On Monday 2 July, the EU again warned the USA about the disastrous consequences of a possible tariff increase on car imports, and it criticised the lack of legitimacy and foundation of the ongoing US investigation.
As with the US tariffs on steel and aluminium, the investigation, launched by the US administration at the end of May under Section 232 of the 1962 US Trade Expansion Act into imports of automobiles (including cars, SUVs, mini-vans, vans and light lorries) and spare parts in order to determine their impact on national security, "lacks legitimacy, factual basis and violates international trade rules", the Commission states in its written observations sent to the US Department of Commerce on Friday 29 June.
The imports of European automobiles into the US are stable, in line with US production and respond to market signals. "They do not threaten or impair the health of the US industry and economy", the Commission states.
The EU and US industry specialise in largely different market segments and vehicle imports from the EU do not constitute an economic threat to the US automobile industry – which is healthy, having steadily expanded domestic production over the last ten years.
"Imposing restrictive measures would undermine the current positive trends of the US automobile and automotive parts sector and negatively impact US GDP by up to US$13-14 billion", the Commission warns.
It also underlines that EU car companies contribute significantly to US employment (120,000 direct jobs in manufacturing plants and 420,000 jobs with dealers), while being well integrated in the US value chain (which exports about 60% of automobiles to third countries including the EU), thus contributing to improving the US trade balance.
"Trade restrictions are likely to lead to higher input costs for US based producers, thus in effect a tax on the American people", the Commission warns.
The EU also says that its car companies foster innovation through research and develop the local workforce. Rather than posing a threat to national security, they are a driver for securing long-term economic stability and competitiveness. Almost 20% of research and development expenditures in the US is derived from foreign-owned subsidiaries.
The Commission also warns that the impact on the US economy will be aggravated significantly by the likely countermeasures of US trading partners, as evidenced by the reaction to the US tariffs on steel and aluminium. "US trade restrictive measures could result in a very significant volume of US exports affected, estimated at US$294 billion (or around 19% of US total exports in 2017)", the Commission states.
The EU also says that US trade restrictive measures on cars would be contrary to international trade rules, as there are no exceptions under the General Agreement on Tariff and Trade (GATT) that justify import restrictions by a developed country to protect a domestic industry against foreign competition, unless in the form of permitted trade remedy measures. Furthermore, although the GATT provides for security exceptions, "the scope of these exceptions has been circumscribed carefully for specific situations and conditions, which are absent in this case".
In addition, the Commission challenges the US argument of a threat to national security, saying that if one reasons in terms of defence applications, US needs for vehicles or vehicle parts for defence or military purposes "appear to be covered by US-based specialised suppliers. These operate in a niche market that is independent and unrelated to the US automobile industry".
The EU has asked to participate in a public hearing that will be organised by the US Department of Commerce on 19 and 20 July. (Original version in French by Emmanuel Hagry)