ANNOUNCEMENT 26 Jun 2009

In June 2009, the government of the United States of America announced a change in production support.

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 0 neutral
  • 1 liberalising

SOURCE



See the hyperlinked items in the description above for the sources.


Inception date: 24 Jun 2009 | Removal date: open ended
Still in force

Production subsidy

The Consumer Assistance to Recycle and Save (CARS) Act of 2009'1' is Title XIII of the Supplemental Appropriations Act of 2009 (Public Law 111-32). Known less formally as the "cash-for-clunkers" program, it provides credits to consumers who trade in old, fuel-inefficient vehicles when buying or leasing new, more fuel-efficient vehicles. The law is notably nondiscriminatory, applying equally to the purchase of domestic and foreign vehicles. Congress enacted this measure in lieu of another proposal that would have provided credits only for North American vehicles.
This program is related to, but not formally a part of, the loans and other support measures provided to the U.S. automotive industry (see the Global Trade Alert report on those measures).
The National Highway Traffic Safety Administration (NHTSA) posted a website on June 26, 2009 explaining how the system will work. The trade-in vehicle must be less than 25 years old and must generally get 18 or less miles per gallon. The amount of the credit is $3,500 or $4,500, and generally depends on the type of vehicle purchased and the difference in fuel economy between the purchased vehicle and the trade-in vehicle. For example, a consumer can get a voucher worth $4,500 by purchasing a passenger vehicle that receives at least 10 miles more per gallon than the trade-in car. The vehicle that is traded in must be destroyed. The program runs through November 1, 2009 or when the funds are exhausted, whichever comes first. The CARS Act appropriated $1 billion for this program, of which up to $50 million could be used for administration of the program.
From the perspective of trade policy, the most significant aspect of this law is that it does not discriminate between imported and domestically produced vehicles. NHTSA makes that point explicit in the 'frequently asked questions' section of its website, in which the following exchange is given:
 
I don't drive an American car but I would like to trade in my old car for a newer, more fuel efficient one. Is this program only for American cars?
No. You may trade in or buy a domestic or a foreign vehicle.
 
Considering the fact that many of the most fuel-efficient vehicles sold in the United States are imported from Japan and Korea (see the data at http://www.fueleconomy.gov/feg/bestworst.shtml), the law may prove in practice to be more beneficial to foreign than to domestic manufacturers.
Congress explicitly chose the nondiscriminatory route by opting between two very different measures. One was the 'Accelerated Retirement of Inefficient Vehicles Act of 2009' (H.R.520), as introduced in the House on January 14, 2009. This bill did not discriminate between domestic and imported vehicles. On March 17, 2009, however, another measure was introduced that would have provided credits only for North American vehicles. Sponsored by Representative Betty Sutton (Democrat of Ohio) and 35 co-sponsors, most of them from automobile-producing states in the Midwest, the original version of the 'Consumer Assistance to Recycle and Save Act of 2009' (H.R.1550) would have limited credits to the purchase of vehicles assembled in the United States or, for some classes of vehicle, in North America (i.e., Canadian or Mexican vehicles would qualify).'2' Although this was this bill that lent its name to the program that Congress eventually approved, the discriminatory provisions in the bill did not survive the legislative process.
Negotiations between the Obama administration, members of Congress (including the sponsors of both H.R.520 and H.R.1550), and stakeholders in the automotive industry led to agreement on a compromise measure that did not discriminate between domestic and foreign vehicles. On May 19, 2009 the Committee on Energy and Commerce in the House of Representatives passed the compromise by a bipartisan vote of 50-4. That vote appended the CARS Act to the American Clean Energy and Security Act of 2009 (a wide-ranging bill dealing with climate change), but the CARS Act was later decoupled from that larger measure and considered by the House as a stand-alone bill. In the June 9, 2009 debate over this measure on the floor of the House of Representatives, the sponsors introduced letters of support from a wide range of interested parties, including U.S. and foreign-owned automobile manufacturers as well as labor unions and business organizations. Representative Sutton acted as floor manager for the bill. The House voted for the bill by 298 to 119. The measure was later attached to the aforementioned appropriations bill, which both houses of Congress then approved June 16-18, 2009. President Obama signed the bill into law on June 24, 2009.
The program proved to be much more popular than its sponsors or critics had originally expected, and ran through the initial $1 billion within a week of its implementation. Congress approved additional funding for the program in August, 2009, but that funding was soon exhausted and the program has now ended.
 
 
 

'1' Note that the CARS acronym is also rendered as the 'Car Allowance Rebate System.'

'2' For example, a $4000 voucher would be available for a 'passenger automobile assembled in the United States with a minimum highway label fuel economy value of 27 miles per gallon,' or for a 'passenger automobile assembled in North America with a minimum highway label fuel economy value of 30 miles per gallon.'

 

AFFECTED SECTORS