Australia lobbies Trump administration for auto tariff exemption
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Australia lobbies Trump administration for auto tariff exemption

Palo Alto, California: Foreign Minister Julie Bishop has used high-level meetings with her US counterpart, Secretary of State Mike Pompeo, to urge the Trump administration to exempt Australia from a potential 25 per cent tariff on automobile parts that would have a devastating effect on Australian manufacturers.

Earlier this year the Turnbull government secured an exemption from US tariffs on steel and aluminium, but there are fears Australia may not be spared if the Trump administration proceeds with new tariffs on imported cars and auto parts - a move that could unleash an unprecedented global trade war.

Foreign Affairs Minister Julie Bishop, left, shakes hands with US Secretary of State Mike Pompeo before their meeting on Monday.

Foreign Affairs Minister Julie Bishop, left, shakes hands with US Secretary of State Mike Pompeo before their meeting on Monday.

Photo: AP

Ms Bishop and Defence Minister Marise Payne are in California this week for the annual Australia-US Ministerial Consultations (AUSMIN) meetings with their American counterparts, Mr Pompeo and US Secretary of Defence James Mattis. Australian Ambassador to Washington Joe Hockey, who has been lobbying for Australia to be exempt from any future tariffs, is also attending the talks.

The ministers also discussed security concerns including the South China Sea, North Korea, and terrorism in the Middle East.

The local auto parts industry has warned that jobs will be lost and manufacturing plants will close if the tariffs come into effect.

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The last VFII Commodore Redline to come out of the Elizabeth factory in Adelaide on October 20 last year.

The last VFII Commodore Redline to come out of the Elizabeth factory in Adelaide on October 20 last year.

Photo: Supplied

While the car manufacturing industry has ceased production in Australia, Australia currently exports $330 million worth of automobile parts each year to the US. The industry employs an estimated 21,000 workers.

"Australia would be concerned about any measure that negatively impacts on manufacturers of components for the automobile industry," Ms Bishop told Fairfax Media following the first day of talks.

"Trade and investment, as well as economic issues more broadly were discussed at AUSMIN.

"We will continue to advocate strongly that any trade restrictions not apply to Australia."

In May the Trump administration launched a sweeping investigation into whether imports of cars and auto parts pose a national security risk to the US.

Earlier this month the Australian Automotive Aftermarket Association - representing 2250 companies - warned negotiators at the Department of Foreign Affairs and Trade that local businesses would be "significantly affected" by the proposed tariffs.

"As a matter of urgency, the AAAA requests that your office make representations to the US government with a view to gaining an exemption for Australian manufactured goods from this action," executive director Stuart Charity said in a letter to the department.

"The imposition of an additional tariff would drive down demand and as a result, revenue reductions of at least 20 per cent in the medium-term are currently estimated."

Mr Charity told Fairfax Media he feared local manufacturers could be "collateral damage" in Trump's larger trade war with China, Europe and Canada.

"The US is our biggest export market so this is a real concern for us," he said.

Glenn Paine, Australian vice president of PRO/RACE Performance Products, said the company would consider relocating from Melbourne to the US if the tariffs came into effect. The company, which specialises in manufacturing harmonic dampers which reduce engine vibrations, currently exports 95 per cent of its products to the US.

"We would have to consider whether we're still competitive," Mr Paine said.

"We're taking this very seriously."

Then Dayco operations manager Daryl Day at the factory in Wagga in 2013.

Then Dayco operations manager Daryl Day at the factory in Wagga in 2013.

Photo: Michael Frogley

Arnold Mouw, Australian managing director of auto parts supplier Dayco, said the company would consider closing its 50-employee manufacturing plant in Wagga Wagga, NSW, if the tariffs were introduced.

"It is already 40 to 50 per cent more expensive to manufacture here than in China or eastern Europe," he said.

"We're getting caught in the US-China tariff battle."

US carmakers warned at public hearings last week the tariffs would drive up the price of cars by thousands of dollars and cause the loss of up to 600,000 jobs if other countries retaliated with like measures.

The US had its own request of Australia at the talks: to get tougher on China over the theft of intellectual property.

In a briefing last week, a senior US official said China's "neo-mercantilist" approach to economics was distorting global markets.

"I think there is shared views on the importance of getting China to stop its theft and forced transfer of intellectual property and to get it to adhere to higher standards for the protection of intellectual property," the official said.

The AUSMIN talks will conclude on Tuesday US time.

Matthew Knott is a Fairfax Media reporter based in the United States. He previously worked in the Canberra press gallery and recently finished a Masters of Journalism at Columbia University in New York.