U.S. Transportation Equipment – Emerging Opportunities With TPP CountriesJanuary 15, 2016
Scott Kennedy is ITA’s Acting Deputy Assistant Secretary for Manufacturing
During the past few years, U.S. producers of transportation related goods and equipment have experienced an increase in demand for their products at home and overseas. Products such as U.S.-built commercial aircraft, aircraft engines, miscellaneous aircraft parts, and parts of railway rolling stock, have become critical components to other countries’ transportation infrastructure system.
Recently, leaders across the Pacific Rim signed the Trans-Pacific Partnership (TPP). The new agreement will eliminate tariffs, lower service barriers, and increase transparency while also increasing competitiveness by instituting stronger intellectual property rights protection, and establishing enforceable labor and environmental obligations. The TPP will lead to an overall increase in economic activity and trade for the region. As economies grow there will be a natural, corresponding rise in demand for transportation related products.
It may come as no surprise that in 2014, there were more than 680,000 U.S. transportation equipment manufacturing workers, accounting for four percent of total manufacturing production. To remain competitive, U.S. firms need duty-free access to overseas markets. Currently, some exporters face high tariffs and a host of other obstacles when conducting business in some of the TPP countries. This historic agreement will reduce the cost of exporting, increase competitiveness of U.S. firms, and promote fairness for transportation equipment manufacturers.
ITA’s Industry and Analysis division recently released a transportation equipment sector report that highlights the benefits of TPP related to some key players in the transportation industry. Thanks to TPP, Japan, Malaysia, Brunei, and New Zealand will eliminate import taxes on all U.S. transportation exports immediately. TPP is critical because 26 percent of U.S. transportation equipment exports to the world went to TPP countries.
For example, U.S. exporters of aircraft and aerospace equipment will now have new opportunities in the TPP region. TPP’s streamlined customs provisions will cut red tape and facilitate trade throughout the region, further enhancing the U.S. industry’s competitiveness. Many TPP partners have already been identified as being Top Markets for U.S. aerospace parts producers, including Singapore, Canada, Japan, Australia, Mexico, New Zealand and Malaysia. Singapore is already a transportation linchpin for the region and a hub for aircraft maintenance. Singapore is consistently a top market for U.S. aerospace parts exports, and parts exports averaged over $5 billion between 2004 and 2013. As trade in the region expands manufacturers could expect this demand to grow.
Similar to aerospace exports- the United States is a competitive producer in railway equipment including railway rolling stock, switching equipment, and signaling and safety equipment. However, U.S. exports of railway equipment face tariffs of five percent in Malaysia and New Zealand, making those products less competitive compared to Chinese goods which face low or zero tariffs in those markets. Under TPP, both countries will eliminate tariffs on all U.S. exports of railway equipment.
Internationally, the demand for transportation equipment is expanding. By offering stronger opportunities for U.S. exporters to compete abroad, we will enhance innovation and job growth at home. To learn more about this historic agreement and access our market assessment tools for U.S. exporters, visit trade.gov or contact one of our local offices.