General Motors announced this week that it will start building the Cadillac XTS, CTS and ATX in China in an attempt to keep up with the insatiable demand for luxury consumption by that nation's nominally Marxist elite. It seems that Communist Party princelings and their crony capitalist clients just can't get enough Caddies, not to mention the BMWs, Ferraris and Lamborghinis. While China's ever widening class divide offends human dignity, what is really scary is the way that we have been importing it into America via a trade policy that undermines the value of U.S. labor while increasing the returns to capital invested in China. As American industries flee to China's exploitive manufacturing heaven, real wages for working class Americans steadily decline. Meanwhile the profits of multinational corporations soar and the growing rift between wage earners and the smart, big money investors swallows our dwindling middle class.
The Cadillac announcement nicely underscores the source of this problem. China Car Times notes "Currently the car is imported from the USA which makes it price much higher than it should be due to higher taxes on imported high displacement vehicles." A great way to target American imports and jobs. Chinese bureaucrats and law makers at all levels have internalized a national industrial policy which impedes imports from the U.S. while welcoming the American capital investment that creates jobs in China. Most North American made cars imported into China get hit with about a 25% tariff while the Chinese cars that are beginning to sneak into our market a paltry 2.5% tax. DOH! That's the trade deal presidents Clinton and Bush sold to America when they pushed for permanent "Most Favored Nation" (normalized) trade status and then entry into the WTO for the Boys from Beijing! We've seen the outcome of that policy in industries from textiles to electronic assembly. There is no sane reason to believe it will play out any differently in cars, or aircraft as every firm seeks to obtain Apple-like profits off the backs of China's weary workers.
We should expect to see a lot more GM models made with repressed Chinese labor in a regulatory environment that allows this formerly American firm and its Chinese partners to pollute the environment and injure employees at will. We can also expect to see those cars exported to other countries, killing even more U.S. jobs. In the not too distant future, we will see Chinese made Cadillacs, and other GM cars, imported right back into America, with our timid tariff serving as an ironic welcoming mat to the enemy of truly free markets.
Even after GM drives this latest stake into the heart of America's manufacturing base, our Faustian bargain with Communist China will continue. American consumers will continue to blindly trade their high paying manufacturing jobs for low prices at Wal-Mart. The administration will surely respond with extended unemployment benefits and more fruitless stimulus, while promoting manufacturing via subsidies to speculative industries. Meanwhile both the president and Congress will continue to advocate the misrepresented version of "free trade" that has destroyed our proven industries, because multinationals will continue to pour money into their Super PACs. China will continue to behave in a mercantilist manner and it rulers will continue to spend their accumulated wealth on a repressive internal security apparatus and a rapidly growing military preparing for war in East Asia.
Supporters of the Bush and Obama bailouts are always quick to assert that GM has paid back its debt to the U.S. However, what GM has really done in the decade or so can be summed up as:
1. Taken billions in U.S. government money. (Ironically, much of which we borrowed from China with interest to be paid by our unemployed kids.)
2. Invested billions into joint ventures in China controlled by Chinese state owned enterprises like SIAC.
3. Closed plants in America and laid off workers in the U.S.
4. Built new facilities and hired more workers in China.
5. Dumped subsidiaries, like its GM Components operations (Delphi), throwing thousand of employees under the bus and then stealing their retirement with U.S. government assistance.
6. Recognized huge profits and reinvested a great deal of them in creating more jobs in China.
It's no wonder that Cadillac has sponsored a Chinese film celebrating the 90th anniversary of the founding of the Communist Party, an organization that has probably killed more people than in any other the history of mankind* and which continues to repress hundreds of millions from Tibet to Mongolia.
Greg Autry serves as Senior Economist with the American Jobs Alliance and is co-author (with Peter Navarro) of Death by China
*According to the latest updates from Prof. R.J. Rummel, expert on Genocide and Democide.