Do clean-car subsidies disguise protectionism?

The US has complained for decades that Japan is making it difficult for American companies to export cars there. The complaints were about regulation, prices, and subsidies. Japan has had a rather easy time dismissing these complaints with the mere fact that US car companies are very reluctant to build right-hand driven cars, which are required for driving on the left side of the road in Japan. The latest US complaint is about subsidies for clean cars, which again are supposed to favor Japanese cars. I would answer that the US could maybe build cleaner cars, but let us have another look at the issue.

Taiju Kitano studies the current Japanese subsidies and the American proposal on how the subsidies should be structured. The subsidy is for scrapping old cars for replacement by fuel-efficient ones. At issue is the method for determining which fuel-efficient cars qualify. Japan has its own method for setting fuel efficiency, but this is not calculated for cars with low production or imports, like US models. That disqualifies them for the subsidy. Later, foreign ratings have been accepted for qualification, but the US complained that its city-driving standard is used, while a city/highway combination were more appropriate. Japan claims its standard is close to the city standard in the US.

The use is not solely about calculation of fuel-efficiency standards, it also about potential market shares. Kitano thus estimates an oligopolistic model to determine demands in each market and thus demanded quantities under different policies. If the goal is to improve overall fuel efficiency, both policies score equivalently. The US one would be, however, much cheaper because new cars become eligible and they substitute for cars that command larger subsidies. The US is thus mainly helping Japan reduce its expenses, while having no impact on pollution or even a positive one on profits of Japanese car makers.