Industry faces long haul to legalize self-driving semis

Keith Laing, Detroit News Washington Bureau
Published 11:58 p.m. ET Oct. 30, 2017 | Updated 12:38 a.m. ET Oct. 31, 2017

Washington — Trucking companies are not giving up the fight to put self-driving semis and delivery trucks on U.S. highways.

Advocates for the trucking industry are pushing back on proposed legislation that largely removes restrictions from operation of autonomous passenger cars but does not do the same for commercial trucks. They say innovation will be stifled at a time of rapid advances.

The push comes as companies like Tesla Inc. have discussed plans to platoon partially automated electric trucks with a lead truck. In that scenario, a human driver in the lead truck punches a hole in the wind, with other trucks drafting close behind for maximum efficiency and to take up less space on the highway. The trucks communicate electronically and can brake immediately as needed.

Testing of autonomous trucks has been ongoing over the past two years: Daimler Trucks North America’s Freightliner Inspiration semi became the first licensed autonomous commercial vehicle to operate on open public highways in the United States when it was cleared for testing by Nevada in 2015. Uber, which acquired self-driving truck maker Otto in 2016, tested a 120-mile shipment of Budweiser in a truck that had no driver in the front seat in Colorado.

Volvo is testing self-driving garbage trucks in Sweden that can navigate cities. And earlier this month, Deutsche Post’s DHL Group announced plans to test Ford Transit-based self-driving trucks for deliveries beginning in 2018.

Even the federal government has gotten in on the act: The Federal Highway Administration demonstrated a three-truck platoon of partially automated trucks on a Virginia interstate in September.

“These new technologies have the ability to increase capacity on our highways and make freight transportation more efficient,” Acting Federal Highway Administrator Brandye Hendrickson said after the test.

Avoiding ‘murky’ areas

The law on autonomous vehicles is one of the few pieces of legislation moving quickly in a bitterly divided Washington. Self-driving trucks were dropped from the legislation Sept. 28 after labor unions raised concerns about millions of professional drivers losing their jobs.

“These are vehicles that share the road together, so they should share the same regulatory framework,” said Sean McNally, vice president for communications for the American Trucking Associations, which lobbies for major truck companies. “If companies need to operate under different regulatory policies in, say, Michigan than California, that would have a significant impact on testing.”

The self-driving bill — minus trucks — has been approved by the U.S. House and cleared a key U.S. Senate committee. The measures, which would allow automakers to each put 100,000 or more self-driving cars per year on U.S. roads — and prohibit states from blocking them — has been touted as a rare bipartisan bill in this Congress.

In a bid to exclude trucks and passenger buses, the Senate version of the bill places a 10,000-pound weight limit on its definition of a “highly automated vehicle.” Most big-rig semis weigh around 80,000 pounds. The House version includes language stating that the definition of a self-driving car “does not include a commercial motor vehicle.”

A spokesperson for U.S. Sen. Gary Peters, who pushed for trucks to be removed from the Senate’s bill, said in statement that the Bloomfield Township Democrat believes “self-driving trucks raise a separate set of issues, especially given their economic and employment impacts, that must be more thoroughly examined … before moving forward with legislative action.”

The American Trucking Associations’ McNally noted that states could ban self-driving truck testing on their roads unless the bill’s definition of an autonomous vehicle is broadened.

“If the bill doesn’t specifically address the trucking issue, you may get into a murky area where states can do whatever they want,” McNally said. “We need an explicit preemption for commercial vehicles. The only way to get that certainty is if autonomous trucks are in the bill.”

Norita Taylor, a spokeswoman for the Owner-Operator Independent Drivers Association, which represents truck drivers who are not affiliated with large trucking companies, said the self-driving truck debate should not just be focused on big trucking corporations represented by the ATA.

Taylor added that her organization is OK with the decision to handle self-driving trucks separately from the rapidly moving legislation that pertains to driverless cars.

“Trucks need to be considered separately,” Taylor said in an email. “There are safety and security issues, an entire industry of jobs, regulations and need for cost versus benefit analysis.”

Safety groups have raised concerns about the idea of automating 80,000-pound big rigs and allowing them on U.S. highways. They point to the high number of crashes that occur now between human-operated cars and trucks.

“You’re talking about a great big huge truck, and it takes them much longer to stop,” said John Simpson, privacy project director at the Santa Monica, California-based Consumer Watchdog group.

“The potential devastation that a large commercial vehicle can wreak is just horrendous,” Simpson continued. “That’s one of the biggest problems on some of these interstate highways, the interactions between the trucks that are on the road and the cars.”

IHS Automotive estimated in 2016 that 60,000 self-driving trucks could be sold annually in the U.S. by 2035, but that is assuming that Congress clears the way for them to operate on the nation’s roadways.

