Commerce Releases 2019 Report on ‘National Security’ Threat Posed by Foreign Autos

Trade Update • JULY 07, 2021

The U.S. Commerce Department’s Bureau of Industry and Security this week released a redacted version of its Section 232 report on the national security implications of U.S. imports of automobiles and automobile parts. Lawmakers in Congress have repeatedly called for the report to be made public, but the Trump administration refused to release it, claiming the document was protected by executive privilege.

The 113-page report, dated Feb. 17, 2019, details findings of the investigation launched by Commerce in 2018 under the authority of Section 232 of the Trade Expansion Act of 1962 and includes several recommendations by then-Secretary Wilbur Ross.

Findings

Applying a contentiously broad definition of “national security” that goes beyond national defense requirements to include the “general security and welfare of certain industries,” Commerce found that significant import penetration over the past 30 years has “severely weakened” the U.S. automotive industry to a degree that it said, “jeopardizes U.S. military leadership and its ability to fulfill America’s defense requirements.”

The report also found that the U.S. auto industry’s “technological leadership in innovation is quickly diminishing,” noting that the share of research and development now being conducted by American-owned companies is a fraction of that being undertaken by foreign competitors. A continued decline in domestic production Commerce warned: “will further weaken and will impede the automobile industry’s ability to invest in the development of technologies that are imperative to maintaining a leading edge in U.S. military capabilities.”

Recommendations

Based on these findings, Commerce presented the following three recommendations for presidential consideration:

1. Obtain agreements with countries similar to the one reached with Mexico and Canada in connection with the renegotiation of NAFTA that restricted shipments from the two nations to a certain level.
2.  Impose a 25% tariff on imported automobiles and automobile parts; or
3.  Impose a 35% tariff on sports utility vehicles and crossover utility vehicles.

The tariffs were threatened but never imposed by former President Trump after automakers said the action would result in the loss of hundreds of thousands of auto jobs, raise vehicle prices and threaten industry spending on the development of self-driving cars.

Reaction

In a terse statement, Republican Senator Pat Toomey, who last year drafted legislation to require the report’s release, said that “a quick glance confirms what we expected: The justification for these tariffs was so entirely unfounded that even the authors were too embarrassed to let it see the light of day.”