Senators urge hard line on auto trade talks
Washington —Three senators urged the Obama administration to win more concessions for automakers as 12-nation trade talks may be getting closer to a deal.
U.S. Sens. Sherrod Brown, D-Ohio, Rob Portman, R-Ohio, and Debbie Stabenow, D-Lansing, wrote U.S. Trade Representative Michael Froman urging the administration to take a hard line on auto issues in the Trans-Pacific Partnership.
The three urge him to negotiate an agreement that keeps U.S. tariffs on Japanese cars and trucks for a lengthy period and do more to drop other barriers to U.S. vehicles like currency manipulation.
Early last month, the long-running talks stalled amid a standoff between Japan and Mexico over autos.
The key issue is how countries will classify vehicles as built in one of the 12 nations — and how much content from other countries can be included in what is known as the “rules of origin.” The rules are in place to prevent China or other lower wage countries from being able to produce the majority of content in a vehicle and export it without paying taxes.
“The Trans-Pacific Partnership could have a significant impact on the U.S. auto supply chain due to the agreement’s inclusion of major auto producing nations, including Japan, Canada, and Mexico. The agreement must include tariff phaseouts and rules of origin that maximize U.S.-based production and suppliers to ensure U.S. producers gain equal market access and prevent our foreign competitors from gaining an unfair advantage,” the three senators wrote. “We urge you to negotiate the TPP to support and grow domestic auto manufacturing by including the longest, backloaded tariff phaseouts on cars and trucks, NAFTA-based rules of origin, and provisions to remove non-tariff barriers, including currency manipulation. An agreement that does not include these provisions will give our foreign competitors an even greater unfair advantage and will undermine the future of the U.S. auto industry.”
A spokesman for U.S. Trade Representative Mike Froman, Matthew McAlvanah, said the administration is pushing to open markets for automakers.
"President Obama has been a tireless champion of the American auto industry, including through TPP. TPP will be a major step forward to open new markets and level the playing field for American workers and manufacturers, including in the auto industry," he said.
Under the North American Free Trade Agreement, at least 62.5 percent of a passenger car or light truck’s net cost must originate in North America to be considered tariff-free under the agreement. Mexico wants to increase the percentage to 65 percent in the Trans-Pacific Partnership, while Japan wants it to be about 45 percent — which would allow for a greater number of parts from low-wage countries like China and Thailand to be included.
Mexico’s auto industry is booming as automakers and parts firms around the world build new plants and expand production thanks to low wages. About 70 percent of Mexican-built vehicles are exported.
At the same time, crucial negotiations are continuing over other auto issues that could reshape global auto production. They include how long U.S. tariffs on light trucks and cars will be in place before they are phased out; the procedures for extending tariffs if Japan fails to open its market to more U.S. exports; and the number of vehicles that Detroit’s Big Three will be able to ship under a streamlined approval procedure.
For more than seven years, the U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership, or TPP, that would create a massive free trade zone. The pact would cover one-third of global trade and nearly 40 percent of the world's economy. The deal could reshape auto production around the world.
President Barack 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.
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 tariffs have 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 dominated by Detroit’s Big Three.
American automakers fear that if Japan intervenes to weaken its currency, its automakers eventually will be able to dramatically undercut the U.S., especially when tariffs are phased out. Automakers want the tariffs kept in place for at least 25 years or more.
Japan and the United States have not said how long the U.S. auto tariffs will be in place — except to say that they will remain in force for an extended period — as long as any other tariff that gets phased out, and that’s expected to be around 20 years.
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.
The senators noted that “before Japan joined the TPP talks, the U.S. secured a commitment from Japan that U.S. tariffs on motor vehicles will be phased out in accordance with the longest staging period in the agreement and will be back-loaded to the maximum extent. It is imperative that the agreement live up to this commitment, given the chronically closed nature of the Japanese market. In addition, an agreement that provides the longest tariff to cars but not trucks or vice versa is not acceptable.”
Last month, the president of the AFL-CIO urged the administration to do more on autos. “Thousands of good American jobs and an iconic American industry are at risk, and we don’t even know what our government’s negotiating position is,” AFL-CIO President Richard Trumka said in a letter last week toFroman obtained by The Detroit News Wednesday.
McAlvanah said last month the Obama administration is “working toward a strong rule of origin in TPP that meets our objective of making sure that TPP benefits go to TPP countries and that promotes a vibrant domestic automotive industry and the jobs it supports. That task requires finding the right balance between the needs of domestic auto producers, who have made clear that they rely on international supply chains to be able to produce in the U.S., and our desire to promote U.S. sourcing and American jobs. In the end, we are confident that we will come to an agreement that strikes the right balance.”