The American Automotive Policy Council (AAPC) and its member companies—Chrysler Group LLC, Ford Motor Company and General Motors Company—support the negotiation of a comprehensive, high-standard and commercially meaningful trade agreement with the Trans-Pacific countries of Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore and Vietnam. The negotiation to establish a Trans-Pacific Partnership (TPP) could provide an important opportunity for expanding U.S. economic engagement and improving U.S. competitiveness in the Asia-Pacific region.
While the United States already has trade agreements with several of these countries separately (Australia, Chile, Peru and Singapore), this multilateral agreement could have substantial additional benefits by opening new markets, harmonizing key rules, providing important strategic benefits by streamlining key issues on a regional basis, and raising the standard for Free Trade Agreements (FTAs) in the region. It is our understanding that the agreement is also intended to serve as the foundation for an Asia-Pacific wide trade agreement- by allowing for other countries in the region to join the agreement in the future.
The U.S. has a trade surplus in the auto sector with six of the seven countries (Australia, Brunei Darussalam, Chile, New Zealand, Peru, and Singapore), and a small auto trade deficit with Vietnam. For the group, the U.S. exported $2.6 billion in parts and vehicles in 2008, and recorded an auto trade surplus of $2.0 billion. In 2009, exports and imports from the U.S. to the group dropped sharply (exports down 34% and imports down 7% over 2008)—mirroring the economic recession that hit many countries in the region. Nevertheless, the US still maintained an auto trade surplus of $1.7 billion in 2009. Of the group, the largest volume of trade in autos and auto parts is between the U.S. and Australia, followed by Chile and then Singapore.
One of the goals of the TPP is to expand the principles of open market access and fair and reciprocal trading benefits to the entire Asia-Pacific region. As noted above, the U.S has an open and complimentary trade relationship with the group seven countries that are part of the initial negotiations. However, certain large economies in the region practice export led growth strategies that have resulted in significant and sustained trade imbalances with the United States. In fact, the United States has a major auto trade deficit with the Asia-Pacific region, due in large part to large auto trade deficits with Japan (-$33 billion in ‘09) and Korea (-$7.8 billion in ‘09). These longstanding imbalances have to be taken into account when considering the expansion of the TPP beyond the initial seven countries.
Consequently, AAPC supports a negotiation that will promote comprehensive liberalization in the region. As such, in the end, the TPP agreement should:
- Dismantle non-tariff barriers (NTBs), as well as tariffs. Phase-out of tariffs and NTBs should be accelerated.
- Include in the agreement specific provisions that put limits on the ability of countries to use currency manipulation to gain an unfair trade advantage.
- Endeavor to promote the harmonization of auto standards and regulations, with the goal of having TPP countries accept our automotive products without additional or duplicative regulatory tests or requirements. U.S. automotive products already meet the most stringent auto safety and emissions standards and regulations in the world. Mutual recognition arrangements should be considered to promote harmonization under the principle of “tested once and accepted everywhere.”
- Enforce trade law with respect to intellectual property rights;
- Seek reciprocal investment policies with key trading partners;
- Harmonize customs practices and pursue trade facilitation measures, in a manner that promotes U.S. competitiveness;
- Adopt the APEC Auto Dialogue recommendation on auto rules of origin (RoO)- that the Auto RoO be a two part Tariff Shift + Regional Value Content (RVC) with RVC determined by the “Adjusted Value” and/or “Net-cost” based methodological formula recommended;
- Adopt disciplines that support the primary purposes of a preferential free trade agreement– providing benefits to the parties of the agreement, not third parties
- Address key and growing challenges to trade and investment globally, including challenges posed by government preferences for national champions;
- Provide for efficient dispute-resolution procedures and effective implementation.
Furthermore, the negotiation should provide the mechanisms for other nations in the Asia-Pacific region to be able to join once they have adopted all its commitments and they have proven to truly embrace free trade and seek mutually beneficial trade opportunities. With several major automotive producing countries in the region, it may be necessary, during those negotiations, to add special automotive provisions to the agreement to ensure that the agreement addresses the auto policy practices specific to those countries to ensure reciprocal market access.
The AAPC looks forward to working with the Administration and Congress to further flesh out the key principles outlined and assist in crafting a negotiation that will provide expanded opportunities for American automakers.