Officials lost for words in car quota talks

Date: 17/10/1996

By Elizabeth Wise

THE European Commission is in the strange position of wanting to hold negotiations when there is nothing to talk about.

It is all the more strange considering that negotiations with Japan over car imports used to be dreaded by one and all.

Commission officials hope that, despite the lack of anything controversial to discuss, their Japanese counterparts will meet them next Monday (21 October) for 'technical' talks.

The discussions have become a bi-annual ritual for Japan and the EU since 1991, when the Union - reacting to the wave of inexpensive Japanese cars flowing on to European markets - set import quotas.

Commission officials prefer to refer to the quotas, which are negotiated with Tokyo, as a “voluntary export restraint” accord under which Japan agrees to monitor its exports to the Union and allow them to increase only gradually.

The quotas for each year are agreed in the spring based on import forecasts, and redressed in autumn on the basis of two seasons of actual imports. The system will expire in the year 2000.

This year, the two sides agreed on their forecasts in April and although Japanese cars have not come into the Union at the predicted levels, thus eliminating the need for a recalculation, the Commission wants to hold talks anyway.

“Not much has changed,” conceded a Commission official, acknowledging that the Japanese were not convinced of the usefulness of the exercise but adding: “If we do not go through with the autumn, meeting, that would give the Japanese a reason not to hold two meetings next year.”

If imports do rise next year, he explained, the Commission will want to recalculate and wants to be sure it can get the Japanese to the table. If they break the custom of bi-annual meetings, the Japanese might not feel obliged to return.

The Brussels-Tokyo auto trade regime has been free of contention this year as Japanese imports have remained under quota.

Because of the yen's high value, Japanese cars are more expensive than they used to be, making them too costly for many European consumers.

In 1994, sales of 815,911 vehicles fell below the 993,000-car quota. The ceiling was not reached in 1995 either.

In the other direction, European-made cars are selling well in Japan. “The Japanese gave us a lot of concessions a year ago and we are not doing badly in the Japanese market,” said an aide to Trade Commissioner Sir Leon Brittan.

Japanese car-makers are even buying more European auto parts. According to the Japan Automobile Manufacturers' Association (JAMA), nearly 4-billion-ecu worth of European parts and materials were sold to Japanese companies in the year ended 31 March.

The lion's share of that went into Japanese auto plants in Europe, however, with less than a fifth going to Japan. And European parts makers still have a long way to go to catch up with American producers, who sold 16.8-billion-ecu worth of parts to the Japanese.

Of greater concern in Europe, however, are Korean automobile imports, with French car-makers setting off alarm bells about the risk of a new Korean tidal wave.

Korean car-makers are targeting western Europe, which accounts for some 25&percent; of its exports, and closing in by opening plants in eastern Europe - and their campaign to undercut Japanese and American prices is working.

Last month's figures from the European Automobile Manufacturers' Association (ACEA) showed that Korean cars have only captured 1.8&percent; of the western European market in 1996, just half a percentage point more than last year. According to ACEA, Japanese cars have 10.5&percent; of the European market, a smaller share even than that enjoyed by Ford Group of the US.