8 June 2018
U.S. Considering Import Restrictions on Automobiles
The U.S. Department of Commerce announced on 23 May its self-initiation of an investigation under section 232 of the Trade Expansion Act of 1962 to determine whether imports of automobiles (including sport utility vehicles, vans and light trucks) and auto parts are harming U.S. national security. The DOC will accept input from interested parties by 22 June (rebuttal comments are due by 6 July) and a public hearing will be held on 19-20 July.
A DOC press release explains that auto manufacturing has long been a significant source of U.S. technological innovation and that this 232 investigation will therefore consider whether the decline of domestic automobile and auto parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes and other cutting-edge technologies. The DOC notes that U.S.-owned vehicle manufacturers in the United States account for only 20 percent of global research and development in the automobile sector and U.S. auto part manufacturers account for only seven percent in that industry.
If the DOC finds that excessive automobile and auto parts imports are a threat to U.S. national security, and the president concurs, the president has the authority to adjust imports, including through the use of tariffs and quotas. The DOC has up to 270 days to conclude its investigation and any resultant actions would be imposed within 15 days of the president’s determination to act.
There is some speculation that the new investigation is a negotiating tactic by the White House. Press sources note that the Trump administration is pressing major trading partners to limit exports of steel and aluminium to the United States and attempting to persuade Canada and Mexico to incorporate tougher auto rules of origin in the North American Free Trade Agreement and that many of the countries involved in these initiatives are significant exporters of automobiles and auto parts to the United States. President Trump has often used the threat of adverse trade actions to secure desired outcomes, though with mixed results.
The U.S. business community has expressed strong opposition to the new investigation. The U.S. Chamber of Commerce, for one, issued a statement on 24 May strongly opposing the administration’s threat to impose tariffs on auto imports in the name of national security. According to the Chamber, “if this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.” The Chamber added that this probe is not about national security but rather an attempt by the administration to “leverage this tariff threat in trade negotiations with Mexico, Canada, Japan, the European Union, and South Korea.” The National Association of Manufacturers echoed the Chamber’s concerns, noting in a separate 24 May statement that “incorrectly using the 232 statute will create unintended consequences for U.S. manufacturing workers that will limit the chance for Americans to win, just as we do when government gets out of the way and allows us to lead.” Cody Lusk, president and CEO of the American International Automobile Dealers Association declared that “to treat auto imports like a national security threat would be a self-inflicted economic disaster,” while John Bozzella, head of a trade association that represents foreign auto companies in the United States, noted that to his knowledge “no one is asking for this protection.”
Criticism from U.S. lawmakers has also been swift and sharp. Senate Foreign Relations Committee Chairman Bob Corker (Republican-Tennessee) accused Trump of “abusing” the section 232 law and said the new investigation “should be abandoned immediately,” while Senate Finance Committee Chairman Orrin Hatch (Republican-Utah) described the investigation as “deeply misguided” as he urged the administration to remain focus on addressing mainland China’s trade practices and work constructively with U.S. trading partners. House Financial Services Committee Chairman Jeb Hensarling (Republican-Texas) said that “national security measures should never be used as an excuse for raw protectionism,” adding that the historic tax reform effort “can be wiped out overnight if we end up in a global trade war.” Lawmakers have also hinted at potential legislative efforts aimed at reclaiming some of the trade authorities that Congress ceded to the executive branch years ago.
Not surprisingly, major U.S. trading partners immediately expressed opposition to the new investigation. European Commission Vice-President Jyrki Katainen said any tariffs that may result from the investigation “obviously would be against” WTO rules, while mainland China’s Foreign Minister spokesman Lu Kang said that “we oppose abusing the clause on national security, because such an abuse would sabotage the multi-lateral trading system and disrupt the normal international trading order.”