‘We’re not ready’

Labor unions who pressed Congress to block self-driving trucks in a bid to protect jobs of truck and bus drivers are urging lawmakers to keeping pumping the brakes. They cite a May report from Goldman Sachs that forecasts the professional driving sector stands to lose 6.2 million jobs globally by 2030 due to the advent of fully autonomous vehicles.

Samuel Loesche, legislative representative at International Brotherhood of Teamsters, which counts 600,000 professional drivers among its membership, said his union is remaining vigilant about the possibility of self-driving truck supporters moving to put the truck provisions back into the autonomous driving bill when it comes to the Senate floor.

“If it’s reinserted into the bill on the floor, it would completely blow up the bipartisan agreement,” he warned.

Loesche added: “We’re not anti-technology, we’re not anti-innovation. What we are is pro-American and pro-worker. Anything that’s done in this space needs to take into account the job and economic issues that manufacturers and tech companies don’t seem to want to deal with.”

Larry Willis, president of the AFL-CIO’s Transportation Trades Department, agreed, saying his union’s members “don’t believe this is the right time to introduce autonomous vehicles on the truck or bus side.”

“We’re not ready for that transition,” he said. “There has to be a lot more thought given to making sure that we’re doing enough on the worker side and the job protection side for the huge transition that is going to come with these advanced technologies.”

ATA spokesman McNally countered that self-driving trucks will not be able to live up to their full potential unless Congress gives the OK for them to operate nationwide.

“Autonomous trucks as developed are not going to be confined to one state,” he said. “Our belief is you derive the benefits from this with long hauls. We are an interstate industry, which means we need laws that recognize that.”

http://www.detroitnews.com/story/business/autos/mobility/2017/10/30/industry-faces-long-haul-legalize-self-driving-semis/107182628/

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Ford accused of mileage hypocrisy

Keith Laing, Detroit News Washington Bureau
Published 5:22 p.m. ET Oct. 25, 2017 | Updated 10:26 p.m. ET Oct. 25, 2017

Washington — Environmentalists in Washington are accusing Ford Motor Co. of hypocrisy when it comes to auto fuel efficiency as they launch a campaign to save stringent gas mileage rules currently being reviewed by Trump administration.

They say the Dearborn automaker is publicly expressing its commitment to increasing the fuel performance of its new cars, but privately lobbying federal officials to roll back stringent gas mileage rules.

The mpg rules, which were enacted by the Obama administration in 2012, require automakers to achieve fleet-wide averages of more than 50 miles per gallon by 2025. In a victory for automakers, the Trump administration has reversed an Obama administration decision to finalize the rules for the model years between 2022 and 2025, reopening a review that was scheduled to take place in 2018.

Dan Becker, director of the Safe Climate Campaign, said Ford “hypocritically declares its concern for the environment” at the same time it is “colluding with Donald Trump” to roll back the mpg rules. He also noted that Ford and other automakers agreed to the gas mileage rules in 2012.

“Bill Ford has proclaimed himself a conservationist, and the company declared to its shareholders that quote ‘we know climate change is real and a critical threat and we will continue to work leaders around the world in support of ambitious global greenhouse gas reduction targets,’ ” Becker said. “Ford is capable of making clean cars. They should just get on with it and stop fighting it.”

Margie Alt, executive director of Environment America, added: “As the best-selling car brand in the U.S., and one of our most historic auto manufacturers, Ford Motor Co. should be a leader, not a laggard, when it comes to getting zero-emission vehicles on the road.”

The complaints about Ford are at the center of a new campaign called “Forward, Not Backward” that was launched Wednesday by the Sierra Club, Public Citizen, Greenpeace, Safe Climate Campaign and Environment America. The groups say their aim is to convince Ford and other automakers to “stop working behind the scenes with the Trump administration to roll back the popular standards.”

Becker accused Ford of dragging its feet on boosting the fuel performance of its vehicles, in addition to lobbying the Trump administration to roll back the gas stringent mileage rules.

“Ford lags near the bottom of the heap on fuel efficiency and pollution,” he said. “It’s the third worst among the 12 major automakers. Ford fails to use the best technology on the bulk of its vehicles. It’s at the back of the pack on four of the six key efficiency technologies highlighted by EPA in its trends report.”

John Viera, global director of sustainability and vehicle environmental matters for Ford, vehemently disputed the allegation that his company is acting hypocritically when it comes to the gas mileage rules.

“If you go back to 2012, we didn’t commit to a 2025 number,” he said. “What we committed to was having a mid-term review to determine what the number was going to be for 2025. We’re not working behind the scenes to get (the rules) rolled back. We’re working to get all parties at the table, like we did in 2012.”

