Now, I don't want to be an alarmist sounding a warning bell to the governmental affairs teams at the US automakers or anything, but it looks like those free-trading Republicans over in the US House of Representatives want to put a crimp on the one segment of vehicles still profitable for them. That's right, the US House is looking to repeal the "Chicken Tax", the one thing that is stopping foreign-built light trucks from being imported into the United States.
Edmunds.com broke the story:
The Chicken Tax was instituted back in 1963, and was aimed at European (read VW) truckmakers. The long and the short of it is that there was a trade war going back then between the USA and Europe. The Europeans tripled the tax of chickens being imported into Europe, and the US retaliated by putting a 25% tax on any truck imported into the USA. That's how it came about, and we've lived with it ever since.
So now there is an effort afoot by the Bush administration for a free-trade agreement with Thailand that would substantially reduce this tariff, if not eliminate it. The UAW and Detroit automakers are fighting this tooth-and-nail not to let this happen. They fear that if the Chicken Tax is reduced or repealed, the US will be flooded with cheap pickups made in Thailand, and that their "truck cash cow" will disappear.
It's worth noting that American pickup trucks outsell foreign-built rivals with the help of the chicken tax. By comparison, car imports only face a 2.5 percent tariff. Pickup trucks are also very profitable for manufacturers, which explains why some politicians and the UAW are unhappy with the Bush administration. According to The Hill:
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."
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.
If the tariffs are lifted and small foreign built pickups flood the market, market share will erode even more for Detroit automakers. Consumers would benefit from the cheaper imports, but at the expense of worker's jobs. So what's the answer? I think Detroit Wonk has the most reasonable and fair way of dealing with this tariff:
What Republicans in Congress and the President should be doing is looking at phasing out these restrictions as the market allows it instead of merely attempting to make wholesale changes to the tariff structure independent from the markets current situation. What they are doing currently is nothing more than the same free-marketing craze which accomplishes nothing positive to the US economy. [Emphasis mine.]
Unfortunately, Bush already made it clear he won't help the auto industry, so it's up to Levin and Voinovich to work some bipartisan magic and protect American worker's jobs.