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TOKYO—Chapter II of the U.S.-China row is set to become Donald Trump’s white supremacy against Xi Jinping’s Chinese hegemony.

By year’s end, Trump should have decided to raise tariffs on most Chinese goods to 25 percent on Jan. 1, 2019, following a rise to 10 percent on Sept. 24. But tariffs alone may not reduce American imports of Chineses goods as his threat has arbitrarily lessened the impact on prices because it had weakened the Chinese currency yuan’s value against the U.S. dollar, as well as American consumers’ voracious appetite for Chinese products not manufactured in the U.S., like Apple’s iPhones.

Next phase, Trump is likely to become even more aggressive toward China no matter what Congress and the public would have to say. It’s because he is first and foremost a white supremacist and nationalist.

No matter, Xi Jinping is expected to pursue his hegemonistic policy reminiscent of the days when China was ‘the Center of the World’ as his country’s name proudly reads. He will continue dispatching millions of Chinese to not only neighboring Asian countries but to far ends of the earth, arming them with money from government coffers to start Chinese restaurants jointly with Chinese entrepreneurs and then build social infrastructure.

That’s not all: Nov. 10, at the China International Import Expo in Shanghai, Xi announced that China would open further its markets for foreigners and imports to win the hearts and minds of foreign businesses. That meeting came after his one-on-one with Japan’s prime minister Shinzo Abe, who Xi had shunned for months, making the meeting the first bilateral summit in years.

On the military front, Xi is standing pat on China’s control of South China Sea islands that had been claimed by the Philippines and Vietnam, the two countries that have been quiet in recent months presumbly in return for Chinese investments and other grafts.

So, China probably won’t waver on its hegemons, though it is giving hints of willingness to compromise with the U.S.

The one-on-one sovereign rivalry picture evokes what was happening between Japan and the United States and Britain in the run-up to 2^ndWorld War: The popular view is that the U.S. and its allies fought against japan’s imperial military expansion in China and elsewhere in Asia to prevent Japan’s annexation of those countries.

The Japanese imperial military did expand into China, Korea, and as far as Singapore, Burma, South Pacific island nations. It was the time when developed nations around the world were continuing to strong-arm against each other for control of land for acquiring more colonies. Britain, the Dutch, France, Russia all did that as they attempted to acquire Japan during the mid-1800s.

The Japanese were the last to ride on the bandwagon of this WWII period colonial occupation obsession but their expansion into its neighboring countries was different from the West’s colonial policy: fighting against the white supremacy colonialism espoused by the western colonialist.

Historians say that the Japanese did not rule as the West did to indigenous peoples by using them as slaves or for manual labor. Instead, the Japanese rule was one based on symbiosis concept on culture, education and other policies.

Historians’ views on the Japanese expansion may be dubious but what China is facing now against the United States , under Trump’s policy, resembles what Japan faced during the war.

–Toshio Aritake

TOKYO, Nov. 5—With much fanfare, Toyota Motor Corp. in late 2015 launched a $1 billion artificial intelligence research institute, TRI Inc. in California. TRI’s research results are now being tested in next-gen Toyota cars and assembly lines but hardly any of them are put to commercial applications, giving an impression that the automaker is not catching up in lockstep with its rivals in the global competition for automated driving and smart traffic management.
Toyota’s Nov. 4, 2018 joint announcement with Softbank Corp. that invests in Silicon Valley and other hitech companies, seems to illustrate the automaker’s angst that things are not going fast enough under its direct command and that it needs to approach beyond its comfortable arms length relationships to leapfrog to the next phase of transportation.
At a press event on that day, Akio Toyota, Toyota CEO, effectively confirmed that Toyota had initiated the joint project with Softbank: When he was a junior Toyota employee, he started a used-car vending website called Gazoo.com. Softbank sounded out Toyota for a joint venture but Akio said he turned down the offer and later he regretted the decision.
Akio asked that Yahoo Japan, which Softbank owns, change his angry-looking images from the portal with a smiling one now that the two companies have agreed to pursue a joint project, a clear sign of admission that Toyota is threatening to becoming an also-run in the autonomous transport tech development race.
Softbank CEP Masayoshi Son, who spoke before Toyoda, explained why he decided to go along with Toyota with much confidence that his group companies are well ahead of Toyota in offering ride share, autonomous driving and other next-gen technologies. He said the joint project can use Toyota’s autonomous driving vehicle E-Pallet, now being experimented, as part of its platform.
The two companies’ announcement said that they will start a joint venture, MONET, ‘to help realize a safer and more comfortable mobility society.’
‘MONET will provide coordination between Toyota’s Mobility Services Platform (“MSPF”), Toyota’s information infrastructure for connected vehicles, and SoftBank’s Internet of Things (IoT) Platform, which was built to create new value from the collection and analysis of data acquired from smartphones and sensor devices. By utilizing a wide range of different forms of data related to automotive and human mobility on both platforms, MONET is aiming to optimize supply and demand in transportation and, ultimately, to launch Mobility-as-a-Service (MaaS) businesses capable of resolving social mobility issues and creating new value,’ the announcement said.
Translation: Toyota will supply vehicle and hardware for creating a next motor vehicle mobility society and Softbank will be in charge of the society’s infrastructure – applications, software, and so on. Translation II: Toyota would become a hardware supplier like most Japanese electric/electronics manufacturers, which dominated the world market in the 1 980s and 1990s, have become for Apple and other global brands. Proof that Toyota has agreed to let Softbank lead MONET: Softbank will hold 50.75% and Toyota 49.25% of the company, a rare case the automaker assumes a minority interest.