Viera pointed to announcements from Ford in recent years about plans to spend $4.5 billion on “electrified vehicle solutions” by 2020 and introduce 13 new electric or hybrid vehicles globally in the next five years as evidence of the company’s commitment to fuel efficiency.

“Our company has shown a lot of leadership and initiative when it comes to fuel efficiency,” he said.

The gas mileage rules, which Ford and other automakers have said could be too ambitious, requires automakers to go from an average of over 35 miles per gallon for 2017 models to producing car and truck fleets that average more than 50 miles per gallon by 2025.

The environmental attack on Ford comes as green groups have released new polling showing drivers in Michigan and other states are in favor of keeping the gas mileage rules in place. The poll, conducted on behalf of the Natural Resources Defense Council, NextGen America and the Sierra Club, showed 73 percent of registered voters in Michigan are in favor of enforcing the gas mileage rules.

Industry observers say fuel economy appears to matter mostly on the margin in car purchasing decisions — drivers who are in the market for an SUV might compare mileage notes on various models, but not switch to smaller vehicle — but it has not historically been a tipping point.

Rebecca Lindland, senior analyst at Kelley Blue Book, said fuel economy typically ranks behind factors like durability, reliability and cargo space for most car buyers.

“It’s typically in the lower part of the top 10 reasons, especially when gas prices are low,” she said. “When gas prices increase, people are more concerned, but at the end of the day, things like utility, safety and cargo room still out rank fuel economy. What people want is a fuel efficient version of what they already want to buy.”

Environmentalists argue their new polling shows that research is out-of-date.

“Michiganders want cleaner, more efficient cars, not more air pollution and increased costs at the pump,” said Andrew Linhardt, deputy legislative director for transportation at the Sierra Club. “These rules are driving technological innovation, cutting dangerous pollution, saving families money, and reducing America’s reliance on oil.”

The mileage rules at issue call for automakers to achieve a fleetwide average mileage rate of more than 36 miles per gallon for cars and trucks in 2018. The standard then increases to more than 37 miles per gallon in 2019 and nearly 39 miles per gallon in 2020, which is the last year before automakers will have a chance to weigh in on the need for any course corrections.

The rules for mileage years 2022 and 2025 were by law originally set to be reviewed for their feasibility by April 2018, but the Trump administration has said it is also looking at the feasibility of the rules for the 2021 model year, by which automakers will be required to hit a combined average of 41 miles per gallon for their cars and trucks.

Under the current rules, automakers will face fines of $5.50 for each one-tenth of a mile-per-gallon their average fuel economy falls short of the standard for a model year, multiplied by the total volume of vehicles sold under the new regulations.

Viera, the Ford sustainability director, said the Dearborn automaker and other manufacturers are just asking for the review of the mileage rules that they were promised in 2012, arguing that the Obama administration rushed to finalize the rules ahead of schedule.

“All we’re asking from the new administration was for them to reinstate the original timeline so we can have a data-driven review,” he said. “We’ve taken the position that other auto manufacturers have taken, so we’re not unique in that sense.”

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Automakers defending NAFTA, widening rift with Trump

Keith Laing, Detroit News Washington Bureau
Published 11:46 a.m. ET Oct. 24, 2017

Washington — The rift between automakers and President Donald Trump’s administration is widening.

Groups that lobby in Washington for Detroit’s manufacturers and their foreign-based counterparts, as well as parts manufacturers and dealerships, are banding together to fight Trump’s proposed changes to the North American Free Trade Agreement with Canada and Mexico.

“This industry is winning with NAFTA,” John Bozzella, CEO of the Association of Global Automakers that represents foreign-based manufacturers, said in an interview with The Detroit News. “The auto industry is leading a manufacturing resurgence in this country and we ought to recognize what the cause of that is. We are making more 1 million more vehicles in the U.S. now than we were before NAFTA.”

Trump made a show of reaching out to automakers early in his term by pledging to focus on boosting manufacturing jobs — in part by renegotiating NAFTA, enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada. Trump brought CEOs from Detroit automakers to Washington for a White House meeting in his first weeks in office, displaying rare presidential interest in an industry frequently overlooked in the nation’s capital.

But U.S. negotiators have proposed increasing the minimum percentage a car’s parts must be made in one of the three countries — to 85 percent from 62.5 percent — in order to escape tariffs when it is imported to America. And they want to require that 50 percent of parts must come from the U.S.

Canadian and Mexican officials have so far rejected what they see as a hardline proposal, and the time frame for resolving differences has been pushed back into 2018. The next round of NAFTA talks will take place in Mexico on Nov. 17-21.

Bozzella stressed that his and other auto industry groups are not declaring war on the Trump administration. But he acknowledged they are putting on a rare unified front against the president’s most high-profile trade policies, despite earlier hopes of establishing a friendly relationship between automakers and Washington under Trump.

