An Analysis of the Japanese Voluntary Export Restraint Upon
Total Page:16
File Type:pdf, Size:1020Kb
An Analysis of the Japanese Voluntary Export Restraint upon Automobiles to the U.S. and Canada: An investig.tion of its impacts upon International, Bilateral and Domestic Legal Fr amewor k 5 for safeguard me a sure s . , by : Keiki Kimura Institute of Comparative Law December 1985 « McGill University Montreal, Canada , 1 Ath e sis su bm i t te d t 0 the Fa cul t Y 0 f Graduate Studies and t Research in partial fulfillment of the requirements for the deg ree of Haste r of Laws ';1 , ., t' .. • • AB5TRACT This study IHms, flrst of aIl, to examine various view$, and alternatives raised in the Course of conclusion and exten- sions of voluntary restralnt agreements for the Japanese auto- mobIle exports to the u.s. and Canada and, secondly, to assees l ts impacts upon legal framework of safeguard measures at 1 multllateral, domestlc and bilateral levels. A frequent and widespread usage of voluntary reBtraint agreements for a prolonged period would disrupt the safeguard mechanism under the GATT, due highly to i~s discriminatory nature. However, if they are instituted as the last resort subsequant to a thorough investigation of the inJury to domes- tlC industry and its causation by imports, it will st.abilize the safeguard mechanism. The incorporation of the Art. XIX of the GATT into cor- respond ing domestic laws and the acceptance of voluntary ... restraint agreement at the GATT will lessen tt scr iminatory application of safeguard measures. 1 • ( \ c r.' r L, [ /1 f- (pltp l"tll!lP V]<;p, 'Pi,r('lhes et él tprnClt lvr>e; c;nlllt>v('>pc, ,111 ,(>lIre; 'lI l,) ((' [l, ,,[ (h' l 't'xt l'nc; (Hl ,1('<, cH' (lrcle., \!,,) "nt Cl] rpc; 1)"11t ( [' 1t' il Il' , TI ri ] C, ( 'C; " 1 1 Y r t Cl t c~ - 1 n 1 C; (' t , 1 r' [' i1 ( pt l '1 t ,'r i' (, 1 J C; ,1 (j" 1 1 (, (,, JI'" t ,1 (',' .' ,,"-, t' C ,) r r \ {.,. L c , 1 r ' [ , 1 1 ( ,) t 'fi {. (, '1 l" 1 .' tl l j c .. f' 1" Il ,r ,II c;(' r Iml tlrl l 1 f\ r) ~. ri (1 !~ rl t '--) 1 1 ~ ,'n ,1" r n "1 f", ,", 1'1 I,vf'r Il l' 1 ] "II (l,' c 1 (> c; c; ( , r ,'1 " <," (' ,1 't'n'j\J('[ ,Il'st 1 (lUSêl 1 1 1 r' ,)( ) r t (1 t l l'Il t\ t 1 f'e; ,II f f l' 'II t (oc; P( ''l'('r'l(jUt'<' ,) \ 1 c:; f' , r p c; t r lit 1 ( 'II ri l' C; (' >'1 ,( 'r t,olt l' ') r, 1 H' 11 1: (> Il t ,t rl ~ 1 1 1 r " 1 1 (' r {>, 1',1 l' 1 c:; r' f' ,j l' c:; ri 1 J \' f' tj ,1 1 d f' • ,lpC; rtCllc; .'1 l ' ,\, ( (' r ' t a t 1 ( , r ' if' c~ ,), ,,(. l , 1 c; v ( ) 1 ( , l' t ri l r (' c; ; ) ( l 1 J 1 " c; t r I(,n (11'e, PXI" r êl t 1 ( , Il C; ( 1 i'l n c:; 1 (' (,.'\, 1 1 III r' 1 n Il'' r (' l' 1 c • ) i' 1 TABLE OF CONTENTS INTRODUCTION A. Statement of Purpose ....................... 1 B. Statement of problems ...................... ,--- 2 1. Emergence of Non-Tariff-Barriers ........ ) 2 2. GATT Negotiation ....................... 3 3. Non-discr"'iminatory application of safeguard measures .................. 5 C. Framework of Analysis ....................... 6 CHAPTER l Cho ice of volun tary Expor t Res tra i rit A. United States .............................. 8 1. rTC Determination ..................... .. 8 J 2. Vo 1 u nt a r y E x po r t Re s t rai n t s ........... .. 11 3. Local Content Bills .................... 14 4. Extensions of Voluntary Export Restraints ............................. 20 B. Canada...................................... 30 1. Legal Steps Towards VER ...... " . 30 2. The Auto Pact of 1965 ................... 33 3. Weather Forecasting System...... ..... 37 4 . Au tomot i ve Tas k Forc~ Repor t;. .... 43 5. Extensions of the Weather Forecasting Sys tem .................................. 52 C. Comparison of No~th American Approach to othe~s .......................... 57 CHAPTER II Impact of Voluntary Import Restrictions A. Multilateral level (GATT) ................... 62 1. Article XIX of the GATT.......... ....... 63 2. ProposaIs for revision ....... ~..... ...... 65 B. p Domestic level .............................. 72 1. Canada (SMIA) ........................... 72 2. The united States (Omnibus Act) ......... 76 C. Bilateral level ............................. 78 1. Treatment of Canadian automob~le products . ....... ....... ...... 78 2. Inclusion of Japanese automobile manufacturers lo the Auto Pact .... ...... 81 3. Treatment of non-Japanese imported cars ................ :... ....... 84 Conclusion 86 Endnotes 90 • B i b 1 i og r a p h Y ...•....•••...•••...•••....•••...••...