Last week several groups, including the United Steelworkers, petitioned the federal government to whack the latest trade mole -- illegally traded auto parts from China.
With President Obama announcing creation of a new trade enforcement unit in his State of the Union Address, the feds probably will investigate. But even if they whack down the auto parts mole, experience has shown a new mole will pop up.
Mole-by-mole trade enforcement isn't the solution to America's massive trade deficit. Although conservative candidates revel in ridiculing Western Europe, America could learn crucial economic lessons from Germany, which doesn't rely on Whack-a-Mole and maintains trade surpluses, including one with China in auto parts.
The Steelworkers -- along with the United Auto Workers, the Alliance for American Manufacturing and Campaign for America's Future -- explained why the federal government must smack down the latest trade problem that has raised its ugly head.
China and several other countries promote their auto parts manufacturers by providing subsidies and engaging in additional practices banned by the World Trade Organization (WTO). As a result, the United States imports more auto parts than it produces, a situation that kills manufacturers and manufacturing jobs here. For example, over the past 11 years, as the U.S. auto parts trade deficit increased by 867 percent, the Unites States lost 45 percent of its auto parts jobs -- a total of 419,000.
The reason the groups sought action against China specifically is that its exports of auto parts to the United States have increased faster in the past three years than any other country's and China supports its auto parts industry in ways that violate its commitments to the WTO.
For example, China provided $27.5 billion in subsidies to its auto parts industry between 2001 and 2010. It's fine with the WTO if countries subsidize industries that sell their products domestically. But it forbids subsidies for exported products because that distorts the free market, wrongly destroying jobs and industries in the countries that buy those artificially low priced goods.
Beijing also aggressively limited import of American-made auto parts. This is hardly startling. In December, China imposed steep tariffs on imported American-made sports utility vehicles and other large cars. And the WTO affirmed last week that China violated its trade commitments by restricting export of key raw materials. Earlier, the WTO supported President Obama's imposition of tariffs on tires imported from China because Beijing had violated international trade rules.
China has prospered by breaking the rules. Electronics manufacturing is a good example. In a story about Apple's experience, The New York Times described how America lost these jobs to China. Worker wages, while achingly low in China, were not the lure. And they were not the issue for Apple, a company that makes $400,000 in profit for every worker. It was a combination of other factors including the Asian supply chain and Chinese subsidies.
An example is the Chinese company that bid on supplying glass for the iPhone. When Apple executives visited, they found the company already constructing a wing where the iPhone glass would be cut. The company built it with subsidies from Beijing, subsidies that never would be provided by the United States to American companies, subsidies that are of questionable legality under WTO rules because they were for exported goods. Apple gave the contract to the Chinese firm, of course. Here's how the Times described it:
"The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day."
The USW and others that file trade cases often win. But this is Whack-a-Mole trade enforcement. A union or industry wins a case, whacks down that individual annoyance, but immediately another surfaces. America is losing, and far more is at stake than in an arcade game.
America can win. But it's got to deal with trade differently. It needs a game changer, like Germany's manufacturing policies.
Germany accounts for nearly 17 percent of America's auto parts trade deficit. Germany sells more auto parts to China than it imports from China. German auto parts manufacturers accomplish this while paying higher wages and benefits than their American counterparts.
An analysis by the Economic Policy Institute notes that Germany actively enforces its industrial policy. This, EPI noted, stands in stark contrast to the United States, which doesn't even have an industrial policy.
Germany encourages a sector of banks that is devoted to financing small and medium firms -- the size that auto parts manufacturers are likely to be. In addition, Germany favors stakeholder capitalism, and corporate boards of directors there are populated by equal numbers of managers and workers. This changes the focus from profits benefitting only the 1 percent to company operation in the interest of the community, the country and the workers, as well as the executives and stockholders.
Republicans and Americans of the World War II generation might choke on the idea of learning something from Germany. But, frankly, this Western European country has prospered in manufacturing and trade with sophisticated state and corporate planning -- not with the arcade-economics of Whack-a-Mole.
Follow Leo W. Gerard on Twitter: www.twitter.com/uswblogger
Having lived and worked in both Germany and the US, I am pretty certain the median income of the "bottom 95%" in Germany is significantly higher than it is in the US.
The standard of living for the Otto Normal (German for "Average Joe") is definately higher in Germany now than it is in the US in my opinion.
That's not true. USA ranks 9th in productivity worldwide with 49.52$ GDP per hour worked.
#1 is Luxemburg with 71.95$ GDP per hour worked.
#2 Belgium 64.00$ GDP per hour worked, Netherlands 56.35$. Even GREECE (!) is more productive at 54.34$ per hour worked. France, Italy, Ireland and Germany also rank higher than the US in productivity.