“We support modernization of NAFTA,” he said, noting that the current provisions of the trade deal are 23 years old and worth taking a look at now.

Bozzella added that the auto industry’s unity against the changes that have been proposed by the Trump administration shows “how central NAFTA has been to the resurgence of the industry. The industry’s success in the U.S. tells us this agreement is working.”

The auto industry still has hopes for favorable regulations from the Trump administration in other areas like controversial gas mileage rules. But it is banding together in a bid to save NAFTA, an apparent rebuke to the president and his policies.

Matt Blunt, president of the American Automotive Policy Council, which lobbies for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles, said automakers would be forced to pay about $10 billion in tariffs they are currently able to avoid by law if the NAFTA deal falls apart.

“That’s a $10 billion tax we don’t have to pay today that we suddenly would have to begin paying,” Blunt said.

The AAPC has teamed up with the Alliance of Automobile Manufacturers, which represents foreign and domestic manufacturers and the Association of Global Automakers, which represents international carmakers, to form a coalition called “Driving American Jobs” to fight the Trump administration’s proposed NAFTA changes. The coalition also includes the American International Automobile Dealers Association and the Motor and Equipment Manufacturers Association.

The groups said Tuesday their members “agree that the future of the American automotive industry and its workers depends on trade.” They added that “NAFTA enhances the United States’ global competitiveness through the elimination of tariffs and other barriers to trade and investment.”

Jennifer Thomas, vice president of federal affairs at the Washington-based Alliance of Automobile Manufacturers, which lobbies for most major automakers — domestic and foreign — said the Trump administration’s proposals for changing the percentages of domestic parts that are required for automakers could harm the auto industry as much as pulling out of the deal completely.

“NAFTA with unworkable rules of origin can be just as bad as no NAFTA,” she said.

Thomas added that Canada and Mexico could potentially respond to the Trump administration’s demands for higher U.S. percentages of auto parts with local content rules of their own.

Michelle Krebs, senior analyst for Autotrader, said automakers have decided they likely will be more effective in combating the Trump administration’s NAFTA proposals if they are unified.

“Obviously, they see strength in numbers, banding together to let the Trump Administration know of their concerns, most notably that some of the proposed changes in NAFTA will have the opposite intended effect, not creating job but costing jobs.”

On the campaign trail, Trump said he would end the trade pact with Canada and Mexico and slap a 10 percent to 35 percent tariff on vehicles and parts made in Mexico that are imported into the U.S. if NAFTA renegotiation is not a success. That could add $5,000 to $15,000 to the price of a car. Some vehicles assembled by American companies in Canada or Mexico could also be hit with import tariffs.

Trump has threatened recently to withdraw completely from the deal.

Cody Lusk, president of the American International Automobile Dealers Association, said dealerships are equally at risk in the high-profile NAFTA talks.

“If you do away with NAFTA, that reinstitutes a 2.5 percent tariff for cars and 25 percent tariff for pick-ups,” Lusk said in an interview with The News. If automakers are forced to pay higher tariffs to import cars, “my guys aren’t going to be able to sell them at a great price.”

Ann Wilson, senior vice president government affairs of the Motor & Equipment Manufacturers Association added: “Changes in rules of origin will impact suppliers in a more immediate way than it will for some global manufacturers. If you don’t have a global footprint, there’s nowhere for you to move to.”

 

http://www.detroitnews.com/story/business/autos/2017/10/24/auto-industry-bands-together-bid-save-nafta/106958722/

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Carmakers hedge bets with electric vehicles

Keith Laing, Detroit News Washington Bureau
Published 12:00 a.m. ET Oct. 24, 2017

Automakers are moving aggressively to develop electric cars as governments in key markets in China, India, Europe — even California — consider banning gas and diesel engines.

Paris officials this month announced a plan to ban gasoline-powered cars from city streets by 2030. The move came after the city’s mayor said diesels would be banned by 2024, when Paris hosts the Summer Olympics.

California Gov. Jerry Brown is considering a ban on sales of internal combustion engines in that state — perhaps in a decade. Bans in China and Britain would take effect in 2040, while India says it is setting an “aspirational target” of all-electric sales by 2030.

The flurry of activity comes at a time when the Trump administration is focused on rolling back stringent gas mileage rules put in place under former President Barack Obama. Those rules — which encourage development of electric and fuel-cell powered cars — would require automakers to produce fleets that average over 50 miles per gallon by 2025.

Electric-vehicle boosters worry the Trump administration will eliminate a federal tax credit that provides up to $7,500 to drivers who purchase electric cars. And they say the U.S. lags in creating the charging stations necessary to drastically boost the number of EVs on the nation’s roads.

Automakers say they can’t wait for Washington to move forward because they have to compete in foreign markets where the future of gas and diesel engines looks dim.

