Congressional Scrappage Bills Invite Protectionism Criticism

Posted by: David Kiley on March 18, 2009

On March 17, Rep. Betty Sutton (D-Ohio) and Rep. Candice Miller (R-MI) introduced a bill that would give car buyers thousands of dollars in vouchers for replacing vehicles at least eight years old with fuel efficient vehicles.

The bill is an almost sure fire way to drive demand for new vehicle sales—with positive rippling effects that would be felt at the automakers, suppliers and dealers.

But so far, every bill that tries to tackle this issue has been bogged down in arguments over protectionism. Here’s why: the bill, as well as two that went before it, favor U.S. built vehicles over those built in Canada and Mexico. And the most recent bill from Sutton leaves out cars built abroad all together.

“We very much want to see a neutral bill,” said Michael Stanton, president of the International Automobile Manufacturers Association. Stanton says he applauds the goal of pushing more fuel efficient vehicles in the bills, but doesn’t think legislation should create “winners and losers” based on where the car is assembled. The Alliance of Automobile Manufactures has expressed the very same thing.

Mazda North American Operations spoke for itself. “We feel it is very protectionist,” said Mmazda spokesman Jeremy Barnes. “Our concern is that it is a ‘Buy American’ piece of legislation.”

Indeed, though there is populist sentiment among the electorate that tax-paper funded bailouts and stimulus packages should help U.S. companies only, it is tough to pull that off when the U.S. is the lynchpin in a global economy and it has extensive trade agreements with foreign countries.

Nichole Francis Reynolds, chief of staff for Rep. Sutton, said that charges of “protectionism” in the bill was a “tactic to distract from the real goal.” She said that there is nothing wrong with “helping home first.” By “home,” she means U.S. manufacturers and suppliers.

The voucher program outlined in the Sutton bill cover vehicles made in Mexico and Canada, but favor those made in the U.S. A $4,000 voucher would be available for a car made in the U.S. meeting the fuel economy standard. A $5,000 voucher goes for a car that gets 30 mpg. A car built in Mexico and Canada getting 27 mpg gets no voucher. But one reaching 30 mpg gets a voucher of $4,000.

Vehicles imported outside of North America by foreign-based manufacturers that meet the environmental standards would not be eligible for the vouchers at all: they include Toyota Prius, Toyota Yaris, Honda Fit, Mazda3, Mazda5 and others.

Trucks and SUVs meeting the fuel economy standard built in the U.S. get a $4,000 voucher, while those made in Canada and Mexico get $3,000. A business replacing a work truck with one that gets greater fuel economy of any kind gets a $5,000 voucher.

Reynolds said the hope was that the bill would get everyone to the table to discuss the issue. "It's got to be worked on," she admitted.

IAMA's Stanton said he thought it was possible that the measures outlined in the bill might be taken up in deliberation of a Senate Energy Bill.

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Reader Comments

Darin

March 19, 2009 11:18 AM

Doesn't the current trade policy pick "winners and losers"? By allowing other nations to manipulate their currency, abuse non-tariff barriers, and take advantage of a Value Added Tax system that gives an advantage to their automakers they have an advantage when allowed to enter our market with no strings attached. To argue that taxpayer dollars should go to purchase products that don't even generate U.S. tax revenue is absurd To give a foreign product $4,000 in tax incentives when that product generates only $400 is a perverse use of stimulus. If foreign automakers would like to be eligible tha answer is obvious - Build it in America!

Bob

March 26, 2009 12:18 PM

View from the trench--Economic issues aside what is going to happen to those 8 year old cars that are traded? Also should we base it on mileage? I would like to unload my 5 year old car with 150K. The $3,000 rebates, employee pricing and 0% interest will disappear the day this bill passes so what is the point. Reasons that people drive old cars are low income, high debt and bad credit.

RegularJoe

March 27, 2009 2:02 PM

Exactly what the hell is wrong with being protectionist??? In this wimpified "everything fair" la la land, I'd say it's about damn time to protect whats left of our countries manufacturing base. Asian carmakers laugh at us for letting them walk in and own a huge portion of the auto injdustry - and let all the profits go back to Japan or wherever. Wake up ya sheep!

GM Daughter

March 31, 2009 1:35 PM

If we take out the country of origin clause, which is likely in the final bill, we have a measure which is good for Americans and everyone else. Right now a used car doesn't put anyone to work except the used car salesman. A neutral scrapping bill puts a lot more Americans to work without triggering a trade war. Besides, it's parents who should teach their children to buy American, not the gov't.

apm

April 1, 2009 6:47 AM

the fact is that for the last 15 years american cars have been built better, allowing them to stay running and looking better than any car built in this country before. there was a time when you were lucky to get a car to last 5 years much less 10years likr you see today and that is the problem we use to critisize american car makers for building cars that were inferiorer to imports and when they started building better cars, they stopped buying cars as often and that is what is at the crux of our dellema better cars ; fewer sales

apm

April 1, 2009 6:49 AM

the fact is that for the last 15 years american cars have been built better, allowing them to stay running and looking better than any car built in this country before. there was a time when you were lucky to get a car to last 5 years much less 10years likr you see today and that is the problem we use to critisize american car makers for building cars that were inferiorer to imports and when they started building better cars, they stopped buying cars as often and that is what is at the crux of our dellema better cars ; fewer sales

apm

April 1, 2009 7:07 AM

the issue is very simple to understand; the fact is that for years the big three built an inferior product compared to imports and the consumer showed its displessure by buying more and more imports so the big three were forced to start building better cars, more efficent more durible, and that was the down fall of the big three now instead of buying anew car every two or three years they were able to keep their cars up to ten years and still have dependable car this did not affect the imports because they have a world market where the big three were never able to equal

James Mason

April 8, 2009 11:50 PM

Much nonsense being talked here and in Congress. Try putting protectionist measures in place to 'protect' the US vehicle industry and see how quickly other countries cancel orders for Boeing aircraft and buy Airbus instead. Some people in Congress may think that is fine but the suppliers to Boeing are scattered throughout the US. When people in these suppliers start to lose jobs because of a short-sighted Congress, they will remember that when the next elections are held.

James Mason

April 8, 2009 11:50 PM

Much nonsense being talked here and in Congress. Try putting protectionist measures in place to 'protect' the US vehicle industry and see how quickly other countries cancel orders for Boeing aircraft and buy Airbus instead. Some people in Congress may think that is fine but the suppliers to Boeing are scattered throughout the US. When people in these suppliers start to lose jobs because of a short-sighted Congress, they will remember that when the next elections are held.

Todd Bandrowsky

April 9, 2009 8:32 AM

Protectionism is long overdue in the United States. You can only have free trade when the world trades fairly and right now we know that it does not. Kick the foreign market occupiers out. The fact is, protectionism ultimately works well for the USA. It did during antebellum period for the North, during the post-civil war industrial expansion. Free traders are free traitors.

Ken

April 21, 2009 11:12 AM

It should be protectionist. Even though we have given away the farm, these vouchers are paid for by the tax payers of the United States. If other countries want to stimulate their own economies they are free to do so. If they want us to buy their cars with vouchers let them pay for it. It would benefit their companies and taxpayers, we should not foot the bill.

Rachel

May 8, 2009 3:37 PM

As a single mom, separated from my husband,due to domestic violence I am working only part-time and going to school part-time to get my associates to work Full time. I cannot get a loan unless this voucher Bill goes through, I cannot be the only one out there trying to get a decsent car to help my kids and I, not to have to have a co-signer to try and stand on my own two feet... Please let this bill pass I am desperate...

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