Auto Import Impacts on U.S. National Security

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Auto Import Impacts on U.S. National Security

Washington, DC

The Problem

America does not go to war in a Ford Fiesta. There is no support for the proposition that imports of cars, trucks, SUVs and auto parts implicate national security concerns of the United States. To the contrary, the greatest threat at this time is the possibility the Administration will impose duties on imports in connection with this investigation. Such duties would raise prices for American consumers, limit their choices, and suppress sales and U.S. production of vehicles. Rather than creating jobs, these tariffs would result in the loss of hundreds of thousands of American jobs producing and selling cars, SUVs, trucks and auto parts. Any retaliatory tariffs and copy-cat protection based on national-security justifications would cost hundreds of thousands more jobs both inside and outside the sector.

Suggested Solutions

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BMW AG
Posted suggestion on Jul 13th, 2018
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There is ample academic research—much of it undertaken at U.S. institutions and financed by U.S. research funds—that shows that free trade is beneficial to countries. Firstly, it raises the productivity of firms, enhancing a country’s competitiveness and growth. Secondly, by increasing the variety and availability of reasonably priced goods. Finally, it increases national security. The deeper the economic ties from trade and integrated value chains, the more costly conflict would be, and therefore the more unlikely to occur.

It is true that free trade could temporarily produce losers in each country as part of the structural change processes in modernizing economies. Imposing barriers to trade, however, is not the best way to help them. Instead, remaining an open, reliable partner for business and an attractive place for foreign investment will lead to a rebirth of regional/geographical areas that have fallen behind. This is well illustrated by BMW’s history of investment in the United States, and in upstate South Carolina in particular—a region that had well and truly fallen behind in the years prior to BMW’s arrival.  

BMW directly and indirectly adds $6.3 billion annually to South Carolina’s economy and leads to the employment of 36,285 people there. Last year, we announced a $600 million investment in our South Carolina plant, which will create 1,000 new jobs. Our BMW plant in South Carolina is now the largest facility in our global production network. The overall footprint in the U.S. is even larger, with value added by BMW of $15.77 billion and employment of 120,855 people. A 2017 study by the University of South Carolina finds that for every 10 jobs that are directly generated at a U.S. BMW facility, an additional 90 jobs are created elsewhere in the U.S. economy as a direct result of these BMW jobs. 

BMW has proven to be a trusted and valued partner for local law enforcement and the armed services within the United States. In additional to sales of motorcycles to numerous local law enforcement agencies across the United States, BMW has a multi-year contract with the Los Angeles Police Department to provide several hundred electric vehicles for official LAPD use. Additionally, this year BMW became the first premium automotive brand to open a workshop and training program for military service members directly on a U.S. military base. The BMW Military Service Technician Education Program (BMW MSTEP) at Camp Pendleton will provide new career opportunities for service members transitioning from military service to civilian life. It should be noted that any tariff action which has a material negative impact on BMW could have a residual negative impact on these initiatives and partnerships. 

While we do not think that threatening to impose supplemental U.S. duties is the most effective way to achieve this goal, we do support the effort to reduce trade barriers of all kinds. BMW has long supported the reduction of the EU automotive tariffs through bilateral negotiations, as we pay these duties on ~100,000 automobiles we manufacture in South Carolina and export to the EU each year. In 2015, our then Chairman of the Board of BMW Group, Dr. Norbert Reithofer, put this on record, stating, “If we remove tariff and non-tariff barriers [between the U.S. and the EU]—that is, import duties and unnecessary bureaucratic and regulatory differences—the result will be economic opportunities.”

Removing both U.S. and EU automotive duties entirely is in the best interest of German auto manufacturers, as it would save them an estimated €1 billion per year.3 We expect similar savings would be realized by U.S. auto manufacturers as well.  We also note that the EU has not shown itself to be particularly committed to preserving these tariffs. Reducing the EU automotive tariffs was frequently cited as the low-hanging fruit to be claimed through the Transatlantic Trade and Investment Partnership (TTIP).

