Harley-Davidson: A Success Story for American Trade, November 10, 1999
National Dialogue on Jobs and Trade Harley-Davidson: A Success Story for American Trade November 10, 1999
The Success Of Harley-Davidson Is Evidence That American Innovation And Effective U.S. Trade Policy Can Reap Rewards For American Companies And American Workers. Harley-Davidson is one of many U.S. companies that have benefited greatly from U.S. trade laws. In 1983, facing a surge of Japanese imports, the company received temporary relief under U.S. trade laws. Harley used this time to readjust and become more competitive. It improved manufacturing efficiency and product quality, and, as a result, was able to significantly increase its market share. Today, Harley-Davidson is the clear market leader, with a 56% share of the large motorcycle market.
The Harley-Davidson Experience Is An Example That U.S. Trade Policy Can Work. When the motorcycle market shrank due to the 1981-1982 recession, Japanese producers continued to ship motorcycles, creating a glut of unsold bikes that artificially depressed prices and threatened Harley's viability. Following an investigation under Section 201 of the 1974 Trade Act, the U.S. International Trade Commission found in 1983 that increased imports of heavyweight motorcycles threatened serious injury to the domestic industry. This finding gave the President authority to impose temporary import relief to allow the industry time to adjust. A 45% tariff surcharge was imposed with a scheduled phase-out of five years. Harley’s recovery was so successful, however, that it took the unprecedented step of asking that the tariff surcharge be repealed one year ahead of schedule, in 1987. Harley-Davidson has now gone on to further success as U.S. exports of motorcycles and parts have grown 15 percent annually from 1987 to 1998, reaching $626 million last year or about 35% of industry sales.
Harley-Davidson Has Been A Great Success Story Of The 1980s And 1990s. Today, Harley-Davidson motorcycles are in demand not just in this country but throughout the world. Twenty-two percent of motorcycles produced in the York, PA final assembly plant are produced for export, and much of Harley's growth is due to exports. In Japan, for example, the market for Harleys has been growing at an annual rate of 43% since 1996. Motorcycle exports have helped create numerous jobs for American workers, and by 2003, Harley-Davidson expects to double production from 1996 levels. The company has received numerous accolades, including being named one of the 100 best-managed companies by Industry Week magazine. At the same time, Harley-Davidson has also demonstrated good corporate citizenship, having recently received the Minority Suppliers Council's First Step Award in recognition of its commitment to racial and cultural diversity among suppliers. The company's biggest challenge now is to meet the growing demand for its products.
The Clinton Administration And U.S. Industry Have Worked Together To Create A Level Playing Field For American Exports. With the U.S. industry leading the way in innovation, and the U.S. government helping to open markets for American exports, we can continue to expand U.S. sales overseas and create more jobs for American workers. The Clinton Administration has worked with Harley-Davidson to develop its export strategy -- a major part of its strategic growth plan now that the U.S. market has matured – and to identify and remove obstacles to their sales in foreign markets such as Japan, Taiwan, Brazil, Malaysia, Thailand, Indonesia, and the EU. Market-opening initiatives include:
Taiwan: The use of large-size motorcycles is banned in Taiwan. Taiwan had proposed ending the ban, but had suggested enforcing engine emission standards similar to those on small motorcycles. This would have resulted in Taiwan’s engine emissions standards being the strictest in the world and would have effectively served as a trade barrier for large-size motorcycles. As a result of negotiations regarding Taiwan’s entry into the World Trade Organization, the U.S. industry will be able to sell large-size motorcycles in Taiwan soon after accession. The Administration is continuing to work with industry to remove the ban of motorcycles on Taiwan's two major highways.
Brazil: In 1995, Brazil unilaterally increased tariffs on imported motorcycles to more than 70%. The Administration addressed this issue during its participation in the 1996 Hemispheric Summit, and, as a result, Brazil decided to immediately reduce these tariffs by half -- and gradually lower the tariff to 20%.
Japan: Although Japan is the second-largest foreign market for U.S. exports of motorcycles, Japan currently has regulations that hamper sales opportunities for large-size motorcycles -- including prohibitions on tandem riding (carrying a passenger) and a differential, lower speed limit for motorcycles on highways. These regulations do not appear to provide any safety benefits, and the Administration is working with industry to convince Japanese authorities to modify these rules. Previously, the Administration and others helped effect a change in operator licensing procedures for large-size motorcycles that were extremely burdensome.
Upcoming WTO Round: During the upcoming round of negotiations, the Administration will likely be placing a high priority on lowering motorcycle tariffs. In particular, the U.S. will push for the lower tariffs in major markets like the European Union -- which has tariffs that are over twice as high as U.S. import tariffs (6 percent versus 2.4 percent).