General Motors Co. earlier this month said it was planning for a future in which none of its cars or trucks are powered by gasoline or diesel. It said it would introduce at least 20 new all-electric, zero-emission vehicles by 2023, including two in the next 18 months that are based on the all-electric Chevrolet Bolt.

That same day, Ford Motor Co. said it would introduce 13 new electric or hybrid vehicles globally in the next five years.

Speaking in Washington, GM CEO Mary Barra reiterated that GM is “very committed to an all-electric future.” But she said drivers still have to be persuaded to want electric cars, even in places where the government mandates their use.

“Clearly we believe that the Chinese market will have the highest electric vehicles most quickly because of the regulatory environment,” she said. No matter the mandate, she said, “You still have to make customers happy and you have to fill their needs.”

Barra touted the technological improvements automakers have made with electric cars in recent years, although she said governments will have to have a play a role in making them financially viable.

“I think we’re getting cycles of learning and the experience to make it affordable,” she said. “I think it’s going to be part of the solution, both from what customers want to drive because we look at what the customer really cares about, but also from a regulatory environment and doing the right thing for the environmental perspective.”

Michelle Krebs, executive analyst for Autotrader, said automakers and U.S. regulators will have time before most of the global gas and diesel engine bans go into effect. But she said China will play a key role in shaping the global market for electric cars.

“China is going to be the key factor because China can regulate it,” she said. “China is the largest car market in the world, and everybody that wants to do business there will have to get on board.”

Krebs said automakers will have to “get to where electric vehicles cost the same as a gas car.” But she said estimates show that could be a decade away.

“Automakers who are global can’t afford to back down,” Krebs said. “The U.S. government may roll back fuel economy standards, but global players have to move forward with their plans because they want to play there.”

Appetite for SUVs

Drivers in China have have demonstrated a preference for larger cars like their counterparts in the U.S., according to Paul Lewis, vice president of policy and finance at the Eno Center for Transportation, a Washington think tank with a mission of improving transportation safety and sustainability.

“China is trying to encourage electric vehicles, but what they’ve found is that consumers in China really want SUVs,” he said. “Consumers have an appetite, particularly as fuel prices remain pretty low, for big automobiles. That’s what consumers want to drive — and that’s not just for Americans, but for consumers all over the world.”

Lewis said the overall number of electric cars that were sold in the U.S. in 2016 was smaller than the increase in the number of small trucks and SUVs between 2015 and 2016.

He said two big obstacles remain for potential EV buyers: cost and the distance that can be traveled on a single charge.

“Electric vehicles are plain and simple more expensive than gas-powered cars,” Lewis said. “One thing the auto industry has done well is making the internal combustion engine very affordable. It’s going to be hard to justify the purchase of something that costs a lot more that’s not going to take you as far.”

But even those barriers are dropping: The all-electric 2017 Chevy Bolt starts at $36,620 before the $7,500 federal income tax credit and can go up to 238 miles before needing a recharge.

Exporting electric tech

“Electric vehicles are going to be the future,” said Andrew Linhardt, the Sierra Club’s associate director for legislative and administrative advocacy. “Everyone knows the direction this is going, both for technological reasons and the fact that we have to do something with the climate.”

Linhardt said boosting the use of electric cars in the U.S would allow automakers to reap the economic benefits of producing them for both domestic and international consumers.

“We need to probably replicate at least as many fueling stations as there are in the U.S. with charging stations,” he said. “If the U.S. can this get right, we can export it around the globe. It’s not something that’s going to happen overnight, but if we don’t start now, we’re never going to get emissions from transportation down to the levels that we need.”

Luke Tonachel, senior vehicles analyst for the Natural Resources Defense Council, said the Trump administration should protect the tax credits put in place to make electric cars more affordable.

“Electric vehicles are relatively new on the market, and we should continue to accelerate their growth,” he said. “The infrastructure is beginning to roll out. If we sit back and fail to focus on new vehicle innovation, other markets are going to move quickly to be the producers of the cleanest vehicles.”

 

http://www.detroitnews.com/story/business/autos/mobility/2017/10/24/carmakers-hedge-bets-electric-vehicles/106947740/

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Trump NAFTA demands could have unintended effects

Keith Laing, Detroit News Washington Bureau
Published 9:40 p.m. ET Oct. 17, 2017

Washington — A Chrysler Pacifica built in Canada could be hit by tariffs when shipped to the United States under a contentious proposal from the Trump administration in negotiations over the North American Free Trade Agreement.

U.S. negotiators proposed increasing the minimum percentage of parts that must be made in the U.S., Canada or Mexico — from 62.5 percent to 85 percent — in order to escape tariffs when imported to this country. And they want to require that 50 percent of parts must come from the U.S.

