Michigan Delegation Joins Together to Send Strong Message to U.S. Negotiators on Auto-related Issues at WTO

Michigan Delegation Joins Together to Send Strong Message to U.S. Negotiators on Auto-related Issues at WTO

The entire Michigan Congressional Delegation sent a letter to the United States Trade Representative (USTR), Ambassador Rob Portman, on the eve of the upcoming World Trade Organization (WTO) Ministerial meeting in Hong Kong regarding Non-Tariff Barriers (NTBs) in the automobile sector within the context of the Non-Agricultural Market Access (NAMA) negotiations. As a strong automotive industry is vital to the U.S. economy overall and a critical part of the U.S. manufacturing sector, the Delegation believes it is critical that the U.S. take a position during the Hong Kong Ministerial meeting that will further advance this important issue and achieve an outcome that is beneficial to the U.S. automotive sector. This letter was discussed at the recent bipartisan meeting with Governor Granholm and was circulated by Reps. Sander Levin and Dave Camp (both Members of the Ways and Means Committee).

"Nontariff barriers pose a far greater impediment than do tariffs to U.S. auto companies trying to sell their cars and parts in overseas markets," said U.S. Rep. Sander Levin (D-Royal Oak). "I fought four years ago at the Cancun WTO meeting to make sure that NTBs were on par with tariff reductions in the text for these negotiations; now we want to ensure that parity is implemented in the negotiations in a manner that achieves results for the auto sector."

"A tariff by any other name is still a tariff," said U.S. Rep. Dave Camp (R-Midland). "Foreign countries have successfully thrown up barriers and kept their markets virtually off limits to American manufacturers. It is time to break down those barriers and level the playing field for our workers. A series of victories on non-tariff barriers at the WTO greatly increases the chances for recovery within our domestic auto industry."

The letter also highlights the emerging trend that is likely to further substantial opening of the U.S. auto market to imports, with little change in access for U.S. auto and auto parts with major competitors like Japan and Korea whose respective markets remain virtually closed to U.S. products. The Delegation noted a number of concerns with USTR's Draft Proposal on Negotiating NTBs, one of which is the proposal's lack of an explicit call for a single package of commitments in this area. Another concern is the failure to propose or push for parties to specifically link progress on NTBs to tariff rate reduction.

"The U.S. market has seen increases in imports of autos and auto parts without our trade partners making any moves to break down the barriers keeping U.S. products out of their markets," U.S. Senator Carl Levin said. "This inequality greatly hurts our auto and auto parts manufacturers, at a time when our country already is suffering due to great losses in manufacturing jobs. We must insist on taking steps toward a level playing field."

"Unfair trade barriers like currency manipulation are hurting our auto manufacturers and costing Michigan jobs," U.S. Senator Debbie Stabenow (D-MI) said today. "We need Ambassador Portman to take a strong stand for our manufacturers and demand that these countries play by the rules."

Experience has demonstrated that the benefits of tariff reduction should be linked to progress on eliminating NTBs. Trade in the automobile sector is restricted globally by a variety of NTBs including engine displacement taxes and import licensing requirements. A significant NTB to the automotive industry is currency manipulation. Asia's policy of "mercantilist" exchange rate management, particularly the massive intervention by Japan stretching back a decade, has acted as a subsidy to its exports and a barrier to U.S. auto manufacturers efforts to compete fairly.

The Delegation continues by writing: "If NTBs are truly an "integral" and "equally important" part of the NAMA negotiations, any agreement on a tariff-rate reduction formula should take into account the impact on automobile or auto parts tariffs, and how such reductions may, in turn, shape or influence NTB negotiations. NTBs should be considered in tandem with, and not after, tariff reduction formula negotiations have concluded."

See below for the text of the Delegation letter

December 12, 2005

The Honorable Robert J. Portman

United States Trade Representative

Office of the U.S. Trade Representative

600 17th Street, NW

Washington, DC 20508

Dear Mr. Ambassador:

In advance of the upcoming WTO Ministerial in Hong Kong, we write to urge invigorated efforts as to the objectives and desired outcome of the United States regarding Non-Tariff Barriers (NTBs) in the automobile sector within the context of the Non-Agricultural Market Access (NAMA) negotiations. In particular, we are writing to express to you the need for the Doha Round to result in a clear, positive outcome for the U.S. automotive sector and the need for a defined, measurable beneficial result.

