II

103D CONGRESS

1ST SESSION S. 1173

To provide for a comprehensive reduction in the United States bilateral

trade deficit with Japan, to assure mutually advantageous international

trade in motor vehicles and motor vehicle parts, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 29 (legislative day, JUNE 22), 1993

Mr. RIEGLE introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To provide for a comprehensive reduction in the United

States bilateral trade deficit with Japan, to assure mutually advantageous international trade in motor vehicles

and motor vehicle parts, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘United States-Japan

5 Trade Equalizing Act of 1993’’.
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1 TITLE I—FINDINGS AND

2 DEFINITIONS

3 SEC. 101. FINDINGS, PURPOSE, AND DISCLAIMERS.

4 (a) FINDINGS.—The Congress makes the following

5 findings:

6 (1) The United States trade deficit with Japan

7 has increased substantially over the past decade. In

8 1991, the United States trade deficit with Japan

9 was $43,400,000,000. The trade deficit increased by

10 14 percent in 1 year, to over $49,400,000,000 by

11 the end of 1992.

12 (2) The traditional domestic motor vehicle and

13 motor vehicle parts sector directly employs more

14 than 1 million workers and indirectly employs sev15 eral million more. The workers are skilled, hard

16 working, productive, capable, and proud of their

17 work. The workers and their employers have

18 achieved great improvements in quality, perform19 ance, fuel economy, safety, and design of domestic

20 motor vehicles.

21 (3) The domestic motor vehicle and motor vehi22 cle parts sector directly and indirectly accounts for

23 about 12 percent of our gross national product and

24 generates more than $200,000,000,000 a year in

25 revenue.
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1 (4) The domestic motor vehicle and motor vehi2 cle parts sector is a major consumer of steel, glass,

3 textiles, rubber, aluminum, machine tools, chemicals,

4 electronics, and other important products.

5 (5) Recognizing the competitive pressures fac6 ing the motor vehicle industry, Japan has operated

7 under a voluntary export restraint arrangement

8 since 1981 that has not been recognized or enforced

9 by the United States Government.

10 (6) Since 1986 the United States Government

11 has engaged, with little result, in a negotiating proc12 ess with the Government of Japan to obtain fair ac13 cess to the markets of that nation for United States

14 producers of motor vehicle parts and manufacturers

15 of motor vehicles.

16 (7) Despite these negotiating efforts, in 1992

17 the United States posted a $49,400,000,000 trade

18 deficit with Japan of which over $30,000,000,000

19 was accounted for by the automotive sector deficit

20 ($9,800,000,000 of which was attributable to motor

21 vehicle parts), and there is little evidence that the

22 Japanese Government is seriously trying to eliminate

23 such deficits which are detrimental to the United

24 States economy and jobs.
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1 (8) In addition to transplant assembly facilities

2 in the United States that are owned or controlled by

3 Japanese persons, motor vehicles and motor vehicle

4 parts are being imported from Japan into the

5 United States in such increased quantities and

6 under such conditions as to cause, or threaten to

7 cause, serious injury to domestic manufacturers of

8 like or directly competitive products and to the do9 mestic workers producing such products.

10 (9) In the last 5 years, transplant assembly fa11 cilities in the United States that are owned or con12 trolled by persons from Japan have not shifted sig13 nificantly their procurement to traditional United

14 States producers of motor vehicle parts, as illus15 trated by the fact that—

16 (A) the United States automotive parts

17 trade deficit with Japan grew between 1985

18 and 1990 at an annual average rate of 17 per19 cent and totaled $9,800,000,000 in 1992; and

20 (B) only 12.5 percent of the customs value

21 of vehicles manufactured in such transplant fa22 cilities in the United States is based on parts

23 produced by traditional United States motor ve24 hicle parts producers, while 35.1 percent of

25 such value is based on imports from Japan and
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1 32.4 percent of such value is based on pur2 chases from Japanese-affiliated parts producers

3 located in the United States.

