Drove My Chery To The Levee But The Levee Was Dry?

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?

Follow Scott Paul on Twitter: www.twitter.com/ScottPaulAAM

Comments

[therealredstateblues]

"Hu" Paulsen has caved so many times now to communist china on trade and currency and product safety issues he should be retitled as the "Secretary of Spelunking"

[onezero]

Sorry guys, this is the way the market works without regulation. The auto manufacturers and their suppliers are chasing the lowest wage, be it in China, South America, or Slovenia. They're responding to dual pressures - increased profit and competition that is doing the same.
Politically, the republican administration benefits - increased profits for the corporations, and fewer pesky democrat-supporting union workers. Why would they change it?
The only thing that will affect this trend is regulation to level the playing field. Want to increase the price of Asian goods? Slap a tariff on imports from factories that don't adhere to ISO environmental regulations or pay a living wage. This is also not going to happen, as the current administration will not do anything to piss off the countries buying up our debt.
The domestic auto companies are in a bind. They can't afford to stop outsourcing, because the non-union Asian automakers are taking more of their market share every month. They are competing against Korean and Japanese imports (soon Chinese and Indian) that have none of the health care and labor burdens. If they do not outsource assembly to Asia (a-la Chery) or get help through government intervention to offset the imbalance in product cost, they are going to be run out of business.
Regarding electric cars, not enough American consumers want to pay the premium they cost and that will not change until gas is at $5 a gallon for 5 years. The auto manufacturers don't give a damn what the cars run on, but they are terrified of lower sales volumes that will come with higher-priced electric and hybrid cars (and that the imports will dump them into the market first). The Europeans don't drive Chevy Tahoes. Thier governments enacted high fuel taxes, and the price of gas led to the development of clean bio-diesel engines with better gas mileage than most hybrids. None of these engines (which make up 55% of the European market) are available in the US, and the American consumer is not in enough pain to change their shopping habits.

[Nommo]

Hey, the name, Chery? Is that pronounced like that character in Pee Wee's playhouse? (The chair).
Creepy.

[WIpatriot]

But does the Chery get good gas mireage?

[H8FascistCons]

Shocking!!!! Finally a business columnist asking questions that working people have been asking for nearly thirty years, since the father of American fascism Ronald Reagan purposely began shipping jobs to Japan. Our present economic strategy is a totally evil and antidemocratic plan to ensure the power stays in the hands of a few at the expense of the many
(because poor people cannot stand up to the abusive power) even if it means the demise of our precious democracy. Can you say the United States of Multi National Corporations of America? The Republican fascists and the DNC think this is just a fine idea, follow the money!!!..­...

[americaforme]

You did't have to be a rocket scientist to see this nightmare coming...O­utsoursing started in the copper mines in the southwest in the late seventys..­.unions were to weak to grab hold of it...The Electric car was the latest inovative energy saver...Th­e oil companys killed it, they also killed the copper mine industry,bringing in workers from all over
Asia...The Gov. supplied afforable homes to buy....pay­ing their down payments..­.Americans have systematicaly been edged out by industrial monopolys as early as mid sixtys. Big Oil Giants greed, favored over patriotism. We all knew that oil was gobbling up assetts, we also knew it would be our downfall. Industrialist in total control of our USA economy...­MY gosh what a mess...no pain no gain...We'­ve got to start somewhere.­..

[ErnestineBass]

HOW DARE the Chinese government subsidize their burgeoning auto industy!!! That's NOT FAIR!!!

America DOESN'T SUBSIDIZE our auto industry (unless you count that "helping hand" Chrysler got way back when), or our pharmaceutical industry (okay, so we threw 'em a bone with Medicare D), or our banking industry (hey, somebody's gotta do something to make sure the good fellas at Goldman Sachs get their Xmas bonuses), or our oil industry (just as soon as Iraq goes online they'll pay it all back, they promise), or our insurance industry ("Nobody could have predicted.­.."), or ...

Jibber jabber, INDEED, Mr. Paul!!!

[mmckinl]

Bonddad , What do you make of this ?

[givemycountryback]

This is way too late, but thank you. Our jobs have already been given away and how do we get them back? The trade laws have never been enforced. Why should we care about the quality of life of a worker in China when we have people losing their homes, cant afford health care, food, heat right here is our country. NObody is looking out for us, we are on our own.

[nomoredead]

Bravo!

[Nommo]

Hell, if you buy a Chrysler, you get what you deserve. Buy a Chinese car (Yugo, anyone?) and likely we get what you deserve.
No, no one is listening to the voters, have not been, will not be. One can only hope that the voters realize and decide to change the currency they deal in.