The post-Crash intervention by the Obama administration in mid-2009 in righting the General Motors and Chrysler ships was an extraordinary example of ideal cooperation between industry and government. And anyone who argues against it ignores the realities of the surrounding financial marketplace, which at the time offered absolutely no luxury of time and no market-available means of restructuring these two companies so integral to the American economy. A cascade into bankruptcy or liquidation by GM and Chrysler -- with Ford following in their wake -- would have led to the immediate loss of hundreds of thousands of jobs, with disastrous effect throughout the nation, but especially in Michigan, Ohio and Indiana where employees directly and (with the multiplier effect) indirectly associated with motor vehicle manufacturing (autos, parts and tires) account for around 8 percent of total non-farm employment (of 11.9 mm).
For a decade, many of us have been calling on the White House -- first, Mr. Bush's, and now, Mr. Obama's -- to demand that the U.S. have a formal national all-of-government Manufacturing Policy to rival the Policies of our major trading partners. If such a Policy had been in place in mid-2009, the appropriateness of and the mechanisms for restructuring the auto manufacturing industry would have been more obvious to all and the "prove-it-to-me" naysayers would not still be arguing, even today, over either the clear imperative or the now very obvious positive outcomes of the ultimate effort.
But the continuing absence of such a Policy has left stranded, so to speak, many thousands of the 1.6 million combined direct and indirect jobs in the auto industry related to parts and tire manufacturing. The overall motor vehicle manufacturing sector is the second-largest employer among all U.S. manufacturing industries, and parts and tire manufacturing contribute the most direct jobs (two-thirds or more), of which many are now at grave risk of being offshored, especially to China.
Despite the Obama administration's highly successful reorganization of the end-of-the-line manufacturing companies (GM, Chrysler and, indirectly, Ford) -- which has eliminated, at least for Chrysler and GM, the roughly $2,000-a-car cost disadvantage that these companies previously had due to high legacy costs, specifically wages and retiree benefits -- a large number of employees, in the tens and tens of thousands, are still jeopardized by often unfair trade policies.
In laymen's terms, the vital link between the growth of automobile production jobs and automobile parts jobs has been broken: the direct manufacturers are recovering, but the parts companies are still shrinking, with significant continued threat to our ongoing economic recovery. The Obama administration now needs to use its authority and capabilities, within the limits of global trade and trade-related agreements, to protect these jobs as well.
The realities associated with this unfair and often illegal overseas competition need to be fully understood before solutions can be crafted and applied.
Right now, China, in accordance with its "Twelfth 5-Year Plan" and the Plan's stated commitment to promote all aspects of its domestic auto industry, indisputably favors its own domestic auto parts industry in ways that are in direct violation of commitments it made when it officially joined the WTO in December 2001. Evidence of this includes:
The results of these aggressive actions -- which can't be any surprise to anyone -- are that imports of Chinese auto parts into the U.S. have increased by 25 percent in only the last two years and, even more sobering because it confirms a now seemingly irreversible trend, the U.S. trade deficit with China in auto parts has increased an almost unbelievable 900 percent since 2000.
Thankfully, there are solutions to this trade imbalance-cum-nightmare, and if everyone would simply acknowledge that it is indeed a "nightmare," they are solutions which are eminently achievable.
Some would say that we are making appropriate progress in trade reform, and that it's time to slow down a bit. Yes we are progressing, but I, for one, am not satisfied that it is yet the degree of progress we need -- and the Sword of Damocles hanging over the American auto parts manufacturing industry proves the point.
My mantra continues to be that we still need to take a much more pro-active stance in trade in order to better balance the nationalistic economic policies and mercantilist practices of our trading partners with our own trading rights as a nation. And this stance will pretty obviously not come from either of the two remaining major Republican candidates for President. Governor Romney, after first stating that America's Big Three car manufacturers could go bankrupt for all he cared, further showed his true colors by opposing relief for tire workers in the U.S. when that industry faced a verifiably unfair increase in Chinese imports. And Senator Santorum believes tax cuts alone are sufficient to keep the entirety of the overall automobile industry prospering here at home, no matter what unfair behaviors our overseas trading partners adopt.