Honda Motor:
It’s not Toyota alone among global automakers that are forming alliances – for now, and who knows what comes next: Honda Motor Co. will invest $2 billion in developing ‘large-scale deployment of autonomous vehicle technology’ with Cruise Automation, a General Motors driverless car company, and GM, their joint announcement released in San Francisco said.Honda also will acquire $750 million in equity stake in Cruise, it said.
Softbank earlier invested $2.25 billion in Cruise, a GM subsidiary in which GM reportedly had acquired a commanding stake for upward of $1 billion.

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TOKYO—Richard Pyle, ‘The Vietnam War Reporter’ for The Associated Press and my close friend, was a straight, no-nonsense top journalist who despised dictators and bureaucracy, shared the same values as Little Larry on the Brooklyn sidewalks, and cared about the United States and the world with patriotism. Richard shared identical traits as Senator John McCain.
Richard’s ashes, an Army veteran, was entombed at Arlington National Cemetery Aug. 21, 2018. During his half a century career as an AP reporter, Richard covered a whole range of news, starting in Detroit and then in Southeast Asia, Tokyo, the Middle East, and lastly New York.
Richard wrote several books and in one, ‘Lost Over Laos’ co-authored with his Vietnam era AP photographer colleague Horst Faas (Da Capo Press, 2003), John McCain reviewed it:
”The ethic and the courage of…photojounalists in Vietnam’s crucible, brilliantly captured by Pyle and Faas, radiate from those pages like the sun over the battlefields they left behind.’ – Senator John McCain, former Navy pilot and Vietnam POW.’
Richard and Horst had approached major publishers for the book but were politely turned down, understandably so because it was time when the United States was trying to erase bitter war-time memories.
John McCain apparently didn’t think the Americans should erase the Vietnam war memories, and when a galley arrived on his desk in 2002, he agreed to read it and wrote blurbs to go to the book back cover, Richard told me at the time. A former Nebraska senator, John Kerry, also wrote, and David Halberstam, who wrote about the Vietnam War extensively, wrote the book’s introduction.
PBS’s Vietnam War documentary, which was broadcast from September 2017 ‘appears to have used many parts of Richard’s book,’ Brenda Smiley, Richard’s wife, told me recently. The TV series could have been made more accurate and balanced had the producers used Richard’s input, she said.
Richard wrote the book with Faas as an accurate record of what happened around him and his colleagues in Vietnam with uncompromising integrity and accuracy, always from journalists’ eyes, the same eye level as for John McCain’s as a politician, both of them sharing the same compassion for people and nations and still working to make their country and the world a better place to be.

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TOKYO—Two unrelated developments seem to show that Japan is continuing to be haunted by its centuries-old brutal samurai bureaucracy shadows, stifling creative and individualistic thinking and demanding obedience – the very causes sapping Japan’s competitiveness in the modern world.

