Blame The Auto Trade Deficit, Not Detroit’s Workers

Dave Johnson

Wow, it sure is convenient for Republicans and Wall Street to blame unions and working people and government for Detroit’s problems. (It’s what they do.) They talk about crime and corrupt inner-city politicians – Republicanspeak for “black people.” (It’s also what they do.)

So of course their solution is to further weaken government, weaken unions, strip working people of their pensions, tell workers they have to take even more pay cuts … and all the rest of the usual Republican/Wall Street solutions that always just happen to make a few already-wealthy people even wealthier. (It’s what they do.) Of course. And of course, always, always blame taxes. (It’s what they always, always do.)

Obvious Causes Ignored

But the obvious reasons for Detroit’s problems are right there in front of our eyes, so clear and obvious. Free-trade deals have forced jobs and factories and industries out of the country and we have a huge, massive, bloated, vast, incomprehensible trade deficit that is sucking the blood and money out of our economy. When the jobs left Detroit many of the people (and tax base) left and the problems exploded.

Here is a simple fact that tells us all we really need to know about what has happened to Detroit (and Flint and similar cities.) The trade deficit in automobile, parts and supplies is about $12 billion a month. Here is 2012 data from About.com:

Automotive is another category where the U.S. ran a trade deficit in 2012. It imported $298 billion worth of cars, trucks and auto parts, while only exporting $146 billion, running a deficit of $152 billion. (Source: Census Bureau, Real Exports by Principal End-use Category, monthly, 1994 – present and Real Imports by Principal End-use Category, monthly, 1994 – present. Note: These figures have been adjusted for inflation).

A January 2012 report from the Economic Policy Institute (EPI), “Jobs in the U.S. auto parts industry are at risk due to subsidized and unfairly traded Chinese auto parts,” discusses some of the cause and effect of this automotive trade deficit:

Although U.S. automakers have enjoyed a strong turnaround since the government helped restructure General Motors and Chrysler in 2009—with sales up 29.1 percent—that has not translated into a turnaround for the U.S. auto-parts industry, as indicated by the best-available measure of concern to American workers: jobs. Since the deepest point of the recession in 2009, the U.S. auto-parts industry has regained only 60,000 jobs, an increase of 13.8 percent (Bureau of Labor Statistics 2011). This gain is nowhere near what is needