By The Hill Staff - 03/30/05 12:00 AM EST
American automakers no longer dominate the U.S. passenger-car market, but their pickup trucks still outsell their foreign-built rivals — with the help of what critics call the “chicken tax.”
The United States applies a 25 percent tariff on imported pickup trucks — a trade barrier that originated in a dispute with Europe over frozen chicken. By comparison, car imports face a 2.5 percent tariff.
After more than three decades of losing its lobbying fight to repeal the tariff, the trade association that represents foreign automobile dealers finally sees light at the end of the tunnel in a free-trade deal with Thailand.
The potential pact, still under discussion, is more than chicken feed to foreign auto dealers and supporters of domestic auto industry alike.
Thailand is the second largest producer of pickup trucks in the world, behind the United States.
Dropping the tariff on trucks produced there “would be a major victory for us,” said Ed Patru, communications director for American International Automobile Dealers Association (AIADA), the group fighting for tariff repeal.
Alan Reuther, the legislative director for the United Auto Workers union, which opposes repealing the tariff in any pact with Thailand, calls the debate a “huge jobs issue.”
Both sides are readying for the fight. AIADA, founded in part to fight the tariff, has hired two former top staffers to the Senate Finance Committee, which will review the trade deal.
Michael Evans was the chief counsel to the committee, and Timothy Punke was the chief international trade counsel to the committee prior to joining Preston Gates Ellis & Rouvelas Meeds, the law firm that registered to lobby on behalf of AIADA.
Other companies that don’t have a stake in the tariff dispute but support free trade are also pitching in as part of a “comprehensive market-access coalition,” Patru said.
That group, which supports across-the-board elimination of tariffs in free-trade deals, includes Mars Co., the candy maker that wants sugar protections to be dropped in another free-trade deal, and other companies.
Sens. Carl Levin (D-Mich.) and George Voinovich (R-Ohio), the co-chairmen of the Senate Auto Caucus, are trying to throw a wrench into these lobbying efforts. Forty senators have signed a letter circulated by the two that urges the administration to leave the chicken tax untouched.
Backing them is the autoworkers union, which is urging House members to sign a similar letter being circulated by members of the Michigan delegation.
Voinovich and Levin said Thailand should not be given “privileged access” to critical segments of the American market.
“Thailand can be used by third-country automobile producers who restrict our access as a backdoor into the United States market,” the letter states. It specifically mentions Japan, South Korea and India as countries that could benefit from a deal with Thailand.
The issue is one Rep. Rob Portman — who, like Voinovich, hails from Ohio — will face if confirmed as the country’s lead trade negotiator.
President Bush nominated Portman to be the United States Trade Representative. Portman, a Republican who supported free trade pacts, was just reelected to a seventh term and served on the Ways & Means trade subcommittee. Former U.S. Trade Representative Robert Zoellick left the post to become deputy secretary of state.
Any free trade deal negotiated with Thailand would have to be approved by Congress. Lawmakers can approve or reject trade pacts, but not amend them.
An official of the trade representative’s office said negotiations with Thailand would likely continue through the summer, when Thai and American officials meet in Montana.
“We recognize the sensitivity of the issue and are consulting with stakeholders as we prepare our position,” Neena Moorjani, press secretary for the trade representative’s office, told The Hill.
According to a fact sheet AIADA sent to Capitol Hill earlier this month, U.S. trade officials have collected the 25 percent tariff on imported trucks since 1963. The tariff was directed at a Volkswagen-built truck.
The truck tariff was written into law by Congress and has remained on the books ever since.
AIADA argues that removing the tariff would lower truck prices on imports and give American consumers greater choice. But Reuther said the deal would lead to a “flood of imported pickups” that threaten American jobs. Roughly 25,000 workers are employed making pickup trucks in the United States. Toyota, he said, has already moved its pickup-truck production facilities in Japan to Thailand.
But AIADA said foreign truck makers would have already chosen Mexico, with its low labor costs and ability to export trucks duty-free to the U.S. market, as their main platform.
Toyota and Nissan have already sought to avoid the chicken tax by moving some pick-up production facilities to the United States.
There were 164,550 Toyota Tacoma pickups built in Fremont, Calif., in 2003, and nearly 84,000 Nissan Frontiers were produced in Smyrna, Tenn., according to figures provided by the Alliance of Automobile Manufacturers, which represents domestic and foreign automakers on environmental and safety matters. Toyota also had production facilities in Indiana.
The Big Three U.S. automakers — General Motors, Ford Motor Co. and DaimlerChrysler — have thus far been mostly quiet on the issue, waiting as the negotiations progress.
But the industry is paying close attention, said Stephen Collins, the president of the Automotive Trade Policy Council, a group created by the Big Three to track trade issues.
Trade officials are not “under any obligation to offer nonreciprocal concessions,” Collins said.
While imports have carved out a large chunk of the American market, they account for just one percent and four percent, respectively, of the South Korean and Japanese auto markets, Collins said.
According to the most recent edition of Ward’s Motor Vehicle Facts and Figures, which tracks industry statistics, Toyota’s Camry and Honda’s Accord outpaced Ford’s Taurus in auto sales in 2003, The three finished first, second and third in auto sales.
The top vehicle sold, however, remained Ford F Series pickup trucks.
Nearly 807,000 F Series trucks were sold in 2003, versus 413,296 Camrys. GM sold more than 683,000 Chevrolet Silverados, and Dodge, a division of Daimler-Chrysler, sold more than 449,000 Ram pickups, to finish second and third in the race for sales leaders.