4 (10) The pattern of procurement described in

5 paragraph (9) has contributed significantly to the

6 overall United States merchandise trade deficit with

7 Japan.

8 (11) The continuation of current procurement

9 practices by automobile companies owned or con10 trolled by persons from Japan and the increased

11 production of vehicles by transplant facilities in the

12 United States is projected to result in a 110 percent

13 (or $21,990,000,000) increase in the United States

14 motor vehicle parts trade deficit by 1994.

15 (12) Aftermarket parts are likely to account for

16 50 percent of the motor vehicle parts trade deficit

17 with Japan by 1994 because transplant facilities are

18 not purchasing sufficient quantities of original

19 equipment from United States suppliers.

20 (13) Traditional United States motor vehicle

21 parts manufacturers are particularly

22 underrepresented in the production of motor vehicles

23 produced by transplant facilities in the United

24 States in the following 3 major, high value-added ve25 hicle systems:
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1 (A) Engines.

2 (B) Transmissions.

3 (C) Body structures.

4 (14) In the 1991 National Trade Estimates Re5 port, the United States Trade Representative listed

6 ‘‘close and durable relationships’’ between Japanese

7 motor vehicle makers and suppliers as a barrier to

8 United States motor vehicle parts sales in Japan.

9 (15) The market share of Japanese motor vehi10 cle manufacturers in the European Community is

11 currently 10 percent while their market share in the

12 United States is about 35 percent.

13 (16) The European Community has negotiated

14 an understanding with the Government of Japan

15 limiting the market share of motor vehicles produced

16 by Japanese motor vehicle manufacturing companies

17 both in Japan and in the European Community to

18 less than 16 percent until the year 2000.

19 (17) The home market for motor vehicles and

20 motor vehicle parts in Japan remains largely closed

21 to all foreign manufacturers whose combined market

22 share equals no more than 3 percent.

23 (18) Japan’s nontariff market barriers include

24 onerous inspection and certification systems that

25 discriminate against foreign-made motor vehicles
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1 and motor vehicle parts, a tax system that discrimi2 nates against foreign-made products, closed distribu3 tion systems and dealer networks, and government4 tolerated ‘‘Keiretsu’’ relationships involving motor

5 vehicle and motor vehicle parts manufacturers and

6 dealers. At the same time, Japanese firms enjoy

7 open markets in the United States with no limita8 tions or discrimination.

9 (b) PURPOSE.—The purpose of this Act is to decrease

10 the merchandise trade deficit of the United States with

11 Japan by providing for a staged merchandise trade deficit

12 reduction over a 5-year period.

13 (c) CONGRESSIONAL DISCLAIMERS.—It is the intent

14 of Congress that this Act shall not be deemed to modify

15 or amend the terms or conditions of any international

16 treaty, convention, or agreement that may be applicable

17 to motor vehicles and motor vehicle parts and to which

18 the United States, on the date of the enactment of this

19 Act, is a party, including, but not limited to, the terms

20 or conditions of any such treaty, convention, or agreement

21 which provide for the resolution of conflicts between the

22 parties thereto. Nothing in this Act shall be construed (1)

23 to confer jurisdiction upon any court of the United States

24 to consider and resolve such conflicts, or (2) to alter or
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1 amend any law existing on the date of the enactment of

2 this Act which may confer such jurisdiction in such courts.

3 SEC. 102. DEFINITIONS.

4 For purposes of this Act:

5 (1) MOTOR VEHICLE AND MOTOR VEHICLE

6 PARTS.—

7 (A) The term ‘‘motor vehicle’’ means any

8 article of a kind described in heading 8703 or

9 8704 of the Harmonized Tariff Schedule of the

10 United States.

11 (B) The term ‘‘motor vehicle parts’’ means

12 any article of a kind described in the following

13 provisions of the Harmonized Tariff Schedule

14 of the United States if suitable for use in the

15 manufacture or repair of motor vehicles:

16 (i) Subheadings 8407.31.00 through

17 8407.34.20 (relating to spark-ignition re18 ciprocating or rotary internal combustion

19 piston engines).

