Section 1. Voluntary Restraints Imposed on Exports to U.S.
Item 1. Japan, U.S. Agree on Voluntary Restraints on Exports
In 1980, automobile production in Japan topped 10 million vehicles, putting Japan ahead of the United States as the world's largest automobile-producing country. This development was driven by exports, with exported vehicles that year reaching a historical high of 5.97 million units, marking the first time more Japanese-made vehicles had been sold overseas than within Japan. After the second oil crisis, compact cars began drawing consumer attention worldwide, and the high fuel efficiency and reasonable pricing of Japanese vehicles were beginning to win favor.
Including commercial vehicles, the export ratio for vehicles made in Japan in 1980-a year that also saw Toyota's exports of passenger cars top the 1 million mark for the first time-was a record-high 54 percent. However, this growing popularity of Japanese vehicles was also a contributing factor in the sudden increase in trade friction with the United States, Japan's largest export destination, which had begun in earnest in the late 1970s.
In 1980, the United States was experiencing an economic recession, and demand for passenger vehicles was down by 16 percent compared to the previous year, with sales slumping at 8.98 million units. Of that figure, Japanese vehicles accounted for 1.91 million units, an increase of 9 percent over the previous year, marking an expanded market share of 21.3 percent. In contrast, U.S.-made vehicles fell by 21 percent. This resulted in the "Big Three" U.S. automakers of General Motors, Ford, and Chrysler, together with American Motors, all falling into the red. Chrysler was hit particularly hard, and had to accept a 1.5 billion U.S. dollar loan guaranty from the U.S. federal government.
Poor sales forced the U.S. automakers to expand layoffs, leading the nationwide United Auto Workers (UAW) and hardline anti-Japan members of the U.S. Congress to increasingly claim that Japan was "exporting unemployment". In February 1980, UAW President Douglas Fraser visited Japan to encourage Japanese automakers to impose voluntary restraints on their exports and invest in the United States.
Later that year in June, the UAW proclaimed that the sudden rise in unemployment was due to Japanese cars, and took the matter to the U.S. International Trade Commission (ITC), instigating Section 201 of the Trade Act. In August, Ford followed suit with the same claim, with management and workers joining together to request industrial protection measures in the form of restrictions on imported Japanese vehicles.
Toyota Motor Corporation (TMC) (which was still then Toyota Motor Co.) and its affiliate in the United States, TMS, formed a committee to devise various countermeasures. Toyota also joined together with its dealers across the United States and the American International Automobile Dealers Association to actively promote Toyota's position.
In October 1980, TMS Vice President Norman Lean took part in a public hearing of the ITC, telling those present that the difficulties the U.S. auto industry was facing were brought on by the economic situation, and not by imported vehicles. Based on the testimony of Lean and others, the ITC voted the following month three to two in favor of allowing continued imports of Japanese vehicles. Unfortunately, however, the ITC's decision was not enough to put an end to the trade friction between the United States and Japan.
With 1980 being a presidential election year in the United States, conditions were ripe to politicize the Japan-U.S. trade imbalance. After Ronald Reagan took office in 1981, a number of important members of his cabinet began asking the Japanese government to place voluntary restraints on vehicle exports. The U.S. trade representative in the new administration charged with resolving the trade issue was William Brock, who believed that some sort of specific trade policy was necessary and as such entered into negotiations with Japan's Ministry of International Trade and Industry (MITI; now Ministry of Economy, Trade and Industry). Pressure on Japanese vehicles was mounting day by day. In February 1981, a bill was submitted to the U.S. Congress, which would later form the basis of a Japan-U.S. agreement that restricted the annual import of Japanese-made passenger cars to 1.6 million units for three years.
The Japanese automobile industry responded by saying that all parties should wait until autumn, when any recovery in the U.S. auto industry would become clear, and that any action before then was premature. However, the Japanese government determined that a political conclusion had to be arrived at, so at the end of April, MITI Minister Rokusuke Tanaka and U.S. Trade Representative Brook negotiated and signed an agreement in Tokyo to restrict exports of Japanese cars to the United States.