Automotive Products: Expanding a Key Industry to TPP CountriesJanuary 27, 2016
Scott Kennedy is ITA’s Acting Deputy Assistant Secretary for Manufacturing
The auto industry is the largest manufacturing sector in the United States. In 2014, $142 billion in U.S. automotive products, such as vehicles, engines, transmissions and tires were exported to the world. These exports provide 928,000 jobs here in the U.S. It’s no secret that this industry is booming and the United States is leading the way in exports.
Over the years, the sector has evolved into a global industry with automakers from Europe, Japan, India, Russia, Korea and other countries all providing state-of-the-art equipment for consumers. While auto production occurs in nearly every corner of the world, consumers across the globe have become increasingly fond of cars and trucks made in the United States, creating great opportunities to sell U.S. products overseas. In the last five years, the U.S. auto industry has nearly doubled its exports, with growth forecast to continue. In order to meet the demands of consumers while leveling the playing field for American workers, trade ministers from 12 nations recently completed negotiations for the Trans-Pacific Partnership (TPP). This historic agreement is one of a kind. The TPP will reduce the cost of exporting, increase the competitiveness of U.S. firms, and promote fairness and transparency. Why is this important for the automotive industry? Prior to TPP, United States automotive product exporters faced an estimated $22 million in duties with exports to TPP countries every year. The International Trade Administration’s (ITA) Industry and Analysis division has developed a TPP sector report that captures what exporters in the industry can expect as a result from the new partnership.
The United States exports nearly $1.3 billion in auto parts to new TPP markets each year. These exports face tariffs as high as 40 percent in Malaysia and 32 percent in Vietnam. At the same time, competing auto parts made in China face lower—or even zero—tariffs in Malaysia and Vietnam as a result of trade agreements that China has with those countries. Under TPP, 98.1 percent of U.S. auto products exports will be eligible for immediate duty-free treatment into the new TPP markets, and all remaining tariffs will be eliminated over time.
Let’s not forget, American-made motorcycles are in high demand throughout the TPP region for their quality and craftsmanship. Yet, American-made motorcycles exports face prohibitive tariffs in new TPP markets: Vietnam applies tariffs as high as 75 percent, while Malaysia applies tariffs ranging up to 30 percent. Under TPP, United States motorcycles will see deep annual cuts to the tariffs before they are phased out entirely. These significant cuts, combined with the rising middle class in the Asia-Pacific region, will provide new export opportunities to America’s motorcycle manufacturers.
Additionally, did you know that the United States is the world’s largest remanufacturer? TPP contains provisions that will provide benefits for America’s competitive remanufacturing industry. Remanufacturing is a complex, high-value, and labor-intensive production process. TPP ensures that recovered materials derived in the region and used in remanufactured goods count as TPP materials, allowing more goods to count as TPP originating. These commitments reduce the need for companies to import materials and components from outside the TPP region and incentivize domestic production, benefitting U.S. and other TPP workers.
ITA is here to provide companies with the tools to reach these emerging markets. We recently produced a series of Top Markets Reports that provides U.S. auto parts manufacturers an assessment of opportunities and challenges needed to successfully export to various markets throughout the world. For more information on this historic agreement and export opportunities for U.S. auto exporters, contact one of our local offices.
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