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A worker drives a Toyota pickup onto a ship in Thailand. Increased truck imports from the country could threaten the Big Three.Thai pickups threaten Big Three
Free trade agreement could add a new Asian rival in what's been a Detroit stronghold.
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WASHINGTON -- A free trade agreement being negotiated between the United States and Thailand could place the Asian nation alongside Japan, Korea and China as a major threat to U.S. automakers and American manufacturing jobs, officials say.
Thailand is the second-largest producer of pickup trucks in the world. The United States currently has a 25 percent tariff on all imported light trucks.
If the tariff were removed on vehicles exported to the United States from Thailand, Japanese and other automakers with assembly plants there could compete much more effectively for American truck buyers.
Meeting with Thai negotiators this past week in Montana in the latest round of bilateral talks, U.S. trade negotiators acknowledged the significance of the issue by reserving discussions on removing the tariff for the most intense final rounds of negotiations, said Rep. Sander Levin, D-Royal Oak, a leader on trade issues in Congress.
"Truck production is so critical to the Big Three," Levin said. "Thailand presents such a big threat. The concern is they could shift from the small trucks they now produce to a larger truck, and all the implications that could have."
Pickup trucks have been steady business for U.S. automakers. For example, the Ford F-150 is the best-selling vehicle in America and pickups account for 33 percent of Ford Motor Co.'s total production.
The F-150 is built in three North American plants including the Dearborn Truck plant at Ford's Rouge complex.
About 582,000 of the 928,000 vehicles that were assembled in Thailand in 2004 were light pickup trucks, according to the Automotive Trade Policy Council, which represents the Detroit's automakers on trade matters.
Due to import tariffs and taxes in place in Thailand, a vehicle imported into Thailand for sale would cost more than twice a vehicle produced there, said Stephen Collins, president of the trade policy group.
Most of the pickup production there is by Japanese companies Toyota, Mazda, Mitsubishi, Isuzu and Nissan, but General Motors Corp. and Ford also build trucks there for sale and to export to other parts of Asia.
"Thailand is an offshore pickup truck subsidiary of the Japanese auto industry," Collins said. "That is driving the pressures they are bringing to bear on the debate about wanting to secure duty-free access to dramatically increase, we believe, imports of pickup trucks from their offshore subsidiary, Thailand, to the United States.
"We are looking at substantial disruption of the U.S. pickup truck market, which has obvious plant and job implications."
While most eyes are on the heated debate in Congress over a free trade agreement with Central American nations, the United Auto Workers has made the Thai talks one of its top priorities for keeping jobs in America.
"We just see essentially the same pattern being repeated, without any regard to what that's going to do to auto production and jobs in this country," Alan Reuther, legislative director for the UAW, said of U.S. trade agreements. "We hope we will get a different result in Thailand. That's the biggest trade battle we are in currently."
The union contends not only that sales of UAW-built vehicles will drop with heightened competition, but that there will be less incentive for companies like Toyota to invest in plants like its new pickup facility in San Antonio, which opens next year, and that U.S. car companies could start importing vehicles they make in Thailand.
Reuther said he thinks that would be harmful to the ailing domestic steel industry as well.
"You'd see a huge shift of pickup truck production to Thailand; that's less American steel that would be used in the pickups. There'd be a ripple effect on other sectors as well," he said.
Dennis Fitzgibbons, director of public policy at DaimlerChrysler, said Thai capacity to build trucks is actually 1.3 million, twice its own market for the products.
"It has the UAW spooked -- us too," Fitzgibbons said. "We're not opposed in principle to eliminating the tariff, but it's a question of what do you get in return."
Fitzgibbons said officials from the Office of the U.S. Trade Representative have asked the automakers for a proposal of what it would take to get them to support a trade agreement with Thailand, but the companies haven't responded yet.
"It's premature," Collins said. "It's hard to create a scenario in which there's a substantial gain or really any net gain on the U.S. side. But we're open and we're reviewing and working with the government on various options and strategies."
The fourth round of U.S.-Thai trade talks wrapped up Friday in Great Falls, Mont., and the next round is scheduled for September in Hawaii. Negotiators are hoping to reach an agreement, which would need congressional approval, by September.
The pending agreement is so significant to the auto industry that it has even affected product design, said Steven Szakaly, an economist at the Center for Automotive Research in Ann Arbor.
He said Ford delayed a remodel of its Ranger in part because of the possible threat from Thailand, where a version of the Ranger -- as well as trucks it competes against -- is built.
"The pickup trucks from Thailand are very, very inexpensive," Szakaly said. "You don't want to invest a couple billion dollars in designing a new truck that you might not be able to sell profitably."
Most of the world pickup truck production is concentrated in North America because of the 25 percent tariff, or so-called "chicken tax," that stands in the way of the profitable U.S. market, he said.
The tax originated in the 1960s when the Germans placed a tariff on U.S. frozen chicken. The United States retaliated with a tariff on four items that included trucks because Volkswagen was exporting a small pickup at the time, said Jessica Potts, manager of public and industry affairs at the American International Auto Dealers Association.
The group, which represents dealers that sell international vehicles, is aggressively lobbying to have the tariff repealed. Representatives from the organization attended meetings last week in Montana and found the discussion promising, Potts said.
"First and foremost, it's a consumer choice issue," Potts said.
It's also an economic issue for some of its 11,000 international nameplate car dealers who aren't able to compete in the thriving pickup truck market because their manufacturers can't offer competitive choices in the United States due to the tariff, she said.
"To build a truck plant in the U.S., it can cost around a billion dollars," she said, referring to Toyota's new plant in San Antonio. "It's such a significant investment. They want to be able to test a pickup truck in the U.S. market before they make such a huge investment."
GM spokesman Chris Preuss said the company is concerned about the negotiations at a time when U.S. auto companies are struggling with health care, pensions and other costs that foreign competitors don't face.
"We're concerned a rapid repeal of that tariff could lead to further pressure on U.S. manufacturing and thus take what's already a pretty tough situation relative to our competitive position and the impact of imports," he said.
"It could make a tough situation harder. We are watching this unfold, and we are again expressing at certain levels of government our concern with how that develops."
Preuss said the company supports free trade but wants to see a gradual repeal of the tariff.
Levin said he thinks the tariff shouldn't even be on the table for discussion. He said it belongs in a multilateral trade negotiation because it involves the Japanese, Koreans and potentially other foreign automakers.
"I support free trade," Levin said. "The problem is the Japanese companies would be able to use Thailand as a platform when they haven't opened up their own markets to American competition. The problem is it would be a one-way street. And that's why it has to be done multilaterally.
"We've got to keep the heat on these countries that don't practice two-way trade. ... This would be unilateral. Our agreement would be with Thailand, not Japan or Korea. It's totally inadvisable for us to negotiate a change with Thailand. It's totally indefensible."
You can reach Lisa Zagaroli at (202) 906-8206 or lzagaroli@detnews.com.
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