The European Commission has scrutinized care packages given to car makers by their governments. The Commissars find those programs highly objectionable. According to Reuters, “U.S. financial aid to carmakers and a number of stimulus packages adopted by other countries to fight the economic slowdown could distort global trade,” a (probably not very) confidential European Commission report says. Here are the EU commission’s main objections:
“The majority of the measures in the stimulus packages affect positively national companies as well as foreign companies and imports. However other parts are aimed at helping national industrial sectors and could be trade-distorting.”
“Sector-specific and firm-specific direct subsidies, such as GM and Chrysler loans in the United States are potentially the most trade distortive.”
The report is the product of a probe carried out by Brussels between March and June into “potentially trade distortive measures conducted by other members of the World Trade Organization.” Note the WTO reference.
The report is unhappy with several countries, notably the United States, China and Russia. The report points fingers at the planned US cash4clunkers program, and criticizes incentives given to consumers to buy eco-friendly cars in Japan.
Reuters, who has a copy of the allegedly confidential report, mentions nothing about Abwrackprämien and bailout monies given by EU members. The report is being handed over to EU governments today for immediate inaction.
If the EU deems the U.S. is breaching international trade rules it can prohibit Detroit-3 imports, both of them.
BFD. The cash-for-clunkers bill needs to be scrapped. Something with more “kick” is needed.
Cash-for-clunkers is a pretty direct intervention to get the domestic car market moving again… as marginally protectionist as it may be, I don’t have a big problem with that aspect of it.
It IS a pretty toothless incentive and rewards those that made irresponsible decisions in the first place, so I am against it primarily for this reson.
The NYT Freakonomics blog has an interesting take on it as well:
http://freakonomics.blogs.nytimes.com/2009/06/12/still-no-cash-for-clunkers/
“toothless” is the right word.
Actually, all of these activities are trade distorting. Unfortunately, that is the whole point. First we had a car-buying bubble aided by the my-house-is-an-ATM bubble; then the bubble popped. So, now the government is trying to re-inflate that bubble. Just like in the housing market, the government is just prolonging a long-overdue market correction.
SunnyvaleCA :
June 12th, 2009 at 12:58 pm
Actually, all of these activities are trade distorting. Unfortunately, that is the whole point.
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I agree. Trade distortion is the goal, not an unintended byproduct.
In the current context, free trade = Toyota lives and GM dies, Obama gotta distort that to save his minions.
Yeah, we should just be more like the EU and assign fines to even things out.
If the EU was a dude I’d kick him in the nuts.
C4C is a waste of money. What we are in fact doing is collectively borrowing money to subsidize the car purchases of a few. While it may bring some demand forward, it does nothing to solve the fundamental economic problems we face.
So there’s no distortion in Germany’s jabberwocky-a-chromey thingy? Guess it depends on whose dumb ox is being gored.
While it may bring some demand forward, it does nothing to solve the fundamental economic problems we face.
Actually, it does. The theory is that you’re borrowing against future sales that would be higher anyways, and thusly spreading out the sales and revenue hit against a longer time period.
The immediate problem is solves is cash flow. It keeps money in circulation, and keeps people employed. That’s a good thing. It doesn’t fix every problem, but it’s a better solution that a raw bailout.
Trade distortion is the goal, not an unintended byproduct.
Right. Just like it’s no coincidence that the tobacco bill bans cloves (imported from Indonesia, mostly) and other flavored cigarettes not sold by Phillip Morris, but leaves menthol alone.
The EU is likely to be about as effective at trying to stop nation-based auto company support as the UN is at maintaining world peace.
Isn’t Germany doing a similar deal and Britain about to start the same?? Does the EU know what it’s members are doing? Or is it just when the US does something like this that it’s a problem?
Isn’t Germany doing a similar deal and Britain about to start the same?? Does the EU know what it’s members are doing? Or is it just when the US does something like this that it’s a problem?
The US law apparently has a lot more details and loopholes built into it so that people will have incentives to buy Detroit vehicles. For example, apparently if you replace a truck, you have a much lower target if you replace it with another truck or SUV than with a car.
And of course throwing rocks in your own harbor because someone else is throwing rocks in his never makes sense anyway.
Let’s see, do all the other countries supply their workers with medical coverage, retirement and pay for all the research and development of the cars.
Many do not even wory about the environment South korea, china.
Why do all you folks do not consider these major factors in the cost of manufacturing a non-issue.
Most of you probably are not from the US and are just trying to bankrupt the US. The end result of no manufacturing sector in the US