That would mean the Pacifica and several other vehicles made by Detroit carmakers could be hit by import taxes when sent here. Only 44 percent of the components of the Pacifica — which is built in Windsor — originate in the U.S., according to a study conducted by American University. And industry observers say the demands could raise the price of cars and actually drive production offshore by causing carmakers to just pay the tariff and shift production to countries with lower labor costs.

Canada and Mexico this week rejected what they see as a hardline proposal, and pushed the time frame for resolving differences into 2018. The next round of talks take place in Mexico on Nov. 17-21.

“We have seen proposals that would turn back the clock on 23 years of predictability, openness and collaboration under NAFTA,” Canadian Minister of Foreign Affairs Chrystia Freeland said Tuesday in a press conference at the conclusion of the latest round of negotiations in Arlington, Va. “In some cases, these proposals runs counter to (World Trade Organization) rules. This is troubling.”

Mexican Secretary of Economy Ildefonso Guajardo Villarreal added: “In order for this effort of the United States, Canada and Mexico to be fruitful, we must understand that we all have limits.”

U.S. Trade Representative Robert Lighthizer said he was “surprised and disappointed by the resistance to change by our negotiating partners.”

“NAFTA has resulted in a huge trade deficit for the United States and has cost us tens of thousands of manufacturing jobs,” Lighthizer said. “The agreement has been come very lopsided and need to be rebalanced.”

A 50 percent requirement for domestic content would trigger import duties not just for the Pacifica, but for the Ford Fusion, which is built in Mexico with 48.5 percent of its parts coming from U.S. A GMC Terrain built in Mexico with 43 percent of its parts coming from the U.S. also would also face tariffs if it was sold domestically.

But a Toyota Tacoma — which is built in Mexico and in Texas with 52.5 percent of its parts coming from the U.S. — would clear the threshold.

Paul D. Ryan, vice president of trade and competitiveness for the Washington, D.C.-based Association of Global Automakers, which lobbies for international carmakers, said the Trump administration’s demands are “unprecedented, and I think they’re both unrealistic and unworkable.”

“I don’t think it’s anything our trading partners could accept,” he said.

Assessing ramifications

Renegotiating NAFTA was central to President Donald Trump’s campaign as he promised to bring back jobs, especially in auto-dependent states in the Midwest. NAFTA was enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada.

Trump vowed to end the trade pact with Canada and Mexico, and slap a 10 percent to 35 percent tariff on vehicles and parts made in Mexico that are imported into the U.S. That could add $5,000 to $15,000 to sticker prices.

Critics have noted Mexico will continue to be attractive to automakers because it has free-trade agreements with more than 40 countries that are separate from NAFTA. Additionally, they note the U.S. has most-favored nation status with all 164 countries that are members of the World Trade Organization, including Mexico, Canada and China, which limits tariffs on most traded goods to 2.5 percent.

Kristin Dziczek, director of the Industry, Labor and Economics Group at the Center for Automotive Research in Ann Arbor, said the Trump administration’s latest demands could push more auto companies into claiming most-favored nations status, meaning they would pay only a 2.5 percent tariff for cars imported from Canada and Mexico if they fall under the 50 percent threshold. Automakers, she said, are not going to move production to the United States unless the cost of doing so is less than paying a 2.5 percent tariff.

Then there’s the “chicken tax.”

Without NAFTA, pickups and SUVs built in Canada or Mexico and then sold in the U.S. would be subject to a 25 percent duty imposed by former President Lyndon Johnson in response to tariffs by France and West Germany on U.S.-raised chickens.

Dziczek said the higher tariffs for pickups and SUVs could force automakers to be more creative in their vehicle designation. She noted that crossovers have already blurred the lines between SUVs and passenger cars.

“A 25 percent tariff is going to make you think about how to get around it,” Dziczek said.

Dziczek said auto companies claimed NAFTA’s duty-free treatment for 99.5 percent of the cars that were imported from Canada and 99.7 of the vehicles that were imported from Mexico in 2016.

She said the proposed changes to NAFTA could put U.S. auto companies at a disadvantage against global competitors.

“Every vehicle that is traded in the world has a portion of that car that is done in a low-cost, or some would say best-cost, country,” she said. “If you’re competing in a global market and you don’t have a low-cost or best-cost country, you’re going to be at a disadvantage.”

‘Self-sabotage’?

Alan Deardorff, professor of public policy and economics at the University of Michigan, said it’s not clear how Trump’s NAFTA proposals will impact employment in the U.S.

He noted automakers would be free to import cars cheaply from other U.S. trading partners, except in the case of light trucks that would face higher tariffs due to U.S. trade law.

“If they are no longer trying to qualify for preferential tariffs, they might as well import parts from China,” Deardorff continued.