20 (ii) Subheading 8408.20 (relating to

21 the compression-ignition internal combus22 tion engines).

23 (iii) Subheading 8409 (relating to

24 parts suitable for use solely or principally
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1 with engines described in clauses (i) and

2 (ii)).

3 (iv) Subheading 8483 (relating to

4 transmission shafts and related parts).

5 (v) Subheadings 8706.00.10 and

6 8706.00.15 (relating to chassis fitted with

7 engines).

8 (vi) Heading 8707 (relating to motor

9 vehicle bodies).

10 (vii) Heading 8708 (relating to bump11 ers, brakes and servo brakes, gear boxes,

12 drive axles, nondriving axles, road wheels,

13 suspension shock absorbers, radiators,

14 mufflers and exhaust pipes, clutches, steer15 ing wheels, steering columns, steering

16 boxes, and other parts and accessories of

17 motor vehicles).

18 The Secretary shall by regulation include as

19 motor vehicle parts such other articles (de20 scribed by classification under such Harmonized

21 Tariff Schedule) that the Secretary considers

22 appropriate for the purposes of this Act.

23 (C)(i) The term ‘‘Japanese motor vehicle’’

24 means a motor vehicle which is the product of

25 Japan.
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1 (ii) The term ‘‘Japanese motor vehicle

2 part’’ means a motor vehicle part which is the

3 product of Japan.

4 (2) ENTERED.—The term ‘‘entered’’ means en5 tered, or withdrawn from warehouse for consump6 tion, in the customs territory of the United States.

7 (3) IMPORT RESTRICTION IMPLEMENTATION

8 PERIOD.—The term ‘‘import restriction implementa9 tion period’’ means a calendar year which—

10 (A) occurs after 1994 and before calendar

11 year 2001, and

12 (B) follows a calendar year with respect to

13 which the Secretary finds, under section 201(b),

14 that the trade deficit reduction target was not

15 met.

16 (4) INTERSTATE SALE.—The term ‘‘interstate

17 sale’’ means sale or distribution in the interstate

18 commerce of the United States.

19 (5) BASELINE DEFICIT.—(A) The term ‘‘base20 line deficit’’ means the average monthly merchandise

21 trade deficit, as computed by the Secretary, of the

22 United States with Japan during calendar year

23 1993.
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1 (B) In computing merchandise trade deficits

2 under this section, the value of bilateral trade be3 tween the United States and Japan in—

4 (i) crude petroleum; and

5 (ii) nonmonetary gold;

6 shall not be included.

7 (6) SECRETARY.—The term ‘‘Secretary’’ means

8 the Secretary of Commerce.

9 (7) TRADE REPRESENTATIVE.—The term

10 ‘‘Trade Representative’’ means the United States

11 Trade Representative.

12 TITLE II—MERCHANDISE TRADE

13 DEFICIT REDUCTION

14 SEC. 201. STAGED TRADE DEFICIT REDUCTION.

15 (a) TRADE DEFICIT REDUCTION TARGETS.—

16 (1) IN GENERAL.—The trade deficit reduction

17 target for each of the calendar years listed below is

18 an average monthly merchandise trade deficit of the

19 United States with Japan during such year that

20 does not exceed an amount that equals the applica21 ble percentage of the baseline deficit that appears

22 opposite such year:

Calendar year Applicable percentage of baseline deficit

1994 ......................................................................................... 80 percent

1995 ......................................................................................... 60 percent

1996 ......................................................................................... 40 percent

1997 ......................................................................................... 20 percent

1998 ......................................................................................... 0 percent
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1 (2) SPECIAL RULE FOR 1998.—For calendar

2 year 1998, the 0 percent trade deficit reduction tar3 get shall be treated as having been met if the mer4 chandise trade deficit of the United States with

5 Japan during such year does not exceed—

6 (A) an amount equal to 5 percent of the

7 value of the aggregate bilateral merchandise

8 trade between the United States and Japan

9 during such year; or

10 (B) $5,000,000,000.

