With apologies to Don McLean, we may all be singing "Bye-bye, American jobs" in a matter of months as cars from the Chery Automobile Company of China, spurred on by a sizable investment of technology and capital from Chrysler, start rolling into the United States in 2009.
This is a case study in how China's cheating, and Washington's own failure to stop it, threaten to sink an entire sector of our economy. A revealing piece by Gordon Fairclough in today's Wall Street Journal analyzes the dramatic rise of Chery. Although Chery certainly has some competitive advantages based on China's level of development, many of its gains have been acquired through unfair and illegal practices with the acquiescence of our own government.
In 2005, Chery settled a lawsuit in a Chinese court for essentially knocking off the design of a General Motors vehicle. Anyone notice that "Chery" looks a lot like "Chevy?" Too bad for the marketing department that it doesn't rhyme with "levee."
Some of Chery's major inputs--energy and metals--are heavily and illegally subsidized by the Chinese government at both the provincial and national level. Although China is obligated to eliminate these subsidies, which amount to tens of billions of dollars, they have not. But the U.S. trade bureaucracy seems satisfied with China's promises that it will eventually comply.
The Chinese government's misalignment of its currency gives its manufacturers a forty percent discount when selling in the U.S. market. This is an illegal practice under U.S. law and international agreements, but all we hear from Treasury Secretary Henry Paulson and his Chinese counterparts is more jibber jabber.
Chery's workers cannot form independent unions and effectively bargain for better wages and working conditions. Workers on the assembly line earn a little more than a dollar an hour, less than five percent of what an average factory worker in the U.S. earns. No one working at Chery will have the ability to buy the cars they make.
Will an engineering degree provide you with economic security in the U.S.? Not if Chery has a say in the matter. Junior engineers at Chery earn just $6,000 a year and sleep four to a room in company dormitories. For American workers, more education will not result in more employment security unless our government takes dramatic steps to make America more competitive. In fact, forty years of job and income growth for scientists and engineers is coming to an end.
Chery's compliance with environmental laws will likely cost it only about one-tenth of what major U.S. manufacturers pay. Do you think that China's air quality doesn't matter to us, half a globe away? Half of America's mercury pollution originates from overseas. It can take only five days for China's smog to make it to the United States.
We have already seen defective Chinese-made tires, toys, dog food, and countless other goods harm American people and pets. Can we trust Chinese regulators to make sure the cheap Chery cars will be truly safe?
Last, but not least, a health care system that punishes employers for doing the right thing in America has helped the Big Three teeter on the brink of insolvency for the past couple of years. In addition to universal coverage and controlling costs, Congress, the Administration and our Presidential candidates need to be thinking about how health care changes will make America more competitive as well.
American workers, businesses, and consumers should be alarmed by these developments. We've witnessed cheating on patents; lax worker, product safety, and environmental standards; billions in subsidies; and, a misaligned currency--all to fuel Chery's rise. The cheap Chery cars haven't yet arrived, but they have already been costly. Chrysler is laying off 25,000 North American workers and investing part of its future in Chery.
Shouldn't a Republican president be a little more willing to challenge a brutal dictatorship that finances its military buildup with our consumer dollars? By the same token, shouldn't a Democratic Congress be a little more willing to stand up for workers' rights, the environment, and jobs, and challenge China's unfair practices?
Voters are once again anxious about the economy, and rightfully so. Is anyone really listening to them?
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