A Vietnamese university team Aug. 26 won an Asia-Pacific robot contest for the second consecutive year while Japan’s University of Tokyo could not even make it to the semifinal, according to the NHK World website of Japan’s national broadcasting station that hosted the 17^thannual event. In Russia, Yandex, dubbed a Russian Google, which claims to have already conducted a driverless taxi service test on Moscow public roads, said Aug. 28 that it has started a commercial driverless taxi service in the Russian city of Innopolis – two days after two Japanese companies probably prematurely announced Aug. 26 a ‘world first’ autonomous, driver-in, taxi trial.

The Asia Broadcasting Union (ABU) Asia-Pacific Robot Contest is the largest robot tech event having been held since 2002, when NHK elevated the previous domestic Japanese contest for vocational high school students, started in 1988, as a region-wide event participated by teams from nearly 20 countries. This year, it was held in Vietnam, according to NHK World. (https://www.abu.org.my/ABU_Robocon-@-ABU_Robocon_2018.aspx)

Japanese teams won two past contests though their reigns have been increasingly challenged by Chinese and Vietnamese teams. In the 1980s through the early 2000s, Japan was a champion of robots. SONY’s Aibo pet dog was the envy of children to seniors, not to mention Japanese industrial robots of Fanuc and Yamazaki Masak (now Mazak) working 24/7 on factory floors worldwide. Now, Japan has become one of the robot-manufacturing countries, and it has to import specialty-purpose robots from the United States and Europe for such work as probing the Fukushima Dai-Ichi nuclear power station that suffered a meltdown in 2011. And Japan is trailing behind other countries in drone technology, only recently has it become serious in drone application R&D.

A small tech upstart, ZMP (https://www.zmp.co.jp) and a Tokyo taxi operator, Hinomaru Kotsu, Aug. 26 announced a driver-in autonomous tax service experiment four round trips a day in central Tokyo Aug. 27-Sept. 8. 2018. The companies’ websites said all trips had been booked full as of Aug. 29. The websites claimed that it was a ‘world first’ s autonomous driving tax trial. It was clearly the first in Japan but dubious whether it was the world’s first. Russian Internet giant Yandex showed a YouTube video clip of a Toyota Prius driverless taxi cruising on the streets of a Russian city of Innopolis Aug. 28 (https://www.youtube.com/watch?v=GFmUcc7LSiw) and a driver-in automomous driving Prius on snowy Moscow streets in February 2018 (https://www.youtube.com/watch?v=Bx08yRsR9ow). Yandex said it would offer the driverless service in Europe soon.

Driverless car R&D was first performed in the United States by tech and auto makers such as Google, Tesla, General Motors and Ford, followed and joined by Toyota and Honda as something like trans-Pacific projects. If the Yandex taxi services are actually commercially available, it’s a defeat for both the United States and Japan. On Aug. 27, Toyota announced that it was investing $500 million in Uber Technologies.The press statement said: ‘As Uber and Toyota look ahead to a self-driving future, this partnership will be critical in realizing self-driving technology at scale. Uber and Toyota anticipate that the mass-produced autonomous vehicles will be owned and operated by mutually agreed upon third party autonomous fleet operators.’

Driverless car technology is evolving fast and researched worldwide so the jury is still out about which countries and companies can prevail to make their technologies as global standards. Even so, a Russian company excelling as a world first is rarely heard except when Moscow sent man’s first satellite, Sputnik 1, into the space in 1957. So Yandex’s Prius may stand out as the first if it becomes truly commercially viable.

The Japanese bureaucracy’s influence has gained significantly over the years after Shinzo Abe became the prime minister. Bureaucrats and their private-sector cronies cooperate and connive with the Abe Company – Abe himself, Finance Minister Taro Aso, and most of his cabinet members – according to feudal era principles of rigid rules and regulations, such as an overtime reduction campaign. Businesses are exposed to a bevy of new workplace rules on top of complex regulations they are required to observe in helping reduce overtime work hours. Important R&D projects about to be completed must be stopped when workers’ overtime limits reach. Small and medium-size company employees, who were replenishing their base salaries with overtime, now have to go to a second workplace to work to make up for the overtime shortfall.