11 (b) COMPUTATIONS.—

12 (1) IN GENERAL.—Not later than January 1

13 following each calendar year listed in subsection

14 (a)(1), the Secretary shall compute whether the

15 trade deficit reduction target for such year was met.

16 (2) ANNOUNCEMENT OF IMPORT RESTRICTION

17 IMPLEMENTATION PERIOD.—If the Secretary finds

18 under paragraph (1) that the trade deficit reduction

19 target specified under subsection (a) for a calendar

20 year was not met, the Secretary shall announce, by

21 publication in the Federal Register, that the import

22 restriction implementation period is in effect begin23 ning on January 1 of the year after the year to

24 which the finding applies.
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1 SEC. 202. COMPUTATION OF IMPORT RESTRICTIONS IF

2 TRADE DEFICIT REDUCTION TARGET NOT

3 MET.

4 (a) IN GENERAL.—On January 1 of the first cal5 endar year (and each calendar year thereafter) for which

6 an import restriction implementation period is in effect,

7 the Secretary shall compute and publish in the Federal

8 Register the quantitative import restrictions for such cal9 endar year.

10 (b) COMPUTATION.—

11 (1) IN GENERAL.—For purposes of subsection

12 (a), the term ‘‘quantitative import restrictions’’

13 means the aggregate quantity of Japanese motor ve14 hicles and the aggregate quantity of Japanese motor

15 vehicle parts that may be entered into the United

16 States (in accordance with paragraph (2) or (3)) for

17 a calendar year described in subsection (a).

18 (2) FIRST YEAR RESTRICTIONS.—The aggre19 gate quantity of Japanese motor vehicles and Japa20 nese motor vehicle parts that may be entered into

21 the United States, during the first calendar year for

22 which an import restriction implementation period is

23 in effect, may not exceed the aggregate quantity of

24 such motor vehicles and the aggregate quantity of

25 such motor vehicle parts entered into the United

26 States during 1993, reduced by 20 percent.
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1 (3) SUBSEQUENT YEARS.—In the case of any

2 calendar year for which an import restriction period

3 is in effect after the first such calendar year, the ag4 gregate quantity of Japanese motor vehicles and

5 Japanese motor vehicle parts that may be entered

6 into the United States shall not exceed the amount

7 of such motor vehicles and motor vehicle parts en8 tered during the most recent preceding calendar year

9 for which an import restriction implementation pe10 riod was in effect, reduced by 20 percent.

11 (4) ADMINISTRATION.—In order to prevent im12 port surging or to otherwise ensure the efficient ad13 ministration of this Act, the Secretary may impose

14 temporary quantitative import restrictions on Japa15 nese motor vehicles and Japanese motor vehicle

16 parts entered during the first 3 months of a cal17 endar year in an import restriction implementation

18 period.

19 SEC. 203. REPORTS.

20 Within 30 days after a computation is made under

21 section 201 or 202 with respect to a calendar year, the

22 Secretary shall submit to the Congress a report setting

23 forth the bases of the computation.
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1 SEC. 204. SENSE OF CONGRESS REGARDING ACHIEVEMENT

2 OF MERCHANDISE TRADE DEFICIT REDUC3 TION TARGETS.

4 It is the sense of the Congress that representatives

5 of the United States and Japanese Governments should

6 undertake continuing discussions regarding the means and

7 measures, to be selected by the Japanese Government, to

8 achieve the merchandise trade deficit reduction targets re9 quired under section 201(a). During the discussions, the

10 Trade Representative should particularly address market

11 access priorities for United States exports to Japan.

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