Has the Chicken Tax Come Home to Roost? #ecarnomics
Not a day goes by where I don’t see a Porsche driving around in my town. In fact, there are so many of them that a 930 Turbo barely catches my attention anymore. Lamborghinis, Aston Martins and even Bentleys are common enough that my initial mental response to seeing one of them is somewhere along the lines of a slightly depressed-sounding “oh, that’s cool”.
And yet, for the sake of exclusivity, I got excited after seeing a damned Volkswagen Amarok on the highway.
For those of you living outside of North America, you probably wouldn’t bat an eye at the ‘Rok if it ran you down on the sidewalk. It’s a very average-looking pickup truck styled with Volkswagen’s uber-conservative design language. It’s like a shovel—very practical and good at what it does, but not something you would hang up on your bedroom wall.
And, yet, seeing one of these trucks gave me the “petrolhead’s fizz”. Seriously. And that’s because it has never been sold in North America. Not one.
To understand why, we need to have a little lesson in American history. And, yes, it involves chickens.
In the 1960s, chicken farming became a huge business in the United States. Even today, there are huge megafactories that have been pumping out millions upon millions of chickens every year. As a result, chicken became much cheaper to buy, making the United States a kingpin in the chicken industry. This was not good news for chicken farmers in Europe, who simply could not compete with the Americans. Europeans were eating more chicken than ever before, most of which had been imported.
As a result, France and West Germany imposed tariffs on imported chicken. A tariff is essentially a tax on imports and/or exports between particular nations. It was thought that the tariffs would decrease the amount of chickens imported into their countries, thereby protecting their own chicken industries. It worked, which was bad news for American poultry farmers, who lost millions of dollars in market share.
To get even, U.S. President Lyndon Baines Johnson imposed what is know colloquially referred to as the “chicken tax” in 1963. The chicken tax was a 25% import tariff on dextrin, potato starch, brandy and light trucks (including cargo vans). The tariffs on the first three items no longer exist, but the tariff on light trucks can still be felt by the North American consumer.
The chicken tax forced foreign automakers to get creative. For example, trucks made by Datsun and Toyota were imported into the United States without the box attached, after which the box would be reattached once in the U.S., This removed the “light truck” status as far as U.S. Customs was concerned, and exempted these trucks from the tariff. The U.S. would close that loophole in 1980, which pretty much extinguished the market for small trucks as the rest of the world knew it.
To solve the problem of importing cargo vans without being taxed, cargo vans would be assembled abroad, disassembled, and then shipped to the U.S. as a complete knock-down, which was not subject to the chicken tax. Mercedes-Benz has been doing this for years with the Sprinter van. Another way to get around the chicken tax would be to import a passenger van (not subject to the tax), remove and destroy the seats and the rear glass, then sell it as a cargo van. Ford has done this to import their Transit Connect van, which has become so popular in North America that Canada Post actually uses them as their standard delivery vans.
Now, if you follow my beliefs about the chicken tax, you’d think that it’s nothing short of garbage. My 1981 Datsun 720D was one of the vehicles impacted by the chicken tax, and my ownership of it has left me feeling cold towards the U.S. government. It’s a damn good little truck. It’s tough, extremely efficient, and very versatile. But, because of the chicken tax, it’s also incredibly rare in North America. Without a word of hyperbole, I have seen at least twice as many Lamborghinis than Datsun trucks in my city. The chicken tax is very clearly manipulating the light truck market in favour of the Big Three.
The traditional argument in favour of the chicken tax has always been that it is protecting the American light truck industry. I believe that, while it may have been the case (at best) at the time, this argument is complete bogus today. Yes, American trucks have dominated since the 1960s. But Toyota and Nissan both have factories in the United States, and they produce trucks out of them. Worse still, the American brands are looking to get some of their foreign models into market, and the U.S. hasn’t really helped them out. In fact, the U.S. began to crack down on Ford for importing the Transit Connect as a CKD, meaning that Ford now has to pay the chicken tax on every van.
Do not adjust your screen, you read that correctly. One of the very companies that the chicken tax was supposed to protect is now being shot in the foot by said tax.
Oh, the irony.
Alas, Ford is not alone. FCA has moved to bring the Fiat Ducato into the USDM as the Ram ProMaster. Chevrolet’s small van of choice is built by Nissan. Most importantly, however, the 2nd-generation Chevrolet Colorado/GMC Canyon are the American iterations of a GM truck that has been a success in almost every other corner of the world. Not surprisingly, the 2nd-generation Colorado and Canyon have been a hit here. They are perfectly capable trucks that are considerably less expensive to run. They are also the right amount of truck for the vast majority of truck buyers.
I think the market has made itself clear—we want more Amaroks, Hiluxes and Navaras. We want a “world truck”, just as the Ford Focus is a “world car.” And Detroit wants to build one, too. It’s simply more cost-effective to build one truck to suit the needs of potential customers worldwide, as opposed to building several different platforms for individual markets. So why does the U.S. have a lame-duck tariff in place that is hampering creativity and progress in the product lines of their own manufacturers?
Your guess is as good as mine. The chicken tax is a policy that has long outlived its efficacy, and it needs to go. Now.