Section 1. Voluntary Restraints Imposed on Exports to U.S.
Item 2. Repercussions Reach Canada and EC
On May 1, 1981, MITI publicized the outline of ministerial talks, announcing that for a three-year period from fiscal year 1981 (ended June 1982) voluntary restraints would be placed on the export of Japanese -made passenger cars to the United States, with a limit of 1.68 million vehicles in the first year. Japan's automobile industry had indicated that it would be able to live with exports of 1.82 million vehicles, comparable with the previous year's results, for a two-year period. However, with the upper limit of the first year set at only 1.68 million vehicles, the industry's calls had been ignored in terms of both the upper limit and the number of years.
As a result, 1981 marked the beginning of an era in which Japanese vehicles exported to the United States became subject to controlled trade. Although it had been proclaimed at the ministerial talks regarding the voluntary restraints that such restraints would cease at the end of fiscal year 1983 (ended June 1984) no matter what the circumstances were, no progress was made on restructuring the U.S. automakers, and a limit of 1.85 million vehicles was set for fiscal year 1984 (ended June 1985). Despite representing an increase over the previous year, it still meant that the system of voluntary restraints remained in place. The limit later reached an annual maximum of 2.3 million vehicles, but it was not until the end of fiscal year 1993 (ended June 1994) that the voluntary restraint system was finally abolished.
The implementation of export restrictions to the United States had Japan's automobile industry worried about how such might affect exports destined for neighboring Canada and Europe, because trade frictions with Canada and Europe were growing more severe in conjunction with the car-trade issues between Japan and the United States.
In Canada, the downturn in the U.S. automobile industry brought with it a worsening of the employment situation, and together with the voluntary restraints imposed on Japanese cars exported to the United States, this prompted the Canadian government to be on guard against an influx of Japanese-made vehicles and to strongly petition the Japanese government to adopt similar measures to those adopted for the United States. At first, due to Japan's unfavorable trade imbalance with Canada, the Japanese government responded that it could not accede to such a request. However, after exports of passenger cars to Canada increased by almost 90 percent in the three months from January to March 1981, the government announced in June that it would cap exports for fiscal year 1981 (ended June 1982) at slightly more than 174,000 vehicles, or a 10 percent increase over the previous year, as a gesture of restraint.
In Europe, meanwhile, the Comite des Constructeurs d'Automobiles du Marche Commun (Committee of Common Market Motor Manufacturers) and the European Metalworkers' Federation requested in 1980 that the relevant authority of the then European Community (EC) adopt measures to counteract the importation of Japanese vehicles. In November that year the EC Foreign Affairs Council made a statement directed at Japan for early and effective control of exported vehicles, followed by a resolution by the EC parliament in January 1981 indicating that it would formulate a common policy to protect European vehicles from Japanese competition.
Furthermore, in March 1981, the EC began monitoring imports of Japanese passenger cars, color televisions and numerically controlled machine tools, in an effort to rectify the trade imbalances between Japan and various EC member states.
In the governmental discussions between Japan and the EC, the EC pushed for moderation of Japanese vehicle exports to the region in its entirety; however, MITI argued that each EC member state's situation was different, so in principle Japan pursued individual negotiations with each relevant country.1
In 1981, West Germany, Belgium and the Netherlands all requested controls on Japanese exports, and the Japanese government countered that it expected exports to grow only marginally that year, and that such marginal growth would effectively be the same as a self-imposed restraint. The result of this action was that some countries established regulations to promote domestically manufactured products, while others adopted preferential tax schemes for purchasing local products, leaving only Switzerland and the four Scandinavian countries with truly free and open markets.
Some countries in Europe left regulations formulated in the 1960s unchanged as they headed into the 1980s and beyond. For example, the direct import quota for 1991 in Italy was only 4,500 vehicles, while in Spain it was a mere 1,200 vehicles. Such restrictions remained in place against Japanese vehicles until 1992.
The ripple-on effect on exports to Canada and Europe that Japan's automobile industry had worried about with the implementation of voluntary restraints on exports to the United States had become a reality, and had a huge impact on the export of completely built units (fully manufactured vehicles) to advanced economies at the outset of the 1980s.