Trade and the Competitiveness Agenda – What’s Next for the Automotive Aftermarket
Tuesday, June 01, 2021
By Ann Wilson, senior vice president of Government Affairs, Motor & Equipment Manufacturers Association (MEMA)
President Biden based much of his White House campaign on an agenda to restore jobs and manufacturing in the U.S. Although few Americans officials disagree with the vision, there are wide differences on how to get there.
For the automotive aftermarket, this vision impacts trade policy and our ability to compete globally in the U.S. And the roadmap includes trade agreements, tariffs, Buy America policies, and much more.
Although President Biden has focused his administration on domestic policies, his trade policies are beginning to take shape.
- President Biden has used the power of his office and issued Executive Orders to further his vision of a stronger U.S. manufacturing base.
- Congress is considering legislation to authorize programs and funding that is designed to allow the U.S. to compete more effectively against China. Yet, the details are still under debate and many on Capitol Hill are using the legislation to further other issues.
- At the same time Democrats in both the Senate and the House are laying out an aggressive “Buy America” program.
What I Am Watching For?
I am watching carefully to judge the actions of Congress and any new Executive Orders from the White House.
- Will Congress reach consensus on a package of legislation that helps level the playing field against China?
- What “Buy America” provisions will be added to the infrastructure legislation?
- We are keeping a close eye on Biden’s trade agenda and the tools the President uses to address his vision.
The Endless Frontier Act, sponsored by Senators Schumer (D-NY) and Young (R-IN), authorizes more than $100 billion over five years to boost research and development of innovative technology and manufacturing at colleges, universities and other institutions and create a new entity within the National Science Foundation to focus on technology.
The package is being pushed toward passage on an aggressive timetable by Schumer. The fervor among Democrats and Republicans to counter about China’s challenge to U.S. economic primacy has made the legislation one of the few bills to draw broad support at a time when partisan divisions are running deep. Its fate also may serve as an indicator for other proposals, such as infrastructure, that have nominal bipartisan support. The consideration of the bill in committee was often contentious and the ability to have it considered on the Senate floor is far from certain.
The aim of the bill has bipartisan interest to address our country’s competitive posture with China. As this blog is being finalized, Senator Rubio (R-FL) has announced his intention to amend the bill to expand oversight of research funds to include the U.S. intelligence community, requiring the Director of National Intelligence and other agencies such as the Federal Bureau of Investigation to certify that anyone receiving money authorized by the legislation is not susceptible to foreign threats. It also would prohibit people who have received financial or other support from the Chinese government from receiving funds authorized by the legislation, among other provisions.
If the legislation passes the Senate, it must then be considered in the House. But Democrats in the House have their own vision of a competitiveness agenda and the final legislation will differ from the current bill under consideration by the Senate.
What About China?
When China and the U.S. met earlier this year, the opening exchange began with a very public disagreement, witnessed by the press corps. Although that session did not appear to affect the rest of the meeting, it sets the tone for our continued relationships. Many experts argued that China believes that the balance of power has shifted in its favor over the past 10 years, especially during the pandemic, and wanted to play to the audience at home.
But President Biden’s priority seems to be creating a greater common cause with allies against China, especially on technology and economics. White House officials compare it to the strengthening of Western allies as a precondition for any talks with the Soviet Union. In creating that alliance, the U.S. will reach out to a group known as the Quad (U.S., Japan, Australia, and India), and the EU. And all of this will be done in the guise of creating a competitive landscape against China.
But What About the Section 302 Tariffs?
U.S. Trade Representative Katherine Tai has committed to re-examining an exclusion process for Section 301 tariffs on goods from China. Yet, she stopped short of committing to the elimination of the tariffs and is supporting continued talks with China on compliance of the agreement mapped out during the Trump administration.
What About Supply Chain Issues?
Last week, the Senate Commerce Committee agreed to add the CHIPS Act to the Endless Frontiers legislation. The CHIPS Act authorizes $50 billion in funding for the manufacture of wafer and semiconductors in the U.S. The committee added an additional authorization for a $2 billion program for legacy chips – including motor vehicle grade chips. Although the CHIPS Act does not present a short-term solution to the shortage of semi-conductors it is a significant step forward in providing greater access to chips and wafers for U.S. manufacturers.
At the same time, the industry is seeing significant increase in prices of raw materials, including steel, a shortage of resins and plastics, and a slowdown at the ports. Congress and the White House realize that these issues must be dealt with to make this country more competitive.
But the path is unclear. There is no clear solution to the immediate shortage of semiconductors and the crisis may continue into 2022. The slowdown at the ports will need infrastructure funding and changes in the Federal Maritime rules. Neither of these are immediately forthcoming. And the Biden administration has yet to commit to any action to lift steel and aluminum tariffs even those imposed against our traditional allies.
What Else Is Being Considered?
The President sees “Buy America” as a tool to promote U.S. manufacturing. On January 25, the President issued an executive order creating a new director for “Made in America” and requiring the federal government to tighten its procedures on mandated U.S. content for federal purchases. The director is now in place and MEMA expects specified content requirements later this year.
In addition, the Biden administration brought a case against GM using a new labor provisions under USMCA designed to assist in union organizing. The facility-specific rapid response labor provisions of USMCA were specifically added to strengthen union organizing in Mexico and provide great impetus to re-shore jobs in the U.S.
Tai has made it clear that trade policy will continue to be used to strengthen the Biden agenda. I expect to see a greater emphasis on trade agreements that use the rapid response system and efforts to include similar provisions in other trading agreements.
What Should Our Domestic Industry Do?
We are all too aware of the limitations of a global supply chain. Congress may indeed consider legislation that combats counterfeiting. And our industry has seen a growing focus on re-shoring operations in North America and specifically the U.S. Furthermore, all aftermarket products must be held to the same industry and governmentally imposed standards.
But the aftermarket must use this opportunity to educate our elected representatives. Unnecessary “Buy America” policies will not work if there is an inadequate supply of components and parts “Made in America.” And the goal of re-shoring all manufacturing in the U.S. is unlikely to be successful. By insisting on moving operations away from Mexico, small manufacturers in the U.S. will be hurt.
I know I sound like a broken record, but educate, educate, educate! In any discussions with elected representatives, explain how the global supply chain makes the United States more competitive, providing more jobs and greater investment in this country. Use specific examples on how your company depends on a global supply chain and how your domestic suppliers benefit from this structure. MEMA will continue to focus on protecting U.S. competitiveness while assuring the ability for our goods to cross borders freely. As they say in the South, a rising tide can lift all boats. With the right balance of domestic and foreign policies we can strengthen our country’s ability to compete globally and make the U.S. an even more attractive place to manufacture.
Let’s commit to working on these issues together. I look forward to seeing you at AAPEX in Las Vegas. To attend, register now.