Ve­hi­cle groups warn US tar­iffs mean job losses

In­dus­try says trade tur­moil has par­a­lyzed in­vest­ment de­ci­sions

Global Times - Weekend - - AUTO -

US au­tomak­ers and parts sup­pli­ers have warned that Pres­i­dent Don­ald Trump’s steel and alu­minum tar­iffs and threat­ened car tar­iffs will un­der­mine the ben­e­fits of the new deal to mod­ern­ize the North Amer­i­can Free Trade Agree­ment, caus­ing wide­spread job losses.

At a wide-rang­ing hear­ing be­fore the US In­ter­na­tional Trade Com­mis­sion over the week­end, la­bor rep­re­sen­ta­tives said the new USMex­ico-Canada Agree­ment (USMCA) fails to in­clude ad­e­quate en­force­ment of la­bor stan­dards, while fruit and veg­etable grow­ers in parts of the US said it leaves them vul­ner­a­ble to sub­si­dized Mex­i­can com­pe­ti­tion.

The tes­ti­mony will feed into a study by the com­mis­sion on the eco­nomic im­pact of the trade deal reached on Sep­tem­ber 30, which could heav­ily in­flu­ence sup­port for it in the US Con­gress. A vote on the pact is not ex­pected un­til the spring of 2019, fol­low­ing a lengthy con­sul­ta­tion process.

Sev­eral au­to­mo­tive trade groups said side let­ters to the USMCA deal that al­low Canada and Mex­ico du­tyfree auto im­port quo­tas in the event that Trump im­poses car tar­iffs was an in­di­ca­tion that such a move seemed in­evitable.

The Trump ad­min­is­tra­tion is con­sid­er­ing rec­om­men­da­tions from the US Com­merce Depart­ment on whether to im­pose tar­iffs on na­tional se­cu­rity grounds un­der Sec­tion 232 of a Cold War-era trade law.

No de­ci­sions have been made, but Trump has fre­quently threat­ened to im­pose 25 per­cent tar­iffs on au­tos and parts to pres­sure the EU and Ja­pan to make trade con­ces­sions.

“If im­ple­mented, in­creased auto tar­iffs would not only un­der­mine the po­ten­tial suc­cess of the USMCA ... they would also pose a ma­te­rial threat to the econ­omy and may re­sult in the loss of as many as 700,000 jobs across the US,” said Jen­nifer Thomas, vice pres­i­dent of gov­ern­ment af­fairs for the Al­liance of Au­to­mo­bile Man­u­fac­tur­ers.

The groups also said the fail­ure of the USMCA to lift steel and alu­minum tar­iffs have cost the in­dus­try bil­lions of dol­lars and trade tur­moil in gen­eral has par­a­lyzed in­vest­ment de­ci­sions.

“The cur­rent state of play on trade has placed our in­dus­try in tur­moil,” said Ann Wil­son, se­nior vice pres­i­dent of gov­ern­ment af­fairs at the Mo­tor and Equip­ment Man­u­fac­tur­ers As­so­ci­a­tion.

“In the last year our mem­bers have faced Sec­tion 232 steel and alu­minum tar­iffs, other Sec­tion 232 tar­iffs pro­posed, and Sec­tion 301 tar­iffs on goods from China.”

US or for­eign brands?

There also was a di­ver­gence of views among do­mes­tic and for­eign au­tomak­ers on the over­all ben­e­fits of the USMCA agree­ment, which re­quires au­tos to have 75 per­cent re­gional con­tent and at least 40 per­cent from the US or Canada.

John Bozzella, pres­i­dent of the As­so­ci­a­tion of Global Au­tomak­ers, which rep­re­sents for­eign brand au­tomak­ers with US plants, said he was con­cerned that the “many lay­ered” con­tent re­quire­ments would hurt au­tomak­ers’ com­pet­i­tive­ness by re­quir­ing “un­nec­es­sary” sup­ply chain shifts and in­vest­ment in com­pli­ance.

Matt Blunt, pres­i­dent of the Amer­i­can Au­to­mo­tive Pol­icy Coun­cil, which rep­re­sents Detroit-based au­tomak­ers Gen­eral Mo­tors, Ford and Fiat Chrysler, de­scribed the trade deal as “work­able” for these com­pa­nies, which have larger US man­u­fac­tur­ing footprints than their com­peti­tors.

He said the deal would not re­quire mas­sive man­u­fac­tur­ing and sup­ply chain changes im­me­di­ately but over time, au­tomak­ers would need to con­sider changes in where they build cars and ma­jor com­po­nents.

La­bor stan­dards

A sim­i­lar di­ver­gence came from agri­cul­ture groups, where grain farm­ers and ship­pers said it was a “sig­nif­i­cant ad­vance­ment” that ex­pands mar­ket ac­cess but sea­sonal pro­duce groups said it fails to ad­dress Mex­i­can sub­si­dies that are driv­ing South­east­ern grow­ers out of busi­ness.

An ini­tial US de­mand for the abil­ity to im­pose sea­sonal tar­iffs to pro­tect US fruit and veg­etable grow­ers was aban­doned dur­ing the 13-month ne­go­ti­a­tions.

“We have got­ten the short end of the stick since the ink dried on the agree­ment,” said Flor­ida Agri­cul­ture Com­mis­sioner Adam Put­nam.

AFL-CIO trade pol­icy spe­cial­ist Ce­leste Drake said that the en­force­ment mech­a­nism for new, higher la­bor stan­dards was weak, re­ly­ing on a sel­dom used state-to-state dis­pute set­tle­ment mech­a­nism. “We urge the com­mis­sion to make clear that if the obli­ga­tions are not en­forced, the lure of cheap and easy la­bor ex­ploita­tion in Mex­ico will con­tinue to draw pro­duc­tion and hold down wages in both coun­tries,” she said.

File photo: IC

Em­ploy­ees at a Volk­swa­gen plant in the US

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