by side of Toyota’s so what are you saying about them.

  4. Brian says:

    The difference between the 2 countries’ programs just outlines the difference between socialism and capitalism. God Bless America!

  5. ?????? Less beer, more reading.

    Japan runs Japan. Or did Russia Invade while I was watching CSI? ‘Cause that would suck. Russia can’t build a good car to save themselves. THAT IS THE DIFFERENCE BETWEN SOCIALISM AND CAPITALISM! Japan is not a socialistic nor communistic country.

    I would comment back to your obviously off the hip statement about nothing being able to qualify for CFC but the statement still stands and you failed (epic) to read it correctly. Also, the F-150 had a lower domestic content. The Tundra had a 5% HIGHER domestic content than the F-150, 75 vs 80. Heck, the CAMRY tied the F 150 on content.

    For the record, I thought the Cash for Clunkers program was bad from the begining.

    Also, for the record: All I want for Christmas is a 2010 Corvette ZR-1 🙂

  6. Anonymous says:

    I remember a time not to long ago when people where all about the “MADE IN THE U.S.A.” Bumper stickers for their Toyota, especially the Tundra’s. How many will put a “I SUPPORT SOCIALISM” on their Toyota? That’s something to be proud of. The common response will be that the money stays in the US. BS, besides even if it did does it change anything? Toyota is still owned by Japan. Maybe we need to invite them aboard the USS Missouri, again.

  7. Mickey says:

    Anonymous So what we call GM? Save the Alamo? You people here think for a momnent when your vehicle is partly made in Mexico still money goes to Mexico. No matter how you look at it. It goes South or North to Canada. Make up your minds what you want. Now if the Big 3 can’t make the emissions that japan sets then what that tells you? Apparently their vehicles are stricter on emissions than the Big 3. Anonymous you only need to look no further than your clothes as to who you really support. How about those sweatshops. Every bit of your electronics are from where? Hyprocrits from Joshua to anonymous. Joshua check the thread on here about who has the most american parts in their truck.

  8. Joshua says:

    Mickey- you make no sense. Why would there be two different emissions standards in Japan? If a automobile did not meet the standard why would they (Japan) still allow it to be sold? If Japan does have two different standards, then in all honesty there is no standard. What is the emission standard. So any thoughts on imposing import tax and trade embargo. Just think import taxes on imports (foreign owned auto manufactures, ex: sorry Audi, BMW, Mercedes, and Honda) new and old, and get rid of the highway tax on gasoline and Diesel. Let the import taxes pay for it. So what is the truth Jason? Is there two different standards? Why is Japan complaining about it now? I think it is all BS and shady on the part of Japan. So can anyone in the audience answer any of the questions posed today?

  9. Joshua says:

    Mickey wrote-Anonymous So what we call GM? Save the Alamo? You people here think for a moment when your vehicle is partly made in Mexico still money goes to Mexico. No matter how you look at it. It goes South or North to Canada. When has Mexico or Canada ever slapped the American people in the face like this?? Japan jumped on the band wagon of Cash For Clunkers and sold their vehicles to the american people. Since Japan can NOT think of ANYTHING original they offer the same idea as ash For Clunkers, BUT only Japanese owned vehicle manufactures can participate. So my tax dollars that I paid to the US Government was used for the Cash For Clunker and for Americans to purchase a vehicle of their choice using the Cash for clunkers thus stimulating the Japanese economy because they (american public) have options and the right to chose what they want to buy. So in return the Japanese say we are going to copy your ideas (what’s new) and do the clunker deal but make sure we get all the money back to Japan. So did my tax dollars go for a Toyota bail out, HELL YES. Go ahead and say then Ford, Nissan, and Honda go bail outs also. That’s the Toyota way blame others, take the heat off you.

  10. IDIOTS! JAPAN IS NOT A SOCIALISTIC COUNTRY. Either use your brain or shut up. They are a Constitutional monarchy with parliment. Just as the USA isn’t a Democracy, we are a Democratic Republic, HUGE difference.

  11. JApan bases their ecomony on capitalism, not socialism. out of the US and Japan. The US is the more socialistic country.

  12. Anonymous says:

    Jeremy tell us more. Your a big fan I see, planes leave everyday! Just call them as we see them. If the US would have done it they would have never heard the end of it. So its ok for others to do it to us. Its funny how soon we have forgotten the past.

