Bob Lutz: Chicken Tax Can Go Away Now
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Since 1964, the United States has upheld the Chicken Tax, which includes protections for light trucks in the U.S. market. Imposed under President Lyndon B. Johnson, the tax remains to this day and has provided cover for U.S. automakers from any foreign truck competition.
Bob Lutz, former General Motors executive, recently spoke about the current state of U.S. trade and tariffs under the Trump administration, and in the conversation, he said the Chicken Tax can likely die off.
His reasoning sits in the U.S. market itself: it’s a highly competitive marketplace, especially in the pickup truck market. Today, General Motors, Ford and Fiat-Chrysler Automobiles face nearly zero competition from foreign automakers attempting to sell light-duty pickups. And automakers that do rival the Big Three’s pickups produce the vehicles in the U.S.
If the Chicken Tax went away, it would likely remain difficult for any automaker to seriously threaten the core competency Detroit has worked tirelessly to build for decades. Automakers, including Ford and GM, have also gotten creative over the years to circumvent the tax, going as far as reassembling cars in the U.S. to avoid the tariff.
The entire conversation over the Chicken Tax comes as Europe proposes reducing tariffs to 0 percent on vehicles. But, the U.S. must also bring its tariffs to 0 percent; President Trump has called for a 25 percent tariff on cars to match Chinese tariffs. The European Union also places higher tariffs on cars exported from the U.S.
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The import duty levied by the EU is the WTO rate: 10%
No, it is not the only tax. There are several others that bring it higher in total. 10% is still too much.
AGREE WITH LUTZ (A SMART MAN). Get rid of ALL taxes! Supposed to be FREE TRADE, right? Why are the Canadaians and Europeans so afraid to compete on a level playing field and adhere to their FREE TRADE AGREEMENTS like NAFTA? And this doesnt even include all the barriers to entry Canada and many countries in the world impose on American products beyond taxes
President Trump is fully justified and within the law to impose a reciprocal tax on nations that tax American products. Love our president for standing up for the American worker!
More incompetent propaganda…
1st: import duty is not a tax.
2nd: Free trade was to be implemented by TTIP (see below). So why has POTUS Trump stopped implementing it?
To clarify:
Import duties are levied by the customs office, as a one-time duty for things passing a customs barrier (of the EU as a whole in the EU case, not of individual member states);
taxes are levied by the internal revenue service on transactions internal within a given country.
Looks like “O7” peruses the #Qanon boards on 8chan. Same handle, perhaps?
Or does that IP address you so sadly tried to mask tell us who you really are? Maybe Alex needs to know…smile.
How high are the tariffs on American chicken sold in Europe?
It would be the WTO rate, I presume, but I think that the tax rate on chickens from the US is a non-issue, because none are being imported.
The main trade barriers are not import duties, but certification issues resulting from technical and health and product safety issues (this is one more aspect of reality with Mr. Trump does not understand).
The US 25% import duty on commercial vehicles from Europe is called “Chicken Tax” just because of such a non-tariff barrier: in the US slaughtered chicken are being treated with chlorine, and the EU health regulations prohibit that (that was the contentious issue, as far as I remember).
In the automobile industry, such non-tarriff barriers are the main problem between Europe and North America.
Those who followed this blog for longer times will remember the case of the Opel Adam, which quite some visitors to this forum whished to see as a Buick in NA, too. But this was declared as impossible, since the car could not be “federalized”, because the development contract assigned to the Rüsselsheim development center did not include to design that car to be “federalizeable”. You might find discussion on such issues by searching for the keyword “federalize” or “federalization” on this blog.
Other cars developed in Rüsselsheim, like those which are sold in NA e.g. as Buick Regal are being designed from the beginning for a “federalization” — the marketing of the car in NA was part of the marketing plan of that car from the beginning.
The European Union has done a great job to unify the technical standards for cars across Europe, so that no car would be technically different for Germany, France, Spain, Sweden, England, what have you. Just for the convenience, for England, Ireland, Malta and Cyprus, they would build the cars with the steering wheel at the right. But besides that, they are all the same. A car which is type certified in one country does not have to undergo a new certification process for each other country.
This is a huge cost saving for the industry, and allows seamless production systems distributed over all European countries, with unique technical standards, and no customs checks and import duties across the national borders (Brexit is threatening to break the British part of the automobile industry out of the global chain, thus causing additional costs i.e. poverty).
TTIP, the Transatlantic Trade and Investment Partnership, the bilateral trade agreement between EU and USA had already neared the stage where it could have been signed, when Mr. Trump had been elected to the POTUS office and as one first act pushed this treaty in the dust bin.
TTIP would have created the same equal level field not only for the automobile industry and all others accross the Atlantic which the EU had created for the EU members and associates.
US and EU automobile industries would have developed their cars to the same technical standards, so that a “federalization” is no longer necessary.
If Trump wanted to see US made cars running on European streets, he would not have scrapped the TTIP. But Trump is a real estate shark and does not know anything of the real world except how to make money. Well, not even that, if you consider all his “success stories” ending with Chapter Eleven.
You must be Canadian…You talk too much!
Or should I say YAP too much…try too hard…butthurt President Trump won…etc.
Lutz is wrong on the VAT (Value Added Tax).
The European Union does not levy taxes. Taxes are exclusive affair of the individual member states. EU agreements only stipulate that a sales tax has to be levied by the members, that it has to be a value added tax, and sets a minumum rate for it.
So the individual EU member states levy different rates of VAT, just like US states levy different levels of a sales tax. Many (or most) member states have more two or more rates depending on the class of product. In Germany, the general rate is 19%, and a reduced rate of 7% applies to foodstuff, books and periodicals, and some other stuff (this can get complicated).
The VAT is a tax consumer tax, consumers are the only ones who carry the burden of this tax, not business. A company, which buys cars for its business is exempt from this tax, although it is being charged e.g. 19% VAT from their supplier, but the business subtracts the VAT charged by its suppliers from the VAT which it is charging its customers, and pays only the difference. This works also accross national borders inside the EU; for this any business doing sales transactions across national borders has a VAT-ID which begins with the two-letter country code according to ISO 3166. For items imported from outside the EU, the importer has to pay an initial VAT, which again is subtracted from the VAT on items he sells. In Germany this import tax is called the “Einfuhr-Umsatzsteuer”, short EUSt which leads to the slang expression that an imported item has to be “vereusted” (translatable perhaps to “eusted”).
One has to understand the system behind it, which makes sure that the sales tax is not cumulative, as it was in the early years of the West German state, when for each sale a sales tax of 6% (I believe) was levied. This was advantageous for vertically integrated trusts, while companies whose supplies passed thru a long chain of suppliers, where each of them had to pay 6% for each transaction, had to bear a much higher sales tax burden than the vertically integrated trust which might even produce the raw materials themselves.
After the change from sales tax to Value Added Tax, it does not matter thru how many sales transactions raw materials and parts pass before the completed product is being sold to a consumer, since it is the consumer alone who is burdened with the VAT.
I think that the en.Wikipedia-article on VAT explains the system: https://en.wikipedia.org/wiki/Value-added_tax
This article also includes a table of the various VAT rates charged by the EU member states, which range from 17% in Luxemburg to 27% in Hungary.
You are the same idiot who was telling us Hillary Clinton had a 96% chance of winning…and then proclaiming our President would be impeached by now. That whole “Russian collusion” propaganda didnt turn out the way you wanted, did it?
The next 6 and a half years is going to be a difficult time fo for you…
The person spreading nothing but propaganda does place a replay to a factual description of the VAT consumer tax system, without any word about the subject of that my contribution, or the original article, but only voices personal attacks, and disqualifiers himself by this way.
And what makes this complete unknown think that he (or she) would be able to know what I had thought about the US POTUS election?
Stop spreading lying propaganda and personal attacks!
Australia removed their 25% tariff on imported vehicles. Let’s wait and see how this works. Before we do anything stupid.
That was decades ago, and GM Holden CEO Peter Hanenberger was one of those pushing for this. GM had already this plant in Thailand, and was about to take over Daewoo Motors.
Wrong! The success/ profitability of the current market is not a legitimate reason to do away with a policy that allowed the market to achieve its current state. You don’t sell your gun just because there hasn’t been any recent burglaries in your neighborhood. That isn’t any guaranty a burglary couldn’t happen again!
Things may be good now, and this policy may not appear to serve any benefit now, but things can change later, and it’s at that potential later that this policy could be the safety net that saves GM and other U.S. automakers.
The Chicken Tax isn’t hurting or helping. Just leave it alone.
Besides, “American cars” are running en masse on European streets since the 1920ies.
In the course of the expansion of the US empire accross the globe, US automobile producers set up shop in Europe to produce there instead of the expensive way of shipping from US factories over the Atlantic Ocean.
GM by acquiring the largest European automobile manufacturers Opel and Vauxhall, Ford by building their own factories. After the previous world war, also Chrysler made a tour acquiring automobile makers in Europe (Simca in France, Rootes in England, another one in Spain), but sold this soon to Peugeot (today PSA).
Trump is just a complete know-nothing regarding the automobile industry, which makes it impossible to him to recognize reality.
If he wants that no more Mercedes drive down New York 5th Avenue, he would have to order Daimler to shut down their US factory in Tuscaloosa County Alabama, U.S.A., and force 4000 US American workers into unemployment.
This would also mean the elimination of another exporter of automobiles from USA.
“Trump is just a complete know-nothing regarding the automobile industry, which makes it impossible to him to recognize reality.”
Coming from the guy who cant accept that Donald J. Trump beat Hillary Clinton…And no amount of whining, crying, spinning the facts, or anti-American left-wing propaganda on here and endless diatribes from you will change that fact.
You really need to get that Trump Derangement Syndrome (TDS) taken care of soon or the next 6.5 years is going to be a tough one for ya. Time to move on and stop being a sore loser…
This person spreading endless propaganda, this time at least quotes a phrase from my contribution, but then adds nothing to factually refute my claim. Only personal attacks and propaganda.
This person is out of place here.