"Car States Balk at Trade Pact
Opponents say president’s push could cost jobs and not result in a more open Japanese market
By
May 18, 2015 6:22 p.m. ET
WILLIAM MAULDIN
President Barack Obama’s
Pacific trade agreement is raising alarms not only in Michigan and
surrounding states dominated by Detroit’s Big Three, but also farther
south where backers of Japanese car makers worry about the fate of
current and future plants in the region.
The
proposed Trans-Pacific Partnership among the U.S. and 11 other
countries would lower tariffs on imported cars from Japan as part of a
much broader agreement to cut trade barriers and abide by a set of
shared commercial rules. At the same time, the U.S. could agree to
reduce or eliminate its import tariffs on cars, trucks and parts in 10
years or less.
While
most U.S. industries are unlikely to notice much difference under the
TPP, the auto sector is set to see a tangible impact. In the
transportation sector, led by cars, the TPP could boost imports by an
extra $30.8 billion by 2025, compared with an exports gain of $7.8
billion,according to a study co-written by Peter Petri,professor of international finance at Brandeis University.
“The
tariff cuts would help Japan, but 10-plus years is a long time in a
dynamic industry,” Mr. Petri said. The auto makers “are looking beyond
the TPP, at tough global competition around the bend” in China and other
Asian countries.
Disappointed
that Japan joined the Pacific talks, the Detroit-centered auto industry
is pushing to get as much possible in the deal, even if that means
seeing it defeated in Congress. With the dollar’s rise eating into
profits, Ford Motor Co. is pressing allies in Congress to include rules cracking down on potential currency manipulation in Japan.
At
the same time, unions and lawmakers wary of lowering trade barriers
warn the TPP could reduce the appeal of U.S. operations for Japanese
producers, which currently avoid a small but significant tariff on cars
produced and sold in the U.S.
“In
truth, if you eliminate the 2.5% tariffs on imported automobiles, that
might reduce the desirability of a foreign country to invest and build a
plant in the United States,” Sen. Jeff Sessions (R., Ala.) said in an
interview last week. “When they decide to build a plant in the state,
they consider a lot of things.”
Because
of the foreign car investments in his state and other factors, Mr.
Sessions says he may join a small group of Republicans expected to vote
against so-called fast-track trade legislation, a procedural measure
that would allow the Pacific trade deal to get an up-or-down vote in
Congress without amendments.
The White House is seeking the legislation to help conclude the TPP talks and ensure a timely vote on the deal.
Mr.
Obama has brushed aside static from Detroit and other defenders of the
car makers, promising in an interview last month with The Wall Street
Journal “to show that it is a good deal for them.” Indeed, the U.S. is
seeking to lower regulatory and other barriers Detroit faces in Japan’s
car market as part of the broad trade pact.
But
while opponents in Detroit would welcome improved access to Japan and
other Asia-Pacific markets, they fear currency manipulation could
undermine any benefits. Ford and other Detroit producers want Congress
to enact rules to deter currency manipulation, backed by the threat of
trade sanctions.
Rep. Sander Levin, a
Michigan Democrat who has emerged as one of the top critics of Mr.
Obama’s trade policy, is calling for the tariff to be cut in 25 years
and phased out over 30 years if Detroit doesn’t gain a foothold in the
Japanese car market. Many observers say the deal may erase the duties in
10 years, with potential reductions in auto-parts tariffs sooner.
Cutting the main duty on cars could save Japanese producers $1 billion a
year.
Mr.
Petri, the Brandeis trade expert, said car imports would see less of a
jump in that period if the U.S. tariff cut is delayed.
Some
lawmakers and backers of Japanese car makers operating in the U.S. fear
the president’s free-trade push could hurt the economics of producing
cars in the U.S., at little benefit to the Big Three. Here, a Toyota
plant in Blue Springs, Miss., earlier this year.PHOTO: ROGELIO V. SOLIS/ASSOCIATED PRESS
But
Mr. Levin—like Sen. Rob Portman, an Ohio Republican who previously
served as U.S. trade representative, and many other lawmakers—is backing
strong versions of currency rules that the Obama administration and
other trading partners oppose. Sen. Debbie Stabenow, another Michigan
Democrat, has warned about cutting auto part tariffs, and Sen. Sherrod
Brown (D., Ohio) is one of the biggest critics of Mr. Obama’s trade
policy over workers’ issues, especially in steel and manufacturing.
“Japan’s
one-way street in the automotive industry has cost U.S. jobs for
decades,” Mr. Levin said. “Any reductions in the U.S. tariff on Japanese
autos and trucks must be tied effectively into the opening of their
long-closed markets.”
Many
backers of freer trade—including the Japanese auto giants that produce
many cars in North America—dismiss the concerns of Detroit and
politicians in the region as outdated protectionism. Cutting car duties
could benefit consumers through lower sticker prices, they say.
“Because
this is a free-trade agreement, we support all auto tariffs in the
TPP—cars, parts and trucks—going to zero as soon as possible,” said Ron
Bookbinder, the Japan Automobile Manufacturers Association’s U.S.
director.
Trade
agreements can also lure more investment from companies that want to
sell to the broader trade bloc. “In our experience, auto companies
invest in Tennessee and elsewhere in the country because of our vibrant
market and skilled workforce, and lowering trade barriers would lead to
an increase in auto manufacturers in the United States,” said Sen. Bob Corker (R., Tenn.).
Observers
say Japan’s auto makers have invested heavily in the U.S. and aren’t
likely to move based on the TPP. “There are huge fixed investment costs
and firms can’t just pick up and move with every exchange-rate
fluctuation or tariff change,” said Douglas Irwin, trade expert and
economics professor at Dartmouth College.
Those
assurances may not be enough for labor unions and allied Democratic
lawmakers worried about the TPP’s effect on Japanese producers in the
U.S.
“The
reason they came here is because they had to,” said Glenn Johnson, head
of local 1112 of the United Auto Workers, which runs the General Motors
Co. plant in Lordstown, Ohio. UAW members operate plants that supply
Asian producers. “We don’t know what the trickle-down effect could be”
if the U.S. tariffs are removed, he said.
Write to William Mauldin at william.mauldin@wsj.com "
That's right, as Glenn Johnson of Local 1112 is quoted, "...they came here because they had to." Foreign car companies be they Japanese, European or otherwise would all choose to import if that were the cheaper option and with trade deals like the Trans-Pacific Partnership being put together in Washington a megasite in every county in North Carolina still won't bring them here.
Nor will incentive packages unless the packages are designed to pay per every car sold-- something no state can afford to do.
