Posted on 02/07/2006 6:44:00 AM PST by Willie Green
For education and discussion only. Not for commercial use.
The accelerating woes of Ford and GM and the ongoing crisis in auto parts have produced vows from Detroit that business-as-usual won't continue. Yet unless business-as-usual in U.S. trade policy ends, too, and Washington imposes sweeping emergency tariffs on manufactured goods imports, the American-owned automotive industry will soon disappear, and along with it much of the rest of America's core manufacturing. The problem for Detroit is that today's job cuts and plant closings are simply band-aids on hemorrhaging wounds. As financing dries up, development of new products and technologies will become impossible. And health care and pension burdens will be dumped onto the taxpayer.
For a quarter century, Washington has dodged the biggest trade problem plaguing domestic automotive producers: an import tidal wave of vehicles and parts from rivals enjoying a host of advantages unavailable to U.S. automakers. Although Japanese, German, and Korean automotive companies sell freely into the U.S. market, their own home markets have been tightly protected. These governments also use numerous other tricks to promote their auto sectors, such as undervalued currencies, subsidies, and tax rebates and other breaks.
Since the import flood began in the 1970s, U.S. leaders have lacked the will and economic savvy to counteract these unfair competitive advantages. And unfortunately, Detroit has flunked the trade policy challenge, too.
In the 1980s, the United States imposed import quotas in part aimed at forcing foreign automotive companies to produce in America. But because no overall competitiveness strategy accompanied these barriers, they handed the Europeans and Asians not only new access to U.S. markets, but also bargain-basement labor and health cost structures and zero retirement obligations - magnifying the advantages created by one-way trade. State governments added to market distortions by competing for foreign-owned assembly plants with substantial incentives largely unavailable to U.S. manufacturers.
During the 1990s, domestic automotive producers strongly backed NAFTA and other outsourcing-focused trade deals. They believed that, in the absence of effective government assistance, NAFTA would strengthen American manufacturing by enabling labor-intensive operations to be sent to low-cost Mexico, and by requiring Asian and European manufacturers to use high levels of North American content if they wanted to sell here.
Today, however, even though foreign-owned factories produce millions of vehicles in the United States, car and truck imports from these countries keep surging. Between 1997 and 2004 alone, total vehicle imports rose nearly 21 percent from high-wage Japan, more than doubled from high-wage Germany, and jumped nearly five-fold from lower-wage Korea.
Further, despite the transplants' claims of using high and rising levels of U.S.-made parts, imports of these items have increased even faster than vehicle imports. From 1997 to 2004, German parts imports soared more than 142 percent in value terms, Japanese imports ballooned by more than 106 percent, and Korean imports more than tripled. Imports of the highest value auto parts show many of the biggest rises. Detroit's foreign rivals, in other words, have simply reserved the most lucrative manufacturing for their home economies and NAFTA's domestic content requirements have been too porous to stop them.
So far, Washington has inexplicably ignored the deepening auto crisis. Faced with the demise of a cornerstone American industry, politicians in both parties are apparently betting that pending free-trade deals will magically reverse decades of trade policy incompetence in time to create the mythical "level playing field." President Bush's recent emphasis on free market solutions for the auto crisis is a perfect example. Without action by Washington to offset foreign interventionism, the president's expectation that GM and Ford acting alone can survive, prosper, and meet their pension and health care obligations is delusional.
Only with an emergency surcharge on imports can Detroit address its internal problems and Washington address unfair foreign automotive competition. Strong medicine, to be sure. But without it, Ford, GM, Delphi and others will keep speeding down the road to receivership, dragging a host of related industries with them, and destroying the middle-class lives of too many hard-working Americans and retirees.
ping
Only with an emergency surcharge on imports....
I think banning the union for 5 years would solve the problem. You can't surcharge imports without violating GATT.
Of course, you could surcharge luxury cars, and that would hurt the imports disproportionately.
US companies driving themselves into the ground -> let's tax their competitors out of competition!
Toyota is already raising their prices to let the poorly managed, poorly operated US auto manufacturers have a little more of the market -- or lose a little less, perhaps.
Don't fail in direct competition and expect me to help bail you out!!!
Fire every union worker and every member of management and that'll be a good start toward rebuilding those companies.
GATT is an offense to our fundamental national freedoms, liberty, independence and sovereignty.
"We are infinitely better off without treaties of commerce with any nation."
--Thomas Jefferson to James Madison, 1815.
Dissolve the unions. Now.
Like non-unionized robots?........
Thanks for posting this informative piece.
a "lets support the blood-sucking unions" plea
I'd go for this - just as soon as the US automakers were allowed to pay a realistic wage and benefits package to their workers and retirees, and produce a product that people want to buy. Let Detroit compete on price and reliability with the imports first.
I'd like to buy a new pickup truck to pull my horse trailer, but I can't afford one that costs $28,000, then it's out of warranty at 3 years or 36,000 miles. I'd rather pay the same price for one that has a 10 year or 100,000 mile warranty. That makes more sense.
Mercedes, perhaps. But Lexus, Acura, and BMW brand names might suffer but the difference would be more than made up in increased sales to their cars under Toyota, Honda and Volkwagen brands.
CSPAN has had several shows with high level department of defense personnel.
There is growing concern that if we have a conventional war that our ability to manufacture military spares would be severely hampered.
We need a strong (heavy) manufacturing base.
Hard to fight a war with only electronics.
With out the auto and airplane industry what could we convert into war time use.
The Constitution clearly grants the Executive and Legislative branches the power and authority to enter into treaties and international agreements and to make such binding on the nation.
What supreme law of the land were you thinking of?
Jefferson was wrong. It wouldn't be the first time.
The auto manufactures ought to follow the lead of the banks and credit card companies. You know, spread a little cash around D.C. , then whine to Congress.
But remember:
Ford owns Volvo, Jaguar, Aston Martin, Range Rover, Mazda
Chrysler is Mercedes
GM owns Saab, Opel, and part Suzuki, Daewoo, Isuzu
It all comes down to Detroit pricing themselves out of the market by giving in to Big Labor.
Where do you think the banks got that business model from?
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