In 1962, the European Economic Community (EEC) raised tariffs onimported chicken, effectively shutting U.S. producers out of agrowing and lucrative poultry market. One year later, after failingto resolve the issue diplomatically, the United States retaliatedby boosting tariffs on four products important to Europeanexporters: potato starch, dextrin, brandy, and light trucks. The"chicken war" was underway.
Forty years later, the truck tariff still stands at a whopping25 percent. While the other retaliatory measures were lifted overthe decades, the truck tariff remains, and nobody quite knows why.It's a policy in search of a rationale.
The retaliatory purpose of the truck tariff was served.Volkswagen, the intended target, no longer even produces thevehicles subject to the tariff. U.S. producers, whom the tariffpresumes to protect, dominate the market regardless of the tariff.Despite the fact that a the large Japanese nameplate producersmanufacture pickup trucks in the United States - a fact related tothe existence of the tariff in the first place - the Big Three hold87 percent of the U.S. pickup truck market.
The concern that imports would run roughshod over domesticproducers in the absence of the tariff is hollow. All of theworld's major producers are already operating in the United States.Having made huge investments in U.S. truck production, they're notabout to leave even if the truck tariff were eliminated. After all,foreign carmakers continue to invest in new U.S. productionfacilities even though the duty on automobiles is only 2.5 percent.The bottom line for cars and trucks is that producers want tomanufacture in their biggest markets.
If the truck tariff has any justification at all, it is abargaining chip in trade negotiations. But since the major foreignpickup truck producers already manufacture in the United States,the truck tariff's value as a bargaining chip is minimal. A U.S.offer to remove the tariff is of limited commercial value toforeign countries, and thus is unlikely to "buy" too much in theway of reciprocal market-opening offers.
Meanwhile, the truck tariff actually works to weaken the U.S.bargaining position by undermining the credibility of overall U.S.trade policy. Maintaining a tariff peak of 25 percent - almost 10times the average U.S. tariff - is unfair to consumers and isjarringly inconsistent with the general U.S. commitment to opentrade and ongoing liberalization of trade barriers. The trucktariff should be eliminated as soon as possible.