Work-related and other new rules and regulations are sapping creative and individualistic thinking from Japanese society, a key reason why the country is losing its once powerful dynamism as evidenced in the fact that there’s been hardly any blockbuster innovations – like the Walkman and Toyota’s engine-gas hybrid engine – over the past decades since the bursting of the Japanese bubble in the early 1990s. Why driverless car technology development is slow in Japan partly can be ascribed to a classic bureaucracy turf battle between and among ministries and agencies concerned – the Ministry of Economy, Trade and Industry for vehicles, hardware and applications; the Ministry of Land, Infrastructure and Transport for roads, vehicles, hardware and applications; the Ministry of Internal Affairs and Communications for telecommunications and then Internet, and vehicle accidents and fire; and the National Police Agency for all kinds of accidents and crimes related to autonomous driving.

And yet, the bureaucracy and politicians are sailing comfortably no matter how incompetent they may be. A crime suspect escaped from an Osaka police station three weeks ago, forcing police to field as many as 40,000 officers to search but he is still at large – and the officers are getting paid! Police blamed the incident as an ‘unpredictable’ situation, not their sloppy security precautions.

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Many in the United States are deeply worried that US President Donald Trump is actively undermining and trying to tear down the institutions on which the health of the American democracy and society depends. His administration is also doing the same to international institutions for which he has shown at best indifference but mostly contempt.

The US security alliances that have underpinned global peace and stability are also under threat. Trump has fanned uncertainty and anxiety around the world by questioning the value of the US alliances with Japan and South Korea as well as the entirety of NATO.

After World War II, the global community was able to take for granted a United States that aspired to values of freedom, democracy and openness, even if those values were imperfectly observed. The US withdrawal from the UN Human Rights Council and its separation of refugee children from their parents has put an end to US moral leadership for now. And it’s difficult to regain moral authority quickly once lost.

But what Mr Trump is doing to the international trading system is likely to be the most damaging. In its second year in power the Trump administration has found its feet in implementing protectionist measures and firing up a trade war. Not only has it imposed catch-all steel and aluminium tariffs and imposed tariffs on US$34 billion worth of Chinese imports (all outside the WTO trade rules), the US Trade Representative is vetoing the appointment of new WTO Appellate Body judges and the administration has tariffs pending on a further US$200 billion of Chinese imports.

US leadership of the multilateral order has been the guiding light for over 70 years. That leadership can no longer be counted upon. Indeed, the rest of the world is going to have to work together to preserve that order in the face of its biggest challenge — from the United States itself.

Allies of the United States, as well as the rest of the global community, are grappling with how much to separate its dealings with Mr Trump from its dealings with the United States itself. The delusions that Trump is a blip and the United States will resume course quickly after he leaves office have been dispelled for most. How long after Trump will it take to rebuild the global institutions that Trump has been trying to tear down? How long will it take to rebuild the trust in those institutions? The fish rots from the head, and the longer Mr Trump is in office, the more time it will take to rebuild the role of the United States as the world has known it for the best part of three-quarters of a century.

The priority now is to protect the international institutions from the United States and keep the multilateral system open to the eventual re-participation of the United States.

As Shiro Armstrong writes in this week’s feature essay, ‘the threat to the global trading system will only be met by a concerted response by other stakeholders in the global trade regime. Such a response needs coordination and strategic action that doubles down on the rules-based global system’.

Managing the rise of China was going to be difficult for the United States and the global system — no matter who was in the White House. China’s economy is already larger than that of the United States in purchasing power parity terms and China is already the world’s largest trading nation and the largest trading partner for most countries around the world.

The United Kingdom worked hard to shape the Bretton Woods institutions in the aftermath of World War II to protect its interests in the face of the rising power, the United States.

The established rules have served us well but there are obvious gaps and weaknesses. A rational United States would be trying to fill those gaps and to expand and strengthen the rules in the face of a rising China. Instead it is trying to tear the rules down.

Much of the US policy establishment is swinging behind President Trump in justifying its attack on China, and for some, the WTO. Very few agreed with imposing tariffs on allies but many have excused them on China. Letting China into the WTO is now portrayed as a mistake in Washington, although China’s economy has changed profoundly through its acceptance of market norms and the rules of international trade. Its society and polity have also undergone remarkable change, though in the eyes of some, it is still not enough ‘like us’.

