Auto Program In US Climate Bill Raises Trade Concerns
July 08 2009 - 5:42PM
Dow Jones News
A provision in the U.S. House-passed climate bill could violate
world-trade rules by favoring U.S. auto makers in the distribution
of potentially more than $2 billion in government subsidies, a
leading free-trade group warns.
The provision would provide an estimated $2.14 billion over five
years to auto makers to build plug-in electric vehicles "that are
developed and produced in the United States." The provision would
also direct the government in distributing the monies to give
preference to auto makers "located in local markets that have the
greatest need for the facility."
The language was added late in negotiations on the bill after
lobbying from the United Auto Workers, whose members are
predominantly employed by U.S. auto makers that operate in hard-hit
areas such as Michigan.
The program could effectively amount to government subsidies for
U.S. auto makers, likely violating World Trade Organization rules
that prohibit countries from treating foreign companies worse than
domestic ones, said Bill Reinsch, president of the National Foreign
Trade Council.
The program is the latest to come under criticism from trade
experts and businesses that accuse Congress of trying to pass
legislation designed to benefit U.S. companies over foreign
competitors.
Reinsch warned that the program for electric vehicles would
invite retaliation from other countries.
"One of two things will happen: either the Europeans will
complain about it or they'll do the same thing and they'll provide
subsidies in Europe to European car manufacturers," Reinsch said.
"From a trade-policy standpoint, either outcome is
market-distorting."
His organization plans to raise the issue with lawmakers and the
Obama Administration in coming weeks. The Senate is currently
crafting its own climate-change bill.
Michael Stanton, president of the Association of International
Automobile Manufacturers, said the program appears biased against
foreign-based car companies.
Toyota Motor Co. (TM), for example, is developing and
manufacturing the plug-in version of its Prius model in Japan.
General Motors Corp. (GMGMQ), meanwhile, plans to make its
plug-in Volt in Michigan.
"We're going to be taking a look at this and seeing what we can
do," Stanton said.
A Toyota spokeswoman said the company was still studying the
climate bill and wasn't prepared to comment.
Alan Reuther, chief lobbyist for the UAW, said the union
supported the provisions in the House bill as a way to ensure
government money is being used to create jobs in the U.S.
"This is neutral between all of the companies, foreign and
domestic companies," Reuther said. "It is saying, 'Invest in this
country and we'll get you help to do that."
There is "no reason Toyota can't produce the Prius in this
country," he added.
The money for the program in the House bill would be funded
through the sale of permits to emit greenhouse gases under the
so-called cap-and-trade system.
The Natural Resources Defense Council, using estimates for
permit prices by the Congressional Budget Office, estimates that
the financial assistance for plug-in electric vehicles would be
about $2.14 billion between 2012 through 2017.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com
(Ian Talley contributed to this article.)