Linda Lim, professor emeritus of strategy at the University of Michigan’s Ross School of Business, said the Trump administration may be trying to “self-sabotage” the NAFTA talks with its strident domestic-content proposals.

“What’s really happening is the Trump administration is not very enthusiastic about NAFTA,” she said. “One thing they can do is make demands that are so extreme they kind of self-sabotage. I’m not saying that’s what they’re doing definitively, but it’s quite ridiculous to suggest such a high local percentage.”

Domestic content

These cars built in Canada or Mexico by Detroit carmakers would face tariffs on U.S. sales under the Trump administration’s NAFTA proposal (U.S. content figures are from an American University study):

■Cadillac XTS, assembled in Canada, 49 percent U.S. content

■Ford Fusion, assembled in Mexico, 48 percent U.S. content

■Chrysler Pacifica, assembled in Canada, 44 percent U.S. content

■GMC Terrain, assembled in Mexico, 43 percent U.S. content

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Carmakers rattled by Trump NAFTA demands

Keith Laing, Detroit News Washington Bureau
Published 6:52 p.m. ET Oct. 16, 2017

Washington — Automakers are raising concerns about the future of the North American Free Trade Agreement after the Trump administration proposed increasing the required percentage of domestic parts in cars to qualify for duty-free treatment.

The proposal, which emerged in talks with Canada and Mexico in Washington over the weekend, calls for increasing — from 62.5 percent to 85 percent — the minimum percentage of parts that have to made in the U.S., Canada or Mexico in order to escape tariffs. The administration has also proposed instituting a new requirement that 50 percent of parts must come from the U.S. directly.

Jennifer Thomas, vice president of federal affairs at the Alliance of Automobile Manufacturers, which lobbies for automakers, said the proposal is not likely to have its intended effect of increasing U.S. jobs.

“This is an onerous proposal that is unprecedented, especially with the domestic content requirement,” she said. “We strongly believe this is going to have an adverse effect. It’s going to lead to a decrease in production, a decline in jobs and an increase in cost to consumers. A lot of companies are going to forgo the NAFTA benefit and just pay the tariff, so you’ll see a shift in production to other locations.”

Renegotiating NAFTA was a central tenet of Trump’s campaign as he promised voters to bring back jobs, especially in auto-dependent states in the Midwest. NAFTA was enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada.

On the campaign trail, Trump said he would end the trade pact with Canada and Mexico and slap a 10 percent to 35 percent tariff on vehicles and parts made in Mexico that are imported into the U.S. if NAFTA renegotiation is not a success. That could add $5,000 to $15,000 to the price of a car. Some domestic vehicles assembled by American workers in Detroit could be hit with import tariffs.

Trump has threatened recently to withdraw completely from the deal, which was enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada. In a Forbes interview published last week he said: “I happen to think that NAFTA will have to be terminated if we’re going to make it good. Otherwise, I believe you can’t negotiate a good deal.”

Thomas said Monday automakers are concerned the latest bid could lead to Canada and Mexico walking away from the NAFTA negotiating table.

“There is growing concern that this is ultimately going to lead to a withdrawal because with the contentious proposal that has been put on the table, it’s hard to see how the three countries can come to agreement,” Thomas said. “This would really set us back and hurt our manufacturing base in the U.S. and hurt our ability to export,” Thomas said.

Matt Blunt, president of the American Automotive Policy Council, which lobbies in Washington for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles, agreed the latest demands are a tough pill for automakers to swallow.

“We are very concerned the approach they are taking could be counterproductive,” Blunt said.

Kristin Dziczek, director of the Industry, Labor and Economics Group at the Center for Automotive Research, said it “could have a perverse effect of having less jobs in the U.S.

“This is going to push more cars and more parts into ‘most favored nations’ status, which is only a 2.5 percent tariff,” she said, referring to rules established by the World Trade Organization that limit tariffs between countries that have given enough the designation.

The U.S. has most favored nation status with all 164 countries that are members of the WTO.

Dziczek said the lower tariffs with those countries could make trade with places with low-cost labor more attractive if NAFTA is drastically altered or eliminated.

“If you’re paying 2.5 percent, you can pay 2.5 percent from any country that has most favored status with the U.S.,” she said. “You’re not going to move production to the U.S. unless the cost of doing so is less than paying a 2.5 percent tariff.”

Linda Lim, professor emeritus of strategy at the University of Michigan’s Ross School of Business, said the Trump administration’s stance could make it harder for the U.S. to argue against protectionism from other countries such as China.

“The whole thing is self-defeating. It’s not going to create jobs. It’s not going to help the economy and it’s not going to help us against China.”

Lim said the automotive sector would be one of the hardest hit if the proposed changes are enacted. But she said the president may decide to blow up the deal anyway.