Global Automakers
Posted suggestion on Jul 2nd, 2018
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Every U.S. production facility in the industry would be available in a national emergency, and every one of the 130,000 Americans who work for international automakers can be counted on as well. They are no less patriotic or willing to serve their country in a time of crisis than any other Americans. They have taken good jobs with companies that have invested billions of dollars in the United States, based on those companies’ appreciation for America’s legal tradition of openness and fair treatment for all. Virtually all of these companies are based in countries that are strong allies of the United States, and that have stood by the United States for decades. There is simply no basis for treating these companies and their employees any differently than those of other U.S. automakers. All U.S. producers contribute to U.S. economic health, whatever their ownership and wherever headquartered. 

Global Automakers
Posted suggestion on Jul 2nd, 2018
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Section 232 is intended to ensure that the U.S. military can obtain the types of products it needs, in the quantities it needs, when it needs them. It is not intended to provide broad economic protection for an industry for other purposes – there are other statutes available to accomplish this. U.S. antidumping and countervailing duty laws are available when unfairly traded dumped or subsidized imports are injuring or threatening to injure a U.S. industry. Safeguard actions under Section 201 of the Trade Act of 1974 are available when fairly traded imports nevertheless are injuring or threatening to injure a U.S. industry. However, no one has asked for protection against imports under our antidumping and countervailing duty laws, because there are no unfairly traded imports. And no one has asked for protection under our laws protecting against fairly traded imports, because our automotive industry is thriving.

Endorsers

4

Official Replies

7

Wilbur Ross, Secretary of Commerce
Replied on May 23, 2018

There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry. The Department of Commerce will conduct a thorough, fair and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.

Wilbur Ross, Secretary of Commerce
Replied on May 24, 2018

On May 23, 2018, I initiated an investigation to determine the effects on the national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts, under section 232 of the Trade Expansion Act of 1962. Interested parties are invited to submit written comments, data, analyses, or other information pertinent to the investigation by June 22, 2018. The Department of Commerce will also hold a public hearing on the investigation on July 19 and 20, 2018 in Washington, DC. The issues on which the Department is interested in obtaining the public's views, include the following:

 • The quantity and nature of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts and other circumstances related to the importation of automobiles and automotive parts;

 • Domestic production needed for projected national defense requirements;

 • Domestic production and productive capacity needed for automobiles and automotive parts to meet projected national defense requirements;

 • The existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce automobiles and automotive parts;

 • The growth requirements of the automobiles and automotive parts industry to meet national defense requirements and/or requirements to assure such growth, particularly with respect to investment and research and development;

 • The impact of foreign competition on the economic welfare of the U.S. automobiles and automotive parts industry;

 • The displacement of any domestic automobiles and automotive parts causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;

 • Relevant factors that are causing or will cause a weakening of our national economy;

 • The extent to which innovation in new automotive technologies is

Donald Trump, President of the United States of America
Replied on June 22, 2018

Based on the Tariffs and Trade Barriers long placed on the U.S. and it great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!

Donald Trump, President of the United States of America
Replied on June 26, 2018

We are finishing our study of tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of trade barriers and tariffs. In the end it will all even out - and it won't take very long!

Cecilia Malmström, EU Trade Commissioner
Replied on July 3, 2018

There is no national security threat from imports of automobile and automotive parts. We underline that the Department of Commerce's analysis of national security must be narrowly tailored to focus on direct threats to national security, in particular defense applications.

Wilbur Ross, Secretary of Commerce
Replied on July 3, 2018

There has been no decision made as to whether to recommend tariffs at all—we’re at the early stages in the process.

Donald Trump, President of the United States of America
Replied on July 3, 2018

You know, the cars are the big one.  We can talk steel, we talk everything. The big thing is cars. What’s going to really happen is there’s going to be no tax. You know why? They’re going to build their cars in America. They’re going to make them here.

Supporting Info

05-31-2018
Peterson Institute for International Economics

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