Impact of Trans-Pacific Partnership on auto industry detailed

Twelve nations, including automotive powerhouses like the United States, Japan, and Mexico have come to an agreement on the terms of the controversial Trans-Pacific Partnership. While the TPP stands to impact up to 40 percent of the world's economy – including everything from cheese production to biotech – we're going to focus on the auto industry. And not surprisingly for something this expansive, a number of parties aren't too happy about the deal.

Much of the ire is directed at the TPP's lack of controls on currency manipulation, a major point of contention for US manufacturers and policymakers. According to The Detroit News, government currency meddling – which TPP participant Japan has a documented history of – is especially bad news when the US dollar is strong, leading to cheaper foreign-built cars. American automakers, and Ford in particular, argued to Congress that provisions for currency manipulation needed to be included in the agreement.

"Within the US Congress, there is bipartisan consensus that currency manipulation needs to be meaningfully addressed. This summer, U.S. lawmakers took unprecedented action to set a clear negotiating objective for addressing currency manipulation in all future trade deals," VP of government and community relations for Ford, Ziad Ojakli, said in a statement. "The TPP fails to meet that test."

Ford, according to The News, is joined by lawmakers on both sides of the aisle in voicing opposition to the deal.

Mexico also had a showdown with Japan over TPP, after the former wanted to increase a NAFTA mandate while the latter has pushed for a big reduction. According to Reuters and Automotive News, the North American Free Trade Agreement dictates that 62.5 percent of a vehicle's parts content needs to come from North America for a vehicle to be considered duty-free. Mexico, whose auto industry has grown in large part because of the NAFTA mandate, wanted that figure bumped up to an even 65 percent. Japanese automakers could get their way, though, with the TPP pushing the parts content rule down to 45 percent. That'd open up the US market to lower-cost suppliers in Asia, which is something Reuters says Toyota is quite keen on. The flip side to this supplier situation, though, is that tariffs, like the Chicken Tax, against Japanese vehicles would take much longer to phase out, perhaps up to 20 years or more. If approved, the TPP would also open up the Japanese market to American-made vehicles, although details on that angle are scarce.

It's extremely unlikely that this is the last we'll hear of the TPP. According to The News, Congress' fast-track rules dictate that the complete text of the deal needs to be public for 90 days before it's voted on. That vote, which won't be done until at least 2016, will be a simple matter of yay or nay. The TPP also needs to be approved by each country involved, so there's still a lot that can go wrong here. Stay tuned.

Share This Photo X