Mercedes is selling its entry-level CLA 250 sedan for $29,900 in the United States. It sells the same car in Germany for $44,525. In international trade, dumping is like predatory pricing. Dumping occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below the costs of production. These factors are what determines “fair value.” Selling in the United States at less than fair value is illegal under U.S. and international law.
Mercedes Benz is now illegally dumping cars in the United States at a huge discount from what it is selling the exact same models for in Germany. This constitutes an unfair trade practice.
Recently the ITC and the Commerce Department found that China was illegally dumping solar panels in the United States below the cost of production that caused significant injury to the U.S. solar panel industry. The Obama administration imposed high countervailing duties to enforce the ITC and Commerce Department’s rulings. Since then, the American solar panel industry has rebounded dramatically—the duties have worked to counteract the injury as intended by the U.S. law.
There is an ongoing war between Mercedes, BMW and Audi, the big three German luxury automobile brands. All three are striving to be the leader in worldwide sales. The key to winning this global war is winning in the biggest market of them all, the U.S. of A.
Mercedes is now selling is CLA 250 luxury automobile for $29,900 in the United States. This is comparable to many non-luxury cars, including the Ford Taurus and the Honda Accord, and well below the prices of American-made luxury cars.
The problem is that Mercedes, according to its German website, is selling the same CLA 250 in Deutschland for $32,500 Euros. The Euro is currently worth $1.37. At this exchange rate the Mercedes CLA 250 sells for $44,525 in Germany, fully one-third more than in the United States.
This means that you could buy a Mercedes CLA 250 in the U.S. and ship it back to Germany and sell it for a large profit. The discount in the United States is a whopping $14,625, the price of some economy cars.
Mercedes does have an asterisk on its incredibly low $29,900 price: Shipping charges of $925 are not included. That is the only exception not included in the price.
Although U.S. manufacturers are doing well in the current economy, they could be doing even better without illegal dumping. Consider this: would you buy a stripped-down Ford Taurus for $27,600 or a luxurious Mercedes CLA 250 for $29,900? Or a Lincoln MKS for $40,425? The Lincoln MKS is basically the Ford Taurus in a luxury package, the same car dressed up with leather upholstery and electronic gadgets.
Similarly, the Cadillac ATS, very close in size to the Mercedes CLA 250, has a sticker price of $33,000. It is comparable in many ways to the Mercedes but at a $3,000 premium many buyers would opt for the German vehicle. Price does matter.
Parties injured by illegal dumping can file a complaint with the Commerce Department and the International Trade Commission in Washington, D.C. That means manufacturers like General Motors and Ford could file a complaint. They may be reluctant to do so because it will make them look like complainers that are unable to compete.
A more likely complainant would be a trade union injured by this illegal dumping. This would include the United Auto Workers and the United Steelworkers union. The autoworkers are injured because they are making fewer cars in the United States as a result of the dumped Mercedes vehicles. The steelworkers are injured because imported Mercedes do not use U.S. steel.
The Obama administration is not likely to do anything unless and until someone files an unfair trade practices complaint.
Joseph is chairman of the Made in the USA Foundation.