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Repeal The Chicken Tax!

This isn’t recent news, but it is so hilarious that I just had to write about it.

A friend of mine really wants to buy a Volkswagen camper van. The only problem was that VW stopped selling them in the US in 2003, despite the fact that that they have remained so popular that a used VW camper van – even with more than 100,000 miles on it – often sells used for as much as it originally sold for. So why did VW stop selling them?

The answer is, because of chickens.

Yes, chickens. You may not believe me, but it is true. And this story also forms a fascinating vignette of how our government works (or rather, doesn’t work). But first, some history.

I know it is hard to believe now, but prior to WWII, chicken was considered a delicacy and was quite expensive. The US diet was meat and potatoes, and meat meant beef (and occasionally pork). After WWII America began intensive chicken farming and the price of chicken dropped, while in Europe, chicken continued to be expensive. But then, in the early 60′s the technology was developed to freeze chickens and ship them to Europe. In 1961 alone, the per capita consumption in West Germany rose 23%, almost entirely on the backs of US chicken.

This not only angered German chicken farmers, but the Americans had a bad habit of using dangerous drugs to fatten up their chickens, doping the chickens with arsenic, antimony, and estrogen-based hormones. Europe responded by slapping large tariffs on American chicken.

This enraged the US so much that Senator William Fulbright interrupted a NATO debate on nuclear weapons to protest the trade sanctions against US chicken, and even threatened to cut the troops that the US was supplying to NATO. The so-called “Chicken War” was a major political issue for presidents Kennedy and Johnson.

So under intense political pressure, in 1963 the US retaliated against Europe by instituting a 25% tax on a number of goods imported from Europe, including potato starch, dextrin, brandy, and (most importantly) light trucks. This tax became known as the “Chicken Tax” even though it was not a tax on chickens at all.

Interestingly, the tax has been rescinded, on everything except light trucks. So now, almost 50 years later, we still have a 25% tax on imported light trucks — enough to make them non-competitive.

So what happened in 2003 was that VW came out with a new model of their camper van, the Transporter T5, to replace the Transporter T4 (which was called the Eurovan in the US). For reasons I haven’t been able to figure out, the T5 was classified as a light truck, and thus subject to the chicken tax! Consequently, VW never even tried to sell them in the US. By the way, just to add insult to injury, the T5 campervan (in Europe) is sold under the names “California Beach” and just “The California”.

To make this even crazier, the tax on light trucks doesn’t even benefit the US automobile industry anymore. For example, Ford makes its Transit light trucks in Turkey. In order to avoid the chicken tax, Ford has them built with rear windows, rear seats, rear seat-belts, and everything else needed to get them classified as passenger vehicles. Then, after the vehicles arrive in the US, they are taken to a warehouse near Baltimore and are converted back into light trucks by throwing away the rear interiors, even taking out the rear windows and replacing them with panels. In fact, it isn’t even possible to buy one of those vehicles with rear seats and windows in the US — they are all converted into light trucks. The process costs Ford hundreds of dollars, but saves them thousands of dollars by avoiding the tariff.

And this is why my friend cannot buy the camper van she wants. Repeal the Chicken Tax!

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One Comment

  1. starluna wrote:

    Fascinating, history. Tariffs are funny that way. Rarely are they used in any productive manner.

    Tuesday, June 22, 2010 at 4:49 pm | Permalink