    Main Entry: so

  13. In order…
    Jeremy – Interesting idea to restrict Cash for Clunkers to vehicles with more than 50% domestic content, but I think it would have been problematic. Consumers wouldn’t have understood why one Corolla (made in California) got the cash and the one sitting right next to it (made in Canada) didn’t get the cash. Still, I know where you’re coming from.
    Joshua – You make some good points in your first two comments (nothing is truly made in the USA, just as you say), but your facts are out of whack. First, Japan created their “preferential handling protocol” in part because of accusations of protectionism. This is a real program created by the Japanese government that is designed to make it easier for foreign car companies. If you check back tomorrow, there’s an article coming up that might explain why U.S. automakers struggle to sell cars in Japan. It’s not about policies – it’s about product.
    Brian – What? Specifics please. By the way…government ownership of major industry (i.e. TARP and Obama’s GM Chrysler bailout) is the definition of socialism. Those who live in glass houses…
    Joshua – In regards to your 3rd and 4th comments, again I say that Japan has a special “preferential handling protocol.” Look it up (references are provided). Also, Japan isn’t complaining about this program – U.S. automakers are. Finally, in regards to tariffs, history has shown that they’re not effective. For the last 60 years, the U.S. government has been the biggest proponent of free trade. I’m not saying that tariffs can’t work, but I think they have a lot of unintended consequences.
    Anonymous – U.S. post office. GM. Chrysler. Amtrak. All “private” companies owned wholly or in part by government. The U.S. national park systems take away private property rights if that property is contained inside a park, effectively making the property useless. The NJ Nets are moving to Brooklyn because the mayor of NY took property using “imminent domain.” In other words, get off your high horse. Socialism isn’t just in Japan.
    For the record, I’m 100% behind a free market system. I’m not defending socialism, I’m merely pointing out that there are dozens of examples of socialist policies in the USA. It’s not black and white as some people say.

  14. ken says:

    This is hilarious! Mickey wants to know who’s truck has the most american parts on it, to easy Ford. Next? Nice way to prove your point!

  15. The Tundra has the most American parts on it. Read the prior comments and link.

  16. Mickey says:

    Jeremy I tried to lead that group to the truth by reading that thread but as usual one wants to play dumb and not read the article and the others follow. I guess monkey see monkey do.

  17. Joshua says:

    Did someone hurt your feelings Jeremy?? Where’s the link, is it the cars dot com american vehicle countdown #2 was the F-150. Where was the Tundra?? Now that you mention it, there are a lot of Toyota’s in the top 10 but jason said “Consumers wouldn

  18. Joshua says:

    Ok I seen the Goverment page and there are a couple questions as for the rating of all domestic trucks. The GMC Serria is actually 3 vehicles (1500, 2500, 3500) and the F-series could be a F-150 thru F-350 or thru F-750 so what constitutes the series and the serria?? Did you see the 4runner with a 0% with a lot of other Toyota’s to include the FJ the Tacoma was 50%. See any resemblance here? Tundra has a frame rust issue along with the Tacoma and FJ. Making one so called american does mean that you know what your doing except their sewing machines saw a awesome Toyota sewing machine in the mall, you should be proud. Now can we get back on subject?

  19. If you are too dumb to click the link I can’t help you.

    The main point is that we now have a entire group of retarded trolls hanging around.

    I made THE point that Japan can do what they want. The only people crying are the 2 domestic brands and the French one. Oh, and the tardo Troll parade here.

    Also, lets think here. If Toyota was REALLY having a wide spread frame rust issue, they are not… model not does a epidemic make, then sourcing the frames with American workers would be the solution so they don’t have to be carted across the ocean. That is what Toyota did. I now go back to an earlier statement. READ MORE, LESS BEER.

  20. Joshua – There is only one emissions standard in Japan, but the Japanese government allows low volume vehicles to skip the complete inspection process (which includes emissions). The U.S. has a similar loophole, but no major auto manufacturers take advantage. Japan’s inspection process is incredibly expensive, which is why most importers (i.e. GM, Ford, Chrysler, and some euro companies) skip it. Again, READ THE LINKS to see this explanation for yourself.
    The “made in America” index is weighted by sales. So, if Ford builds 10% of their F-series in Mexico and 90% in the USA, and if the vehicle has 90% domestic content, then the “made in America” index score would be about 80%. You don’t have to take my word for it – explains the methodology in the article (again, a link is provided).
    I have to agree with Jeremy – you need to read the links before you comment. You’re obviously a smart person, but you’re taking a shortcut and hurting your argument.

  21. Goofballtech/Tony says:

    All i have to say is “Wow”

  22. Joshua says:

    So what everyone is saying is that the Tacoma has not been bought back in some cases by Toyota due to frame rust? So there is no issue with the Tacomas frame, you may want to tell the Tacoma owners that. Apparently that rust is spose to be their. Now what about the FJ crusier? Your right one doesn’t case a epidemic but two going on three does. Now you never answered the question what constitutes a series as in the F-series. You posted it and seem to be the all knowing and the link doesn’t tell explain, that changes everything easy for Toyota they only make one and can’t get it right, right Jeremy there is no frame issue, let wait and see. Don’t be so upset Jeremy, if you don’t like the troll parade stop posting stupid articles. You should be as mad as anyone else they took U.S. Tax payers money, but then again you must not work and be part of the new generation.

  23. Mickey says:

    Okay, Joshua time to call you out. You sit here and completely trash Toyota so please by all means explain this entry you made:

    joshua Said in December 14th, 2009 @8:57 pm I just bought a 09 Rock Warrior and can wait, I figured with people making such big deals out of normal stuff I will never have to do anything. I already know how to get my first oil change, wait on the light. What is the plan for when the brakes wear out? Any idea about the tires. Someone need to start thinking about this now. I don

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