A strong automotive industry is vital to the U.S. economy overall and a critical part of the U.S. manufacturing sector. The forthcoming WTO negotiations provide an opportunity for the U.S. to take meaningful and concrete action to benefit this critical sector in the global marketplace. Specifically, the NAMA negotiations present an important opportunity to seek a more level global playing field for U.S. auto and auto parts companies by increasing access to foreign markets for U.S. exports of these products.

As you are well aware, NTBs pose a far greater impediment to market access than tariffs for the automotive industry. On previous occasions, we have noted with approval USTR's pursuit of a vertical NTB initiative in the automobile sector. We are pleased that USTR has taken steps to mobilize this initiative through a series of informal meetings to identify NTBs and discuss potential solutions. We are also encouraged by language in Chairman Johannesson's progress report of the NAMA negotiation, which not only re-affirms, but also expands upon the principle that NTBs are an "integral" and "equally important" part of the NAMA negotiations. While we acknowledge that progress has been made in underscoring the importance of this issue, we continue to have a number of concerns regarding the direction in which the current negotiations are headed and their possible outcome.

Based on the Doha progress to date, we see emerging a disturbing trend that is likely to further substantial opening of the U.S. auto market to imports, with little change in access for U.S. auto and auto parts with our major competitors like Japan and Korea whose respective markets remain virtually closed to our products. Further exacerbating this trend is Asia's policy of "mercantilist" exchange rate management, particularly the massive intervention by Japan stretching back a decade that has acted as a subsidy to its exports and a barrier to U.S. auto manufacturers efforts to compete fairly. The U.S. automotive industry views this as the most significant NTB and has sought to have this issue addressed within the WTO negotiations. We are very disappointed that the Administration has declined to raise currency manipulation within this multilateral context. Failure to act on this issue will result in further job cuts, further plant closures, and a continuing erosion of the U.S. automotive and broader national manufacturing base.

As to the NTBs that the Administration has agreed to pursue, we have previously noted a number of concerns with USTR's Draft Proposal on Negotiating NTBs, one of which was the proposal's lack of an explicit call for a single package of commitments in this area. This issue continues to be a major concern. While much of USTR's focus to date has been on party consensus building and identification of NTBS - both of which are important and necessary to advancing this issue - there has been no indication that USTR has included, or is willing to include as part of its strategy, the pursuit of a package of NTB commitments in the automotive sector.

Another concern is USTR's failure to propose or push for parties to specifically link progress on NTBs to tariff rate reduction. Trade in the automobile sector is restricted globally by a variety of NTBs. Experience has demonstrated that the benefits of tariff reduction should be linked to progress on NTBs. This is especially true, as in the case of Japan, where tariffs on autos and auto parts either are low or duty free. Within the context of the NAMA negotiations and the broader Doha Round overall, NTBs appear to be a "back-burner" issue to which parties will turn only after ironing out differences in tariff-rate reduction formulas. We believe that such a strategy is short sighted and could potentially compromise the U.S. negotiation position on NTBs.

If NTBs are truly an "integral" and "equally important" part of the NAMA negotiations, any agreement on a tariff-rate reduction formula should take into account the impact on automobile or auto parts tariffs, and how such reductions may, in turn, shape or influence NTB negotiations. NTBs should be considered in tandem with, and not after, tariff reduction formula negotiations have concluded. Specifically, USTR should seek flexible formulas and provide assurance that tariff reduction concessions will be balanced against a meaningful NTB package, which guarantees that U.S. automotive companies will have access to foreign markets where U.S. import penetration as been substantially low, or even declining.

Another area of concern outside of the NAMA discussions that could negatively impact the U.S. auto industry involves Trade Related Investment Measures (TRIMs). The WTO TRIMs agreement is the single most important achievement for the auto sector that emerged from the Uruguay Round. We are surprised and troubled to see language in the Ministerial draft that allows developing countries to maintain existing TRIMs and to introduce new TRIMs, as we have been told throughout this Round that no language re-opening agreements, such as the TRIMs agreement, would be permitted.

During the Hong Kong Ministerial, it is critical that the U.S. takes a position that will further advance this important issue and achieve an outcome that is beneficial to the U.S. automotive sector. We stand ready to assist you in moving forward on this issue, which will help strengthen U.S. auto and auto parts companies by opening markets and leveling the global playing field for their products.

Sincerely,

The Michigan Congressional Delegation

http://stabenow.senate.gov/press/2005/121305MichiganDelegationLetterOnWTONegotiations.htm