Detroit’s Big Three fear Asian trade pact

David Shepardson
Detroit News Washington Bureau

Washington — – An Asia-Pacific free trade deal that encompasses 40 percent of the world’s economy took a major step forward this week and could radically reshape the U.S. auto market.

President Barack Obama says the pact could help support millions of new jobs by opening fast-growing markets to U.S. exports. And he argues if the U.S. doesn’t act, China will — writing its own far-reaching trade deals.

Over objections of U.S. automakers, House and Senate panels this week approved “fast track” legislation to allow President Barack Obama to get an up-or-down vote, without amendments, on a 12-nation free trade deal still under negotiation. In its current form, the Trans-Pacific Partnership does not include provisions the auto companies seek to bar countries from intervening to weaken the value of their currency.

A strong U.S. dollar against a weaker local currency — especially one that is artificially weak due to government manipulation — means foreign vehicles are cheaper here, and U.S. vehicles are more expensive there.

For more than seven years, the U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free-trade zone comprising 40 percent of the world’s economy; Japan joined the talks in 2013. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are part of the negotiations.

The pact eventually would end America’s 25 percent tariffs on imported light trucks and 2.5 percent tariffs on cars and auto parts. The tariff has been in place for more than 50 years. Those tariffs, especially the truck tax, have forced foreign automakers to build truck and SUV plants in the United States and helped keep some would-be competitors out of the truck market that is dominated by Detroit’s Big Three.

Obama wants the free-trade deal as a cornerstone of his administration’s economic legacy, and a way to boost exports of U.S.-made products. His administration also seeks a deal with Japan as crucial, since the world’s third largest economy is a critical ally in a region where China is expanding its influence.

U.S. Trade Representative Mike Froman says the U.S. faces a choice “between a world in which America sets the rules of the road on trade and a world in which our competitors do ... If we allow others to carve up the markets of the future, our workers and businesses will pay a steep price. To drive production in the United States and create good jobs here, we must lead — and we must lead together, with a united, bipartisan voice about our commitment to opening markets for our workers and businesses.”

But the White House faces strong opposition from most Democrats — especially liberals such as Sen. Elizabeth Warren, D-Mass., and his traditional allies in organized labor: the AFL-CIO and United Auto Workers union. Unions have held rallies and marched to the U.S. Trade Representative’s Office to angrily denounce the trade deal, saying it will send thousands of factory jobs overseas.

They have raised a number of questions about the deal — especially the fact that the administration hasn’t released the text of an agreement.

“Workers in Michigan have seen what happens when bad trade deals get fast-tracked that hurt our manufacturers and drive down wages. Michigan families simply cannot afford to take home smaller paychecks or watch their good-paying jobs go overseas,” said Sen. Debbie Stabenow, D-Lansing. “Instead of fast-tracking trade, we need to fast-track the middle class by putting policies in place that will allow our businesses and workers to compete on a level playing field.”

Japanese Prime Minister Shinzo Abe will be in Washington next week to address Congress and meet with Obama; a final deal could be announced by then.

‘Damaging to workers’

The seemingly obscure issue of the value of currency could impact hundreds of thousands of U.S. jobs.

“This is a very big deal,” said Harley Shaiken, a professor at the University of California Berkeley who studies the auto industry. Foreign automakers would have significant advantages. “It would put considerable pressures on U.S. automakers and prove damaging to workers.”

But the administration says currency issues can be dealt with in other international forums, not trade deals.

American automakers fear that if Japan intervenes to weaken its currency, its automakers eventually will be able to dramatically undercut them, especially when U.S. tariffs are phased out. Automakers want the tariffs kept in place for at least 25 years or more, while Japan wants tariffs on auto parts dropped immediately.

Japan imports very few U.S. cars, even though it has no tariffs on U.S. vehicles. U.S. automakers have complained for years of other barriers to U.S. vehicles, while Japanese automakers argue U.S. companies haven’t made enough of an effort to sell vehicles in Japan. Japanese automakers note they have spent tens of billions of dollars and employ thousands of Americans building cars and trucks in the United States — something U.S. companies don’t do in Japan.

Obama needs GOP’s help

Obama says the current rules aren’t working, since U.S. autos aren’t selling in big numbers in Japan — just a few thousand a year.

“Now, the last time I checked, if you drive around Washington, there are a whole bunch of Japanese cars. You go to Tokyo and count how many Chryslers and GM and Ford cars there are,” Obama said last week.

Obama will need to rely mostly on Republicans in Congress to win approval of a trade deal. Most experts think as few as 15 to 30 Democrats in the House and 180 or more Republicans will vote to approve fast track. Obama has been personally lobbying Democrats to back the deal..

Lobbyists for Ford Motor Co. and General Motors Co. stood outside the Senate Finance Committee for hours Wednesday, monitoring the proceedings after the committee voted 11-15 against an amendment that would have required the administration to seek enforceable currency rules in a final deal. The Obama administration called that a “poison pill” that could derail a deal.

U.S. automakers and opponents will make another push when the bill comes to Senate floor, and will have still another try when a final trade deal comes before Congress seeking to include currency provisions.

“It’s clear there is broad, bipartisan agreement that currency manipulation must be addressed,” Ford spokeswoman Christin Baker said. “The status quo isn’t working.”