Infamous Chicken Tax Ripe for Plucking

The U.S. is Planning to Restart Free-trade negotiations with Thailand after a 4-year hiatus, and America's hefty tariff on truck imports likely will occupy a good portion of the talks.

Thailand is a major hub for the production of pickup trucks by global auto makers, including Ford Motor Co. and Toyota Motor Corp.

However, multi-lateral discussions half a world away could pluck the “chicken tax” off the table in the near future.

The 45-year-old duty, which places a 25% tariff on imported trucks, began in 1963 as a reaction to Europe, which tripled its levy on imported chickens. The tax has remained on the books to protect the Detroit Three's pickup-truck business against foreign auto makers.

But truck manufacturing in the U.S. has changed. Overseas manufacturers such as Toyota, BMW AG, and Daimler AG have built their own U.S. plants to skirt the tariff, while others, such as Isuzu Motors Ltd. and now Suzuki Motor Corp., have turned to the domestic makers to build their products.

Some, such as Daimler with its Dodge Sprinter van, reassemble their trucks in the U.S. from imported knockdown kits.

Margins on small trucks are razor thin, making the prospect of building them more cheaply in Thailand or Brazil attractive to U.S. OEMs. Sales are slumping in the segment, as well, because consumers can buy a fullsize pickup for only slightly more in cost.

Deliveries of small pickups in the U.S. last year fell 16.6% to 516,865 units from 616,653 in like-2006, according to Ward's data. At one time, the segment accounted for sales of 1.46 million units annually.

Some industry observers say the so-called chicken tax could be eliminated in the current final phase of trade talks at the Doha Development Round, whose aim is to lower, or eliminate, trade barriers, red tape and subsidies that artificially reduce prices and squeeze foreign competitors.

WTO Hurries Deal to Slash Global Auto Import Duties
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