This isn't the 1950s anymore.
http://napoleonlive.info/economics/unfair-competition-equals-free-trade/
They put in more work hours than anyone else in the industrialized world.
However, I think they are, and have been kept in the dark regarding wages and benefits.
Organized labor is the right idea, yet I have yet to hear them talk about C98- The Right to organise and Collective Bargaining Convention of 1949. Or the Geneva Conference of the International Labor Organisation that same year.
Of the industrialized countries that signed on, the U.S. did not.
Germany is signatory, as are most industrialized countries- except China
Germany has also decided to shut down their nuke plants by what-2017?
The U.S. worker has been getting shafted since before when!
Time to wake up, before you're broken!
Still, U.S. workers are the best in spite of capitalists, and the uninformed opposition!
http://www.fhwa.dot.gov/infrastructure/reichs.cfm
The Reichsautobahnen
"...For Eisenhower, the vision of the autobahn was strong in his mind as he became President. Years later, he would explain that "after seeing the autobahns of modern Germany and knowing the asset those highways were to the Germans, I decided, as President, to put an emphasis on this kind of road building. ... The old [1919] convoy had started me thinking about good, two-lane highways, but Germany had made me see the wisdom of broader ribbons across the land..."
Globalization's New Underclass
"Stephen Roach (New York)
Billed as the great equalizer between the rich and the poor, globalization has been anything but. An increasingly integrated global economy is facing the strains of widening income disparities -- within countries and across countries. This has given rise to a new and rapidly expanding underclass that is redefining the political landscape. The growing risks of protectionism are an outgrowth of this ominous trend.
It wasn’t supposed to be this way. Globalization has long been portrayed as the rising tide that lifts all boats. The surprise is in the tide -- a rapid surge of IT-enabled connectivity that has pushed the global labor arbitrage quickly up the value chain. Only the elite at the upper end of the occupational hierarchy have been spared the pressures of an increasingly brutal wage compression. The rich are, indeed, getting richer but the rest of the workforce is not. This spells mounting disparities in the income distribution -- for developed and developing countries, alike.
The United States and China exemplify the full range of pressures bearing down on the income distribution. With per capita income of $38,000 and $1,700, respectively, the US and China are at opposite ends of the global income spectrum. Yet both countries have extreme disparities in the internal mix of their respective income distributions...."
Time and money would be better spent in fixing America's broken education system and rebuilding our infrastructure. As to the German "miracle" their unemployment rate was well over 10% (over 12% in 2005) through most of the 1990's when America's was 4.5%. They also have a higher debt to GDP ratio. Most Germans work in services (68%) not manufacturing.
Both China and Germany, which are eating our lunch, have industrial policies. America does not.
It won't do any good to educate students if there are not jobs for them, lucky bear.
For the long term unemployment problem.
http://www.intelligencesquared.com/events/buy-americanhire-american-policies-will-backfire
We need to return to protectionism, at least to the extent that other developed countries do, since our current policy of unilateral "free trade" has been a disastrous failure.
Free trade has increased your standard of living. Have you see the HDTV's you can buy at Target? Those wouldn't exist without fierce competition. I like getting vegetables in the dead of winter (I live in MN). I do not want to pay taxes on imported Chilean produce. Clothing is cheap thanks to international trade. Why should poor people pay higher prices for food and clothing?
Protectionism, historically, was not a liberal or progressive view. It was a Republican view. Republicans supported big protected businesses. Liberals were always in favor of free trade. Wilson, David Lloyd George, FDR, Robert La Follette (a liberal Republican), even Jimmy Carter lowered tariffs. Protection has always hurt the poor the most. This was true 250 years ago and it is still true today. Do not tax the poor; it is immoral.
How dare we believe that workers should have a place at in the board room!
We know that a company should be measured in 1-3-6 or 12 month increments, so the Execs can get their Bonuses, because no one can do what they do.
//sarcasm off//
An analysis by the Economic Policy Institute notes that Germany actively enforces its industrial policy. This, EPI noted, stands in stark contrast to the United States, which doesn't even have an industrial policy.
Germany encourages a sector of banks that is devoted to financing small and medium firms -- the size that auto parts manufacturers are likely to be. In addition, Germany favors stakeholder capitalism, and corporate boards of directors there are populated by equal numbers of managers and workers. This changes the focus from profits benefitting only the 1 percent to company operation in the interest of the community, the country and the workers, as well as the executives and stockholders."
lol...I've posted similar content only to have Conservatives deny the truth..
No, their environmental regulations are far MORE HARSH and STRICT than ours.
Next time, could you possibly have some factual information before responding?