“The administration needs policy wins, and trade was such a big deal on the campaign trail,” she said. “They may be willing to take the economic cost — especially as the global economy is doing well — and shaft the auto industry.”

http://www.detroitnews.com/story/business/autos/2017/10/16/carmakers-rattled-trump-nafta-demands/106721306/

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Trump threatens to terminate NAFTA

Keith Laing, Detroit News Washington Bureau
Published 4:04 p.m. ET Oct. 11, 2017 | Updated 10:17 a.m. ET Oct. 12, 2017

 

Washington — President Donald Trump is threatening to blow up the North American Free Trade Agreement as negotiators from the United States, Canada and Mexico gather in Washington for a fourth round of talks.

Trump said in an Forbes interview that was published Tuesday: “I happen to think that NAFTA will have to be terminated if we’re going to make it good. Otherwise, I believe you can’t negotiate a good deal… .

“[The Trans-Pacific Partnership] would have been a large-scale version of NAFTA,” Trump said. “It would have been a disaster.”

Asked about the possibility of negotiating a separate deal with Canada and Mexico if NAFTA falls apart after meeting with Canadian Prime Minister Justin Trudeau at the White House Wednesday, Trump said: “We’ll see what happens. We have a tough negotiation and it’s something you will know in the not too distant future because we are going to be discussing NAFTA and we will be discussing defense.”

Trudeau put a happier face on the NAFTA talks after Wednesday’s meeting with the president.

“We gave a good partnership and there are always ways to improve it, always issues we need to talk through and that’s why having an ongoing constructive relationship between the president and prime minister is really important,” said Trudeau, who also met Wednesday with members of the powerful U.S. House Ways and Means Committee on Capitol Hill.

Negotiators from the U.S., Canada and Mexico are scheduled to meet Wednesday through Sunday as they seek to hammer out an agreement that would be acceptable to all three nations. The first three rounds of talks between the three countries over potential changes to NAFTA were held in Washington, Mexico City and Ottawa.

Trump administration officials have said the U.S. wants to “update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America.” The administration has not identified a specific percentage of minimum domestic content that it would like to see.

NAFTA supporters have raised alarm bells about the Trump administration introducing “poison pills” into the recent talks.

U.S. Chamber of Commerce President Tom Donohue said in a speech in Mexico on Tuesday, “Let me be forceful and direct. There are several poison-pill proposals still on the table that could doom the entire deal.”

Donohue identified proposals from the Trump administration to impose a sunset clause that would stipulate that the revised trade agreement would terminate after five years unless all three countries agree it should continue and increasing the percentage of parts that are used in cars and other products that have to made in the U.S., Canada or Mexico to qualify for duty-free treatement under the deal as troublesome to negotiators from Canada and Mexico.

Donohue said the Trump administration has also proposed changes to the NAFTA agreement’s Investor-State Dispute Settlement system, which allows individual companies to sue countries for alleged discriminatory practices. Critics have said the system allows companies to go around domestic courts to sue governments in cases that involve international law disputes.

The Trump administration is considering “eliminating this important tool, or making it somehow optional,” according to Donohue.

“ISDS is a long-standing mechanism for using neutral arbitration to resolve investment disputes,” Donohue said in his Mexico speech. “And for the record, the U.S. government has never lost a case.”

On rules of origin, the Trump administration has said it wants to “incentivize the sourcing of goods and materials from the United States and North America.” Administration officials point to a study released by the U.S. Commerce Department showing the percentage of U.S. content of manufactured goods that are imported from Canada dropped from 21 percent to 15 percent from 1995 to 2011. while the percentage of U.S. content in goods imported from Mexico fell from 26 percent to 16 percent during the same period.

“NAFTA supporters assert that the U.S. content in cars assembled in Canada and Mexico is particularly high and that therefore our $70 billion-plus trade deficits with our NAFTA partners are not worrisome,” U.S. Commerce Secretary Wilbur Ross wrote in an op-ed in the Washington Post. “That would be a great argument if it were correct. But it isn’t. That argument is neither true of motor vehicles nor of manufactured goods in general.”

U.S. Rep. Debbie Dingell, D-Dearborn, said in an interview with The Detroit News the Trump administration’s hard line stances on NAFTA could end up endangering the entire agreement.

“The next few weeks are critical,” said Dingell, who has co-introduced a proposal that calls for increasing the NAFTA region content requirement to 90 percent. “The Canadians are really worried, there’s no question.”

Dingell criticized Trump’s apparent eagerness to pull out of the NAFTA agreement completely.

“President Trump came to Michigan and he made promises and that’s why people voted for him,” she said. “They want him to bring jobs back and protect jobs here.”

http://www.detroitnews.com/story/news/politics/2017/10/11/trump-threatens-terminate-nafta/106533516/

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