Automakers, Drug Industry, Titanium Producers Disagree on Japan FTA Direction
Automakers, titanium producers and drug industry players shared diverging views inside their respective sectors of how Office of the U.S. Trade Representative negotiators should approach a U.S.-Japan free trade agreement. The department invited the public to share opinions Dec. 10 on what priorities negotiators should pursue, and how the new deal should be similar or diverge from the path forged for the U.S.-Mexico-Canada Agreement and the Trans-Pacific Partnership. Autos are the single biggest import from Japan, making up $51 billion of the $136 billion in goods imports in 2017, according to USTR.
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"Trade with Japan has been an unambiguous failure for American workers," said Desiree Hoffman, who testified on behalf of the United Auto Workers. Hoffman suggested USTR pursue a floating quota that would follow the import rate of autos from the previous quota. Both she and the American Automotive Policy Council, which represents Detroit automakers, said no phase-out of American tariffs on vehicles should begin until there's evidence Japanese consumers are buying more American-built vehicles. The U.S. should only agree to "long, back-ended tariff phase-outs that are contingent upon measurable increases in import market share," said Matt Blunt, AAPC president.
In contrast, John Bozzella, CEO of the auto trade group that represents Japanese and other foreign nameplates manufacturing in the U.S., said all U.S. vehicle tariffs should be reduced to zero "at the earliest opportunity." The Association of Global Automakers CEO also said the Section 232 tariffs on steel and aluminum should be removed before negotiations even begin. Auto interests also diverged on currency manipulation, with Detroit and unions saying it must be stronger than what was in the USMCA and Bozzella saying trade deals aren't the right places to address the issue.
In pharmaceuticals and biotech, the trade groups that represent branded drugs argued that Japan's price controls on prescription drugs are favoring Japan-headquartered firms, and land harder on drug manufacturers than on hospitals or other drivers of health costs.
Joseph Damond, executive vice president for international affairs at BIO, the group that represents biologic drug developers, said, "We understand the fiscal problems the Japanese government faces with respect to its health care budget," but said it's not fair that while drugs account for 20 percent of costs, they are responsible for 40 percent to 50 percent in savings when reimbursement changes are made. Just under $4 billion in prescription drugs were exported to Japan last year, according to Jay Taylor, vice president of international advocacy at PhRMA.
Both Taylor and Damond said the USMCA provision requiring Mexico and Canada to provide 10 years of exclusivity to biologics is not strong enough, that Japan should be convinced to match the U.S. standard of 12 years. The U.S. Chamber of Commerce also takes this position, and the American Chamber of Commerce in Japan said that pharma should be a particular focus in the talks, as that sector is one of a handful that has a comparative advantage in exporting to Japan.
But Rachel Sher, deputy general counsel for the trade group that represents generic drug makers, said they oppose monopoly extensions for branded drugs. Sher, whose group is named the Association for Accessible Medicines, said U.S. law does extend these periods, but also pays generic drugmakers when they are the first to challenge a weak patent. Trade deals only force longer protections, without providing any incentives to the generic industry, she said.
Two titanium producers testified on Japanese titanium exports, and again, diverged on what the deal should do. Allegheny Technologies Incorporated shuttered its titanium sponge facility in 2016, and favors dropping a 15 percent tariff on titanium sponge, which is the base material for titanium ingots. Titanium Metals Corporation is the only domestic producer of titanium sponge, and it is disappointed that the U.S. International Trade Commission did not agree that Japanese titanium sponge is being dumped. The two companies do agree, however, that titanium products deserve to retain the tariff protection they currently enjoy.
Terrence Hartford, from Allegheny Technologies, said that if USTR chooses not to maintain current duties, they should be phased out over 15 years, as they would have been in the TPP. And, he said, it's important to develop product-specific rules of origin for titanium products, because, he said, after the passage of the U.S.-Korea Free Trade Agreement, Korea imported Kazakh and Chinese titanium ingots, did minimal further processing, and sent the products duty-free to the U.S. He called that disastrous for the domestic titanium industry.