Once again, Mobile’s Airbus plant is faced with the looming prospect of tariffs.
And once again, city and county officials are writing letters and forwarding them to the U.S. Trade Representative’s Office in opposition.
It’s become a routine exercise for city and county officials, along with the Mobile Area Chamber of Commerce and the Alabama State Port Authority, during the Trump Administration. Every 180 days, by law, the U.S. Trade Representatives office reviews whether to continue or revise its list of tariffs.
Important to Mobile is keeping imported airplane parts from Europe off the laundry list of items that could be assessed a 10% or higher tariff.
For Mobile, jobs are at stake if the cost of manufacturing in airplanes soars in Alabama from tariffs on fuselages, wings, and other components that are assembled into a commercial airplane by the Mobile workforce.
“Our hope is that the USTR will continue to listen to the people and communities that would be negatively and directly impacted by the implementation of additional tariffs,” said Kristi Tucker, spokeswoman with Airbus. The European-based aerospace giant has its largest North American manufacturing presence in Mobile, where over 1,100 employees work at the company’s assembly plant for the A320 and A220-series aircrafts at the Mobile Aeroplex at Brookley complex south of downtown.
The Mobile County Commission, this week, authorized a letter to be sent to the Trade Representative Robert Lighthizer ahead of public commenting period on the proposed tariffs that began on Friday. The comment period will last until July 26.
A draft of the letter reads that the county has a “deep concern and objections” to proposed tariffs on imported aircraft parts and components. The letter also personally invited Lighthizer to Mobile’s Airbus assembly plant, something which he has yet to do.
“Airbus’ investment in the Mobile, Alabama, region has generated good-paying U.S. jobs, advancements in American ingenuity, and the development of our high-skilled labor market – welcome achievements that would be sacrificed by trade measures,” the letter reads. “At a minimum, tariffs on aircraft parts and components will result in substantive job loss and will reverse advances in aerospace engineering and growth that the state of Alabama is so proud to support.”
Mobile County Commissioner Connie Hudson said the letter represents a cycle of public comments that local officials are now required to do to protect the potential of tariffs affecting one of the region’s crown jewels in manufacturing. The last round of tariff talks, as well as letters written by location officials objecting to them, occurred late last year. In February, the aerospace components were exempted from the latest round of items that could be assessed a tariff offering momentary relief for local officials.
“Just when you think it’s put to rest … we hear from Airbus it’s being considered again,” said Hudson. “It keeps cycling around. We just took the letter we had before, updated it with a few modifications, and will send it back.”
Commissioner Jerry Carl, who is running in next month’s Republican runoff for the 1st congressional district seat, said the tariff issues will continue recycling until “we get a long-term answer.” He said that answer has to come from the Trump administration.
Indeed, the constant tariff talk is part of an long-running high-stakes dispute at the World Trade Organization involving the two global heavyweights in aerospace development: Airbus and Boeing.
Lighthizer’s office imported tariffs on $7.5 billion worth of European Union products last October after the WTO, on Oct. 2, ruled that Airbus had benefited from illegal government subsidies. Along with aircraft tariffs, the U.S. also slapped 25% levies on so-called “luxury” goods from Europe, such as Irish and Scotch whiskey and Italian cheeses.
The latest round of tariff talks are expected to conclude at the same time the WTO is expected to rule on a parallel case that Boeing benefitted from illegal U.S. subsidies. The WTO case, once concluded, will allow European countries to respond with tariffs of their own.
Airbus and Mobile officials have long pleaded for a negotiated settlement of the subsidies over large aircraft manufacturers instead of a continue escalation of tariff talks that require a local government response every 180 days.
But unlike previous public responses, the latest pushback against the tariffs comes as the aerospace industry has been devastated by the coronavirus pandemic. Airbus CEO Guillaume Faury has called it the “gravest crisis” facing the aerospace industry and led to thousands of employees in France and the U.K. to be place on furlough after commercial flights were grounded to a halt in March.
In a statement from Airbus Wednesday, the company said that the USTR’s previous decision to impose tariffs “escalates trade tensions between he U.S. and the EU at a time when the EU and the U.S. should be working on creating more stability for companies to increase trade. It also ignores the additional costs to U.S. airlines and consumers, which is only made more difficult by the economic impact of the COVID-19 pandemic. A negotiated outcome to this dispute in the absence of tariffs in each direction is the only real solution.”
Mobile city officials are expected to authorize a similar letter in the coming weeks. Also, the Chamber of Commerce plans to submit a letter as well.
Judith Adams, spokeswoman with the Port Authority, said the tariffs “create more losers than winners.”
“Our position is that aircraft manufacturing is an integrated, global supply chain and those components support U.S./Alabama manufacturing jobs,” said Adams. “Any (tariffs) placed on Airbus components adversely affect the cost competitiveness to manufacture aircraft here as oppose to overseas manufacturing operations.”
Steven Livingston, associate director of the Business & Economic Research at Middle Tennessee State University who has extensively research tariffs, said he suspects Mobile will have to keep “on doing this” during and/or after Trump is president. Trump has embraced tariffs as a key strategy toward promoting his “America First” agenda since elected in 2016.
“The non-Trump reason is the never-ending trade dispute involving Boeing and Airbus,” said Livingston. “Boeing wins a case, then Airbus wins a case … the amounts of money involved are huge, and each is sort of a ‘national champion.’ The scene is always set for a possible retaliation. So there’s a point to reminding whoever is in office about the costs of particular actions.”
Presidential politics could also loom as another concern as the tariff talks tick on, Livingston said.
“The coronavirus makes fooling around with the economy more dangerous, but we also have an election coming up,” he said. “You could imagine scenarios where trade retaliation might be good politics?”