The vast majority of 43 witnesses testifying before a government panel at the Commerce Department on Thursday spoke in opposition to the Trump administration’s Section 232 investigation into automotive imports or tariffs that could follow.
Section 232 of the Trade Expansion Act of 1962 requires the Commerce secretary to provide results of investigations under the statute to the president no later than 270 days after the reviews start. This review started May 23, so the report is due to the president by the end of Feb. 17.
The witness who spoke most in favor of the Section 232 investigation was Jennifer Kelly, United Automobile Workers’ research department director, who noted that 70 percent of U.S. auto part imports in 1996 were sourced from high-wage countries like Germany, Japan and Canada, but by 2007, most parts imported into the United States were produced in low-wage countries like Mexico and China.
“Not only have U.S. jobs been displaced by imports, but the remaining U.S. workers’ wages have been depressed by competing with low-wage countries,” Kelly said.
She expressed concern that U.S. manufacturers could continue to lose their competitive edge in production of semiconductors and lithium ion batteries — key components for electric and autonomous vehicles that will be more prominent in the future — to firms in South Korea, Taiwan, Japan and China.
Today, the United States produces 13 percent of the world’s semiconductors and is projected to produce only 14 percent of the world’s lithium ion batteries by 2021, Kelly said, claiming that these trends indicate a potential inhibition for U.S. military efforts to domestically source these critical technologies.
The Trump administration should take “targeted measures” to boost domestic manufacturing at the conclusion of the investigation, but “rash actions” could have “unforeseen consequences,” including mass layoffs for U.S. workers, she said.
Diverging from Kelly’s remarks, EU Ambassador to the U.S. David O’Sullivan said the notion that imports of automobiles or auto parts from close U.S. allies could threaten national security is, “bluntly speaking, absurd.”
If the United States imposes trade measures pursuant to its Section 232 investigation into automotive imports, allies including Canada, Mexico, the EU, Japan and South Korea would be the countries most likely affected, he said.
O’Sullivan said potential U.S. trade actions aimed at economic protection under the guise of national security could breach international law and said the investigation lacks legitimacy or any factual basis.
National Economic Council Director Larry Kudlow said during CNBC’s Alpha Investor conference on Wednesday that the Trump administration expects a “very important free trade offer” from the EU when European Commission President Jean-Claude Juncker visits Washington, D.C., on Wednesday.
Mexican ambassador to the U.S. Geronimo Gutierrez Fernandez and Canadian deputy ambassador to the U.S. Kirsten Hillman spoke in defense of the integrated NAFTA automotive supply chain, warning that any tariffs could disrupt efficiencies gained through the pact.
Gutierrez said the NAFTA auto supply chain is not unlike other automotive supply chains around the world, and noted that the nature of global automotive supply chains implies half of the $131 billion in automotive trade between the U.S. and Mexico are vehicle parts shipped “back and forth across borders several times before reaching the consumer.”
Mexico is the top auto parts supplier to the United States, accounting for about 40 percent of those imports, Gutierrez said.
In 2017, Canada bought 37 percent of the value of U.S. automotive exports, comprising $26.2 billion in U.S.-made autos, and $26.7 billion in U.S. auto parts, Hillman said.
John Hall, a member of the maintenance team at the Hyundai Motor Manufacturing plant in Montgomery, Ala., told the interagency panel that even as other companies shuttered in his area, the South Korea-headquartered Hyundai has stuck with the U.S., Alabama and workers “through good and bad.”
“We at Hyundai believe strongly that automotive imports do not threaten our national security,” he said. “In fact, it’s just the opposite. Imports and exports are essential to our business, and they grow the American automotive industrial base and skilled workforce.”
There is no justifiable national security basis to impose trade restrictions on automobiles and auto parts, and any Section 232 auto tariffs would undercut core goals of the U.S. foreign-trade zones program such as incentivizing U.S. manufacturing and driving U.S. competitiveness globally, National Association of Foreign Trade Zones President Erik Autor said during the hearing.
In previous tariff actions, “quirks” have resulted in certain FTZ goods being spuriously flagged for duties, he said, adding that automotive goods substantially transformed in an FTZ should be exempt from any trade remedies imposed pursuant to the investigation.
Also speaking against the tariffs were proponents of vintage and classic cars.
Mark Hyman, owner of Hyman Ltd., a vintage automobile dealer based in St. Louis, requested an exemption for classic, vintage and collector-grade vehicles from any trade remedies that might be imposed pursuant to the Section 232 investigation.
Hyman cited data provided by New Oak Capital, an investment banking firm focusing on the vintage vehicle industry, showing that classic vehicles encompass an $80 billion to $160 billion industry with interests in all 50 U.S. states.
At times, as much as 70 percent of Hyman’s business has taken place on an international level in the buying, importing, selling and exporting of vintage automobiles, he said. Hyman Ltd. is “highly active” in the collector car trade in the EU, Middle East, South America and Asia.
Hyman concluded that potential tariffs on “vintage vehicles and parts have the potential to cripple a multibillion-dollar industry that relies upon a healthy and open trade environment, free of unreasonable boundaries.”