••• 104 , - ~:'"-_:,,-:_ .. • fi LIST OF TABLES Table l: Expor t Quo tas to the U. s. 4by Company 23 Table 2: The u.s. trade deficit with Japan 24 Table 3: Japanese Auto-plants in North AmerIca....... 28 c Table 4: Export Quotas to Canada . ..... 54 c c -- ~ '. 1. • INTRODUCTION A. Statement of Purpose During the past four years and extra months, the Japanese vol un t a r y e x po r t r est rai n t 0 f pas sen g e r car s ta the u. S. and Canada has not only brought about significant changes in auto- motive trade and investment acrOSB the Pacifie, but a180 rais- e d que s ti 0 n 8 as t 0 the le gal s t a tus 0 f vol u n t a r y e x po r t restraints (hereafter VERs) in the GATT and relevant domestic laws for import relief. The former change i s seen in the con sol i d a ti 0 n 0 f VE R5 and r e fIe c tin 9 th i 8 , i n the lin e - u p 0 f decisions by the five major Japanese automobile manufacturers to set up auto-plants in the V.S. and two of them a1so in Canada, while the latter. questions are rather exacerbated by the fact tha t VERs have not been shor t-l i ved and that they have functioned to limit imports from a particular country, bath of which circurnvent the present international rules and procedures for safeguard measures. This study aims, first of aIl, to assess why a volunt-ary form of import restriction was élO&pted among other alterna- tives raised, second1y, to investigate the extent of 1e981 examinations made in the course of the conclusion of VERs in the U.S. and Canada, and third1y, to explore the impact of VE~s on the 1ega1 frameworks of ~ safegu~rd measures at the • dames t ic, bi la ter al and mul t 1-1a teral leve1s • , ~: .. .., ...-.!- .... .' , 2. • B. BtateAent of Problems A declining role of tariffs for protecti ng domestic v, ind ustry haB been, to a 9 rea texte nt, compensa ted by an i (NTBs) . l ". increaBing usage of Non-tariff barriers This shift of' protectionist instruments has created difficu1ties in th,e GATT sys tem to regu 1 a'te them as the y become in t r ica te and divergent. The GATT negot i a t ions have taken place in a con- tinuous effort to put them under control, nonetheless, sorne ot- c the issues, moat importantly, the non-discriminatory applica- tion of safeguard measures was left for further negotiation. l, ...' L Emergence of Non-Tariff-Barriers / A significant expansion of world trade in the 19605 and '70s can be attributable partly to the successes of GATT negotiations over redUêtion of highly-set tar Iffs among indus 2 trialized nations. The tariff, once the biggest obstacle of free trade, la not a substantial barrier any more. One of the c most important conditions for free trade, which was promoted and encouraged under the lowered tariff system was the appli- ca t ion of compar ati ve advan tage, an economic theory t:ha t the products of lower costs prevail in the market so that a country can develop industries of such product. 3 This neces- sitated the industrial re-structuring as the international comparatl ve advantage shifts from one na tian to another. The developed countries such as the U.S., Canada, B.C., and Japan were most urged to adjust to this shi ft since they were the 3. -{ ,. ones who lowered tariffs most. In spi te of the. economic • necessity, the structural changes in these nations have not prog r e,.ssed as speed i ly as t he pace of the deve lopmen t of wor Id trade, but in most cases have retained a certain Ievel of "" , defensive adjustment to protect domestic industry against foreign products. Non-tariff barriers (NTBs) have increasingly been used as a means of protecting domestic industry as the tariff has been lowered and 66 the re-adjustment o~ industrial structure lags. NTBs set to delay apd complicate the customs permission process at the enterin9 ports func t ion, in effect, ae quantitative restrictions of imports from a maj'Or exporting country. 4 NTBs are net built on a non-diseriminatory basis, nor do they entitle an exporting country to take a retaliatory action, thus being defensive and contingent measures outside the scope of the GATT stipulations. Partly due to the adverse effect of this protectionist movement, the year 198'0 witnessed a de 1 i ne of the total volume of wor Id t rade f rom the prev ioua year. 2. GATT Ne90tia~ion 1 t i s under stood that emergency sa feguard aet ion becornes necessary in situations where imports, although not neeessari- 1y dumped or subsidized, may be causing or threathening serious injury to dornestie producers of like goods.