Earlier today, Politico reported EU’s comments on US section 232 cars investigation submitted to US Department of Commerce last Friday. Below is the full statement from European Commission. Also, EU requested to participate in public hearing on July 19/20.

EU comments on US section 232 Cars investigation

The European Union has on Friday 29 June submitted written comments to the US Department of Commerce in the framework of the on-going Section 232 National Security Investigation of imports of automobiles, including cars, SUVs, vans, light trucks and automotive parts.

The EU has also requested to participate in the public hearing to be held by the Department of Commerce scheduled for 19 and 20 July.

The EU takes the view, as was the case of the section 232 steel and aluminium tariffs, that this current investigation lacks legitimacy, factual basis and violates international trade rules. The EU reiterates its firm opposition to the proliferation of measures taken on supposed national security grounds for the purposes of economic protection. This development harms trade, growth and jobs in the US and abroad, weakens the bonds with friends and allies, and shifts the attention away from the shared strategic challenges that genuinely threaten the market-based Western economic model.

The EU written comments relate to various areas on which input was requested by the US Department of Commerce to conduct its current investigation. The EU submits that:

1. Imports of European automobiles in the US are stable, in line with US production and responding to market signals. Automobile imports from the EU do not threaten or impair the health of the US industry and economy. The EU and US industry specialise in largely different market segments and over the last 5 years imports from the EU have been stable and correlated to US general GDP growth.

2. There is no economic threat to the US automobile industry which is healthy, having steadily expanded domestic production in the last 10 years. Imposing restrictive measures would undermine the current positive trends of the US automobile and automotive parts sector and negatively impact US GDP by up to 13-14 billion USD.

3. EU car companies contribute significantly to US welfare and employment. They are well integrated in the US value chain and export about 60 % of automobiles to third countries including the EU, contributing to improving the US trade balance. They provide 120,000 direct upstream jobs in manufacturing plants and 420,000 jobs with dealers. Trade restrictions are likely to lead to higher input costs for US based producers, thus in effect a tax on the American people.

4. EU car companies foster innovation through research and develop the local workforce. Rather than posing a threat to national security, they are a driver for securing long-term economic stability and competitiveness. Almost a fifth of research and development expenditures in the US is derived from foreign-owned subsidiaries. The EU automotive industry also actively contributes to enhancing the skillsets of the US workforce.

5. The impact on the US economy will be aggravated significantly by the likely countermeasures of US Trading partners, as evidenced by the reaction to the US section 232 tariffs on steel and aluminium. On the basis of the current section 232 investigation into automobile and automotive parts, US trade restrictive measures could result in a very significant volume of US exports affected, estimated at USD 294 billion (or around 19 % of US total exports in 2017).

6. Trade restrictive measures would be contrary to international trade rules. There are no exceptions under the General Agreement on Tariff and Trade (GATT) that justify import restrictions by a developed country to protect a domestic industry against foreign competition, unless in the form of permitted trade remedy measures. Although the General Agreement on Tariff and Trade (GATT) provides for security exceptions, the scope of these exceptions has been circumscribed carefully for specific situations and conditions, which are absent in this case.

7. There is no national security threat from imports of automobile and automotive parts. Without prejudice, we underline that the Department of Commerce’s analysis of national security must be narrowly tailored to focus on direct threats to national security, in particular defense applications. US needs for vehicles or vehicle parts for defence or military purposes, mainly Light Tactical Vehicles, appear to be covered by US-based specialised suppliers. These operate in a niche market that is independent and unrelated to the US automobile industry. As only products from US based manufacturers are used by the US military, any trade restrictions imposed on the passenger car, light trucks and car parts market cannot be justified on national security grounds.

Trump continued his attack on the EU as hie told Fox News on Sunday that “The EU is possibly as bad as China, just smaller, okay. It’s terrible what they do to us.” He added that “take a look at the car situation, they send their Mercedes in, we can’t send our cars in. And, “look what they do to our farmers, they don’t want our farm products. In all fairness they have their farmers so they want to protect their farmers. But we don’t protect ours and they protect theirs.”

He also noted that “they made, last year, $151bn in trade surplus. We had a deficit with the EU.” And, “on top of that, we spend a fortune on NATO to protect them.” Trump also confirmed he will sanction European companies if they do business with Iran, in spite of requests for exemption from EU.

Separately, US ambassador to Estonia James D. Melville Jr. said in his own private facebook post that he’s retiring earlier due to Trump’s behavior and comments. That came less that two weeks ahead of NATO summit in Brussels on July 11, 12.

Melville wrote in the post that “A Foreign Service Officer’s DNA is programmed to support policy and we’re schooled right from the start, that if there ever comes a point where one can no longer do so, particularly if one is in a position of leadership, the honorable course is to resign. Having served under six presidents and 11 secretaries of state, I never really thought it would reach that point for me.”

And, “For the President to say the EU was ‘set up to take advantage of the United States, to attack our piggy bank,’ or that ‘NATO is as bad as NAFTA’ is not only factually wrong, but proves to me that it’s time to go.”

According to a report by POLITICO, European Commission sent a 11-page document to the US Commerce Department’s Bureau of Industry and Security on Friday. It warned that tariffs on European cars will be “harmful first and foremost for the US economy.” And, the impact of such tariffs on US GDP would be “in the order of 13-14 billion USD.” Additionally, the “current account balance of the US would be not affected positively.”

The document also pointed out that European carmakers contributed to production of 2.9m cars in 2017, around 26% of US production. And, production of EU-owned American car companies amounts to 16% of national production, or 1.8m vehicles. In addition to that, “EU companies based in the US export a significant part of their production, thus contributing substantially to improving the US trade balance, which is a priority of the administration.”

Also, “around 60 percent of automobiles produced in the US by companies with exclusive EU ownership are exported to third countries, including the EU. Measures harming these companies would be self-defeating and would weaken the US economy.”