Congressional Scrappage Bills Invite Protectionism Criticism

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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