The ‘China shock’, as it has become known in the United States, and the rapid expansion of its trade (which displaced more US workers than expected and for longer than was predicted) helped mobilise popular support for Trump’s protectionist policies. The aggregate effect of opening trade with China on the United States was overwhelmingly positive but the benefits have not been shared across US society.

The China shock has been more beneficial for other countries that have been able to share the benefits more widely across societies through a mix of higher growth, better income distribution and stronger social safety nets. Those generational issues will need to be addressed to sustain policies of openness in the US economy in the future, or else the current surge of American growth is likely to be a temporary affair.

Technology transfer to China is also seen as illegal and unfair despite most of its being delivered by the voluntary commercial decisions of US companies. The multilateral intellectual property regime may well be inadequate for the United States and other advanced economies. The United States had made headway in its negotiations with China on a bilateral investment treaty to address these issues with China before Trump killed that off. The United States will not be able to impose its own new rules on China since China is already too large. There is a movement to form a bloc of advanced economies in the WTO to address this, but such a bloc would risk fracturing the multilateral system into an emerging market versus advanced economy world.

Rules that deal with issues beyond those currently encompassed within the WTO and other frameworks will have to be created with China. The EU and China have initiated reform of intellectual property rules in the WTO: this is a welcome initiative. Japan and Australia are in a difficult position, being allies of the United States. But the priority has to be the multilateral economic system. This system is of paramount importance to prosperity and security in the Asia Pacific region. Threatened with US tariffs on automobile exports, as Japan is, it cannot afford to yield to bilateral dealing with the United States. ‘Some countries, including Australia, have received exemptions from the US steel and aluminium tariffs’ according to Armstrong, and ‘by accepting those exemptions, they have failed their obligations to the rules-based order’. But like Japan, Australia cannot ultimately put political favours to Washington over its primary security and economic interests in the multilateral trading system.

International institutions and forums are fast turning into a ‘minus-US’ world. The G20, APEC, the G7 and now the WTO are all ‘minus-one’ groupings with the United States standing against multilateral principles, alone. But the leaders in the rest of those groupings need to do more than put Trump in the naughty corner. They will need to move forward with collective leadership on an institutional reform and opening agenda, that, while open to United States engagement, no longer takes its cue from Washington.

Other recent articles in which you may be interested from the East Asia Forum are listed below. You can click the title of each one or visit www.eastasiaforum.org for daily content.

Editors
East Asia Forum
20 August 2018

TOKYO–The Foreign Affairs magazine’s September-October issue printed a grim view of the United States’ position in the global Internet society. Author Adam Segal’s claim that China would likely dominate if not control the Internet is well justified and accurate, backing his claim with interesting data. We probably should not take his view as a threat to the West’s political, defense, economic and societal structure as China’s global expansion probably is no stopping with its demographic might. We should explore for middle ground between our demographic, liberal underpinnings and China’s one-party, state-driven approach.

When China Rules the Web
Technology in Service of the State
By Adam Segal
For almost five decades, the United States has guided the growth of the Internet. From its origins as a small Pentagon program to its status as a global platform that connects more than half of the world’s population and tens of billions of devices, the Internet has long been an American project. Yet today, the United States has ceded leadership in cyberspace to China. Chinese President Xi Jinping has outlined his plans to turn China into a “cyber-superpower.” Already, more people in China have access to the Internet than in any other country, but Xi has grander plans. Through domestic regulations, technological innovation, and foreign policy, China aims to build an “impregnable” cyberdefense system, give itself a greater voice in Internet governance, foster more world-class companies, and lead the globe in advanced technologies.

China’s continued rise as a cyber-superpower is not guaranteed. Top-down, state-led efforts at innovation in artificial intelligence, quantum computing, robotics, and other ambitious technologies may well fail. Chinese technology companies will face economic and political pressures as they globalize. Chinese citizens, although they appear to have little expectation of privacy from their government, may demand more from private firms. The United States may reenergize its own digital diplomacy, and the U.S. economy may rediscover the dynamism that allowed it create so much of the modern world’s technology.

But given China’s size and technological sophistication, Beijing has a good chance of succeeding—thereby remaking cyberspace in its own image. If this happens, the Internet will be less global and less open. A major part of it will run Chinese applications over Chinese-made hardware. And Beijing will reap the economic, diplomatic, national security, and intelligence benefits that once flowed to Washington.

