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  May 24th, 2018 | Written by

BREAKING NEWS: US to Investigate Auto Imports as National Security Threat

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  • Administration move against auto imports promises to rekindle fears of a trade war.
  • Any good-faith argument that car imports threaten national security would have to be a stretch.
  • The problem with invoking national security in trade cases is that other countries can do the same.

US Secretary of Commerce Wilbur Ross initiated an investigation today under Section 232 of the Trade Expansion Act of 1962 following a conversation with President Donald Trump.

The investigation will determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security as defined in Section 232.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” said Ross.

According to the Commerce Department, imports of passenger vehicles have grown from 32 percent of cars sold in the United States to 48 percent over the past 20 years. From 1990 to 2017, employment in motor vehicle production declined by 22 percent. US-owned vehicle manufacturers in the United States account for 20 percent of global research and development in the automobile sector, and US auto parts manufacturers account for seven percent in that industry.

The investigation, said a statement from Commerce, “will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies.”

A notice will be published shortly in the Federal Register announcing a hearing date and inviting comment from industry and the public to assist in the investigation.

In a week in which prospects of a trade war were inflamed and then subsided, this move promises to rekindle fears. The governments of Japan, China, and South Korea said they would monitor the situation. A spokesperson at China’s Ministry of Commerce said “China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order.” Beijing is increasingly eyeing the United States as a potential market for the cars that it produces.

Any good-faith argument that car imports threaten national security would have to be a stretch. A better explanation for this move is political: auto-producing states are among those that supported Trump and helped him win the presidency, just as steel-making states did. The problem with invoking national security in these kinds of trade cases is that other countries can do the same. Although it rarely if ever happens, World Trade Organization rules allow it.

Another explanation: the Section 232 investigation could be part of a larger trade strategy.  “While it is not clear why the administration is utilizing Section 232 for the new investigation rather than more conventional trade remedy tools – such as antidumping, countervailing duties, and global safeguards,” said Dean Pinkert, partner in Hughes Hubbard’s International Trade practice and a former Commissioner of the U.S. International Trade Commission, “the investigation may be intended to set the stage for broad-ranging negotiations that go well beyond the automotive sector.”