Chicken tax

Largely because of post-World War II intensive chicken farming and accompanying price reductions, chicken, once internationally synonymous with luxury, became a staple food in the U.S.[10] Prior to the early 1960s, not only had chicken remained prohibitively expensive in Europe, but it had also remained a delicacy.[11] With imports of inexpensive chicken from the U.S., chicken prices fell quickly and sharply across Europe, radically affecting European chicken consumption.[11] In 1961, per capita chicken consumption rose up to 23% in West Germany.[11] U.S. chicken captured nearly half of the imported European chicken market.[11]

Subsequently, the Dutch accused the U.S. of dumping chickens at prices below cost of production.[11] The French government banned U.S. chicken and raised concerns that hormones could affect male virility.[11] German farmers' associations accused U.S. poultry firms of fattening chicken artificially with arsenic.[11]

Coming on the heels of a "crisis in trade relations between the U.S. and the Common Market,"[11] Europe moved ahead with tariffs, intending that they would encourage Europe's postwar agricultural self-sufficiency.[12] European markets began setting chicken price controls.[11] France introduced the higher tariff first, persuading West Germany to join them—even while the French hoped to win a larger share of the profitable German chicken market after excluding U.S. chicken.[3] Europe adopted the Common Agricultural Policy, imposing minimum import prices on all imported chicken and nullifying prior tariff bindings and concessions.

Beginning in 1962, the U.S. accused Europe's Common Market of unfairly restricting imports of American poultry. By August 1962, U.S. exporters had lost 25% of their European chicken sales.[11] Losses to the U.S. poultry industry were estimated at US$26–28 million[3] (over US$210 million in 2014 dollars).

Senator J. William Fulbright, chairman of the Senate Foreign Relations Committee and Democratic Senator from Arkansas, a chief U.S. poultry-producing state, interrupted a NATO debate on nuclear armament to protest trade sanctions on U.S. chicken,[3] going so far as to threaten cutting U.S. troops in NATO. Konrad Adenauer, then Chancellor of Germany, later reported that President John F. Kennedy and he had a great deal of correspondence over a period of two years, about Berlin, Laos, the Bay of Pigs Invasion, "and I guess that about half of it has been about chickens."[3][11]

U.S. sales of Volkswagen Type 2 vans in pickup and commercial configurations were curtailed by the Chicken Tax.

Diplomacy failed after 18 months,[4][13] and on December 4, 1963, President Johnson imposed a 25% tax (almost 10 times the average U.S. tariff) by executive order (Proclamation 3564) [14] on potato starch, dextrin, brandy, and light trucks, effective from 7 January 1964.[14]

With Johnson's proclamation,[4] the U.S. had invoked its right under the General Agreement on Tariffs and Trade (GATT),[12] whereby an offended nation may increase tariffs by an equal amount to losses from discriminating tariffs. Officially, the tax targeted items imported from Europe approximating the value of lost American chicken sales to Europe.[15]

In retrospect, audio tapes from the Johnson White House, revealed a quid pro quo unrelated to chicken. In January 1964, President Johnson attempted to convince United Auto Workers' president Walter Reuther not to initiate a strike just before the 1964 election and to support the president's civil-rights platform. Reuther, in turn, wanted Johnson to respond to Volkswagen's increased shipments to the United States.[15]

The Chicken Tax directly curtailed importation of German-built Volkswagen Type 2s in configurations that qualified them as light trucks, that is, commercial vans and pickups.[15]

In 1964, U.S. imports of "automobile trucks" from West Germany declined to a value of US$5.7 million—about one-third the value imported in the previous year. Soon after, Volkswagen cargo vans and pickup trucks, the intended targets, "practically disappeared from the U.S. market."[4]

VW Type 2s were not the only vehicle line affected. As a direct result of the Chicken Tax, Japanese automakers Toyota (with its Publica, Crown, and Corona coupe utes), Datsun (Sunny truck), Isuzu (Wasp), and Mazda (Familia), which were selling pickup trucks, coupe utility vehicles, and panel deliveries in the US at the time, pulled these models out of the North American and Caribbean markets and did not bring over many models sold elsewhere.

Chevrolet LUV: imported from 1972 to 1980 in chassis-cab configuration (less truck bed) to circumvent the Chicken Tax

U.S.-bound Ford Transit Connect: pieces of its interior are shredded to circumvent the Chicken Tax

The tariff affected any country (such as Japan) seeking to bring light trucks into the U.S. and effectively "squeezed smaller Asian truck companies out of the American pickup market."[16] Over the intervening years, Detroit lobbied to protect the light-truck tariff, thereby reducing pressure on Detroit to introduce vehicles that polluted less and that offered increased fuel economy.[15]

As of March 2018, the 1964 tariff of 25% remains levied on imported light trucks.[17] Robert Z. Lawrence, professor of international trade and investment at Harvard University, contends the tax crippled the U.S. automobile industry by insulating it from real competition in light trucks for 40 years.[18]

• Talbot, Ross B. (1978). The Chicken War: an International Trade Conflict Between the United States and the European Economic Community, 1961–64. Ames: Iowa State University Press. ISBN 978-0-8138-0265-7.