(continued at foreignaffairs.com)

TOKYO, July 30—The obituary writers for the Japanese electric appliance industry that dominated the world with SONY Walkmans and karaoke boom boxes in the 1980s are scratching their heads: Could it be possible that the once-mighty Japanese industry that was defeated by Apple, Samsung, and now being invaded by Chinese products, can be reborn?

Data seem to suggest so: In 2017, Japan’s domestic sales of civilian electric and electronics appliances, including refrigerators and smart phones and audio visual products, grew 0.5 percent year-on-year to 5.234 trillion yen (USD49 billion), rising for the second consecutive year after 2.8 percent and 2.7 percent in the preceding two years, according to the Association for Electric Home Appliances’s statistics. It’s the aggregate amount of so-called white goods, personal computers, smart phones, video equipment, light bulbs and so on.

Industry watchers are expressing cautious Yes to the recovery and so do the media, including the Morningstar China business website, searchina.net. ‘I see signs of change at Panasonic,’ Yoshiaki Nakamura, a former Ministry of Economy, Trade and Industry official and Senshu University professor, wrote in the Yomiuri Online July 26. The Kadoma, Osaka-based company, among a few remaining Japanese capital electrical makers, ‘thinks it needs to continuously seek change’ and is promoting what the company called the ‘Game Changer Catapult led by project leader Masanori Fukada, he said. The results so far? The ‘Sake Cooler’ that idisplays foodies to go with sake on the digital panel and a new flat screen called the Ambient Media Player, he said. Sharp Corp., which Taiwan’s Hon Hai and its Foxconn group acquired nearly 60 percent of paid-up capital in 2016, is also making a comeback with its new line of appliances, as well as SONY, Nakamura wrote, saying the Japanese makers are showing their ‘muscles.’ No coincidence perhaps, earlier this year, the China site searchina.net, reported ‘an unexpected recovery’ of the Japanese industry.

Dissecting industry data, sales of air-conditioners registered sharp year-on-year gains the past few years as well as fridges and washing machines – clearly reflecting the impact of accelerating climate change and soaring temperatures across Japan. Japanese makers’ shipment of other products are believed modest, if not shrinking sharply. But other factors that contribute to sales rises are few as Japanese consumers are opting to spend for services such as travels and dining-out and sports to purchasing tangible goods.

This may not mean the Japanese electrical appliance industry’s rebirth is actually taking hold and can be sustainable, contrary to what Mr. Nakamura claims. The cold truth is that many Japanese companies that steamrolled the world market with their televisions (SONY, Panasonic, Sharp, Toshiba, among them), threatened foreign rivals with their PCs (SONY Vaio, Toshiba Dynabook, NEC, Fujitsu, Sharp), competed with their mobile phones (all of them plus Kyocera and a few others), have given up their overseas ambitions and been either acquired by foreign makers or retreated to their home markets alone. Plus, the home markets are being challenged by Chinese makers such as Haier that had acquired Sanyo of Osaka and Samsung. Plus, Japan is a saturated market with its population aging progressing at the world’s fastest pace, with nearly 30 percent of its 126 million people over 65 years old.

If the industry’s comeback is taking place, it’s thanks to unheard of names such as Irisohyama of Miyagi, Yamazen of Osaka, Yuasa Primus of Tokyo, info-tech equipment supplier Elecom of Osaka, and Twinbird of Niigata that manufacture what the old big makers had abandoned – electric fans, microwave ovens, radios, and other low-priced products. They assemble their products in Japan by importing half-finished components from their Chinese and other overseas plants. They offer products by eliminating advanced and complicated features – back to the basic – to keep costs low.

Toshio Aritake

TOKYO, July 6—The media are predicting that a full-blown U.S.-China trade war is unavoidable as Washington and Beijing are gearing for head-on collision, forcing the global economy to sustain irreparable damages. History shows that there still is options for both sides to reconcile and save their faces. one option called the voluntary restraint agreement that was exercised between Washington and Tokyo.

In 1981, President Ronald Reagan, whose administration saw Japan as the No. 1 trade threat to the United States, demanded that Japan curb its auto exports to the United States, warning retaliation against Japanese products with Section 301 of the 1974 Trade Act that empowers the president to take action to correct the bilateral U.S. trade imbalance with Japan.

Carrying Reagan’s demand, U.S. Trade Representative William Brock, a Republican, demanded that Japan manufacture cars sold in the U.S. market in the United States as most Japanese automakers do now and while limiting exports to the United States at 1.7 million units annually from 1.82 million units in 1980 to give ‘a breathing space’ to the Detroit 3 automakers for developing fuel-efficient compact cars.

In May 1981, Japanese Ministry of Trade and Industry bureaucrats led by Vice Minister for International Affairs Shohei Kurihara, ambitious and brilliant nationalists, emerged from closed-door meetings with USTR officials and announced what was called the ‘voluntary restraint agreement’ to keep Japanese auto exports to the United States at 1.68 million a year until 1984.

Reagan and Prime Minister Zenko Suzuki thus saved their faces and avoided stepping on WTO free trade rules. But the VRA (also called the voluntary export restraint) proved highly unpopular among American consumers as they were forced to pay steep premiums to buy Japanese compacts that were almost nowhere to be found in U.S. dealership car lots.

So in 1984, the VRA quota was increased to 1.85 million, and to as many as 2.3 million in 1985 to satisfy American consumer demand for small cars, before it was abolished in 1993. Since then, Japanese car exports to the United States has been static at around 1.5-1.6 million and are likely to decrease as more Japanese auto ‘transplants’ would start operating.

Tough highly unpopular and definitely not a panacea, the VRA can be applied to the U.S.-China trade parameters as one tool to eventually balance the tilted U.S. trade deficit with China.

–Toshio Aritake

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TOKYO—Trump’s 25 percent tariff surcharge proposals on import autos and auto parts would have a potentially unintended adverse consequence on Detroit 3 automakers, according to The Prospect’s research.

The tariff, which Trump plans to slap on all imported motor vehicles probably from year-end, would add USD3,000 per vehicle, according to a Roland Berger analysis in March 2017. Much of that sticker price shock would hit American consumers and it likely would drag lower the annual U.S. auto sales, which have been running at 16-17 million vehicles in recent years.

‘(T)he Detroit 3 on average would be hit by USD1,500 cost increase, followed by the Asian manufacturers with around USD2,000,’ the report said. ‘The European (manufacturers based in the United States) would be hit by USD5,300 on average or even USD6,400′ for importers of European vehicles not assembled at all in the United States, it said.

The cost increases would wipe out automakers’ profits in the U.S. market ‘almost completely’ except for Ford and General Motors, even the two U.S. automakers would fall into losses on a global level, Roland Berger warned.

Furthermore, merely moving overseas auto manufacturing to the United States, which Trump champions as part of his ‘America First,’ say, from Mexico, would add USD1,200 costs, on top of billions of dollars of assembly plant investment, it said. ‘The border tax proposals may achieve the exact opposite,’ hitting American consumers and reducing vehicle sales and fewer jobs, it said.

Auto parts tariff impact. The 25 percent Trump tariff proposals are to be collected on auto parts, and that would mean cars with high domestic content ratios can be manufactured with less tariff impact than lower content ratio vehicles. On this front, Detroit 3 cars seem to bear the brunt equally hard as foreign automakers’ vehicles assembled in the United States.

The midsize SUVs, Buick Enclave, Chevrolet Traverse, and GMC Acadia local content ratios were 90 percent, meaning 9/10 of the cars were assembled with American-made parts, according to Frank DuBois, associate professor of the American University’s Kogod School of Business in his 2016 report.

But the ratios of other segment vehicles such as the Ford Explorer, Cadillac CTS, Jeep Cherokee were around 80 percent, or about the same as Honda Pilot and Toyota Sienna.

Tokyo-based industry officials say that given that vehicles around the world now rely on parts supplies from assemblers’ and parts makers’ supply chains, supply disruptions could trigger an all-out assembly halt as occurred during the 2011 northern Japan earthquake-tsunami-radiation-leakage disaster and Thailand flooding. That would hurt both foreign and Detroit 3 makers.

If Trump wants Made-in-America only cars, he’s got one but only: Tesla. Teslas are surely assembled in the United States but the batteries are not: They are supplied by Panasonic of Osaka.

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