American-made products can compete globally just fine, thank you -- their manufacturers only need to be in fair fights in order for these products to do so.
Leo Hindery Jr. is chair of the US Economy/Smart Globalization Initiative at the New America Foundation, co-chair (with USW President Leo Gerard) of The Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media, and is currently an investor in media companies.
Follow Leo Hindery, Jr. on Twitter: www.twitter.com/leohindery
Robert Kuttner: Our Muddled China Policy
Sen. Ron Wyden: Trade Rules Matter
China Is Steadily Buying Up The US Auto Industry - Business Insider
China Trade Violations Put 1.6 Million US Motor Industry Jobs at ...
http://www.pwc.com/en_US/us/technology-innovation-center/assets/ipr-web_x.pdf
Also.. perfect example of what I am talking about - multiply this by thousands to understand how we have developed a 250 billion a year trade deficit with China:
Chinese Copycats
Massachusetts-based American Superconductor (AMSC) makes
advanced electronic systems for wind turbines. In the spring of 2011,
AMSC’s biggest customer, Chinese wind turbine giant Sinovel, began
refusing to accept and pay for AMSC’s product shipments. In June, AMSC
found out why—its engineers in China discovered a near perfect knockoff
of AMSC’s proprietary control software in a Sinovel wind turbine.
Sinovel claims that AMSC’s products no longer meet Chinese regulations.
But legal experts note that Chinese companies often cite Chinese regulations
as a pretext when they’ve stolen what they’re after and want to
abandon a no-longer-needed Western technology partner.41
Here is an excellent gameplan with some good ideas:
http://content.thirdway.org/publications/483/Third_Way_Report_-_China_s_Trade_Barrier_Playbook.pdf
How many don't have jobs?
No it is not nonsense. It is an issue that affect everyone's pocketbook. If you say higher prices don't matter, you are demanding that society chip in and subsidize to create noncompetitive, make-work jobs. Surely not a way to improve American efficiencies.
America is NOT COMPETITIVE because Americans chose (or at least tolerate) to have much higher levels of rules and regulations. Example - manufacturer that is trying to move to new facilities, and add a bunch of new jobs. Leased the building. Started buildouts. Oops, ADA requires that the access slope be 2 degrees rather than 5 degrees. Now you have to get an ADA conversant architect that is willing to sign off, and more permits and approvals, etc., etc., and the project is delayed even further, ad nauseum. Then 2 out of 10 employees who left, sued (worker's comp., discrimination, etc., etc.).
It IS much easier to build and run a plant in China or any of a large number of other countries. No amount of tariff is going to change that.
If the goal is to have jobs, invite in foreign investments to do exports. Who would be better qualified to sell into foreign markets than those who already know the language and customs, and consumer preferences, and who have the connections to make things happen? Also, reform the export control list - if America only sells what is commonly available on the international markets, it could easily be another $100 Billion a year in exports. Most Chinese companies have expressed the wish to buy American rather than Japanese or German, if the products are available at the same prices.
Make the pie bigger and everyone can benefit.
And what is good must be universal. If it is righteous for America to subsidize its major auto companies (they are not called Government Motors for nothing), according to Hindery, then all the alleged subsidies by Beijing could not be faulted.
You are simply wrong. For the entire decade, America was and is the largest manipulator of its currency, seeking to welch on debts, to pay less on what is owed, by depreciating the value of its currency by massive printing of currency, rapidly ramping up its debts like there is no tomorrow. The only thing that Beijing did was to attempt to stabilize the RMB against the dollar, to bring stability to world trade.
Yes, demonstrate to the world the ultimate stupidity and do raise tariffs. WHO pays tariffs? Americans, or the Chicoms? Exports to America is today 15% of the total exports for China, and about 70% of the exports from China to America is done by American companies. Talk about picking up that rock and dropping it on your toes!!