NASCAR, Toyota and Tariffs
Next year, Toyota drives onto NASCAR’s Craftsman Truck series. This is the race circuit featuring pickup trucks.
The leap by Toyota into all-American NASCAR actually raises some interesting trade issues.
NASCAR has a policy of only allowing American-made vehicles to run in their races, and apparently some disgruntled NASCAR fans want that enforced to stop Toyota.
However, how does one define “American made” in this increasingly global economy? Is this prohibition merely a private-sector case of misguided protectionism, similar to the enormous 25-percent tariff that the U.S. slaps on imported light pickup trucks?
The answers to these and related questions can be found in a recent paper from the Cato Institute – “Ending the ‘Chicken War’” – written by trade policy analyst Dan Ikenson. This report has nothing to say about NASCAR, but tells us much about trade and automobiles.
Ikenson points out that “American made” is a tricky phrase these days. For example, he notes: “Today, 32 different foreign-nameplate automobiles and light trucks are produced in the United States.” Later, he states that “less than one-quarter of 1 percent of the almost 3 million light pickup trucks sold in the United States in 2001” were imported from non-NAFTA countries.
So, the folks building Tundras – the truck Toyota will race in NASCAR next season – most certainly are Americans.
Then there is the confusing issue of ownership. As Ikenson observes, Chrysler is now DaimlerChrysler. General Motors owns 49 percent of Isuzu, 20 percent of Fuji Heavy Industries, which produces Subaru, and 20 percent of Suzuki. Ford has a 33.4 percent share of Mazda, and “DaimlerChrysler owns 37.3 percent of Mitsubishi.”
Nonetheless, protectionist views regarding automobiles still run rampant. How many people do you know that will only “buy American,” and probably do not know that most light pickup trucks, along with so many other cars with foreign nameplates, are built right here in the good old U.S. of A.?
Of course, there also is the shortsightedness of being protectionist. Trying to keep foreign goods out of our country means fewer choices, less innovation, reduced quality, and higher prices for U.S. consumers, and that all translates into a diminished standard of living.
Let’s look again at light pickup trucks – this time out on the nation’s roads, not the speedways. The main point of Ikenson’s report is the foolishness of the U.S. imposing a 25 percent tariff on imported light trucks in 1963 in retaliation to “unfair tariff treatment of U.S. chicken exports by a nascent European Economic Community.” The chicken dispute is long over, but the truck tariff is in effect to this very day.
Ikenson argues that this levy makes no sense even from a protectionist’s standpoint. In 2001, according to the Cato study, the Big Three claimed 87 percent of the light pickup truck market in the U.S., and most of the other 13 percent from Japanese firms were built in the U.S.
But wouldn’t these foreign firms pack up and move their production back across the seas if the U.S. tariff barrier were lowered? No. Ikenson notes that these firms are not about to abandon multi-billion-dollar investments in the U.S. In addition, he continues: “With respect to auto production, foreign investment in U.S. manufacturing facilities keeps mounting despite a relatively small tariff of 2.5 percent and the absence of any protectionist storm clouds on the horizon.” Obviously, there are sound, non-tariff economic reasons to produce vehicles in the U.S. that are being sold to U.S. consumers.
In the end, the whopping 25 percent tariff on light pickup trucks should be eliminated. It only serves to limit competition and choices for consumers, and that includes the many small business owners who rely on pickup trucks. Also, it makes the U.S. look rather foolish when we preach the benefits of free trade. Ikenson praises the Bush administration for taking some initial steps toward eliminating the tariff, but notes that the latest proposal might not phase the tariff out until 2015.
Eliminate the tariff now, so automobile manufacturers from around the globe will be able to test the U.S. light pickup truck market. Increased competition helps consumers in terms of both quality and price.
Meanwhile, more manufacturers in NASCAR will do much the same for racing. It will be no more un-American to root for a driver behind the wheel of a Toyota than for one driving a Chevy during a Craftsman Truck series race. The same goes for whatever you decide to park in your own driveway at home.
_______________
Raymond J. Keating is chief economist for the Small Business Survival Committee, and co-author of U.S. by the Numbers: Figuring What’s Left, Right, and Wrong with America State by State (Capital Books, 2000).
