Trans-Pacific Partnership Fears Hover Over Detroit Three

Cameron Aubernon
by Cameron Aubernon
trans pacific partnership fears hover over detroit three

The Detroit Three are among those expressing concern over the Trans-Pacific Partnership free-trade agreement, specifically what it would do to the industry.

Last week, both houses of Congress approved President Barack Obama’s request for an up-or-down vote to fast-track the free-trade agreement involving 12 nations and affecting 40 percent of the global economy, The Detroit News reports. The urgency comes amid warnings that if the TPP isn’t put into effect as soon as possible, China, not the United States, would be the one creating similar trade deals.

Though the TPP has few fans among unions, activists, and most Democrats in Congress, the Detroit Three have their own concerns about the fast-tracking proposal: once enacted, the 2.5-percent tariff on cars and parts, as well as the infamous 25 percent “Chicken Tax” on imported light-duty trucks, would disappear over a period of time. The latter has been used to protect the domestic truck market by keeping competitors out unless the latter were willing to build trucks in the U.S.

According to the trio, were the tariffs – which they want to keep around for 25 more years at minimum – to disappear, and if Japan weakens its currency to better compete against them, domestic automakers would eventually be undercut by Japanese automakers. In turn, the Detroit Three would face considerable pressure to return fire, with those on the factory floor likely to be the hardest hit.

Another issue surrounding Japan is importation of U.S. vehicles, which the trio state has been difficult to accomplish over the years due to a number of trade barriers, tariffs not being among them as far as Japan’s importation policy is concerned. Japanese automakers counter that so few U.S. vehicles are imported annually because the Detroit Three haven’t made much of an effort to sell them to Japanese consumers in the first place. While the former has spent billions and employed thousands to build vehicles in the U.S., Detroit hasn’t done the same at all.

Currently, their lobbyists are working to add an enforceable currency provision to the TPP to protect Detroit’s standing. So far, the provision has yet to be added to the pact.

[Photo credit: Gobinero de Chile/ Flickr]

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  • Jeff S Jeff S on Apr 29, 2015

    @Pch101--Tariffs do not equal more competition and cheaper prices. On the other hand I will have to agree with some of the other comments that good paying jobs in the US have disappeared and probably more will if the Trans Pacific agreement passes. The importance of having an educated workforce will be even more important because the jobs that will be created will be fewer but requiring more skill and education. We cannot be isolated from a global economy. Eventually the demand for bigger trucks will fall and the manufacturers will want to make more of their vehicles in Asia and not want to have to deal with the Chicken Tax. As Big Al said the next generation might not want the same large expensive trucks that their fathers and grandfathers had. Harley Davidson has been experiencing the same thing in that most of its buyers are aging baby boomers. Each generation is different.

    • See 5 previous
    • Landcrusher Landcrusher on Apr 30, 2015

      @Pch101 You figured wrong. I get it all. It's you that doesn't understand markets or causation. Yes, tariffs can create more domestic manufacturing. That's the point of a Tariff, and sometimes it works. However, it leads to inefficiency which misuses resources and reduces activity and wealth overall. TINSTAAFL.

  • Jeff S Jeff S on Apr 29, 2015

    Pch101--Give me some specific examples where raising taxes and raising trade barriers has lowered prices and increased competition. I don't need a list to prove basic economic theory. Are you UAW?

    • Pch101 Pch101 on Apr 29, 2015

      Go make those lists. Are you BAFO multi-handling? You sound just like him.

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