Democrats Scrutinize Auto Rules of Origin at TPP Forum

Ways and Means Ranking Member Sandy Levin, D-Mich., on Jan. 11 said “it is [his] understanding” that the Office of the U.S. Trade Representative will sign the Trans-Pacific Partnership with the pact’s 11 other partner countries in February. Chairman Kevin Brady, R-Texas plans to start TPP hearings within the committee and subcommittees in February, a Ways and Means spokeswoman said in an email. USTR didn't comment.

The lawmakers echoed one another’s concerns that TPP’s rules of origin for automakers would not change Japan’s status as what Sen. Sherrod Brown, D-Ohio, called “the most closed auto market in the world.” Brown said he was skeptical of claims that TPP would benefit U.S. auto manufacturers, and said the agreement was written “by Japan for Japan’s automakers” and would benefit China and kill American jobs. “Cheerleaders for this agreement, from Republican leadership to the White House to the Wall Street Journal editorial page, say new markets will be opened up to American cars, but we’ve heard those words before,” Brown said. “It will be seven to 12 more years until American automakers have full access to … closed markets.”

Harvard law professor Mark Wu said some smaller auto parts could be subject to a lower 35 percent regional value content threshold under TPP. “You start adding all the parts and components—the low percentages—and when you tabulate the cumulative value of the car, you actually could have a very low standard when you add it all up,” said United Auto Workers Legislative Director John Nassar, who testified.

Downstream producers might welcome the more flexible sourcing that TPP’s rules of origin would permit, compared with NAFTA’s, Wu said. “These are companies that might seek to substitute a portion of U.S.-made inputs for those from China, or other non-TPP countries, that they have not yet done so, because of the importance of the North American market and the higher NAFTA rules of origin,” Wu said. “The lower TPP thresholds will allow them to make some of these changes.” If negotiators want to change the rules of origin, they could raise the threshold over a “phase-in” period, like NAFTA, which would guard against substitution of U.S. parts and inputs, and prop up U.S. TPP supply chains, yet tweaking the existing agreement might require concessions in other areas of the pact that the U.S. is unwilling to make, he added. Tier 3 and 4 auto suppliers run bigger risks of losing business under TPP’s existing rules of origin than Tier 1 and 2 suppliers, Wu said.

Dems’ Goals

Levin said the forum was part of his goal to “take the lid off” of TPP, and understand its consequences. Meanwhile, Rep. Rosa DeLauro, D-Conn., along with six House colleagues, and labor and industry representatives on Jan. 11 met to form an anti-TPP coalition just ahead of President Barack Obama’s State of the Union speech scheduled for Jan. 12. “While President Obama is likely to set important goals for the country in his last State of the Union Address, we will remain vigilant in our opposition to his disastrous trade deal, the Trans-Pacific Partnership,” Rep. Louise Slaughter, D-N.Y., said in a statement. “I have never seen a trade agreement that has benefited the American manufacturer or the American worker, and the TPP is no different. This trade deal will ship more American jobs overseas, lower wages here at home, and force us to do business with notorious human rights violators such as Malaysia, a country with one of the most egregious records of human trafficking. We will continue to use every tool at our disposal to stand up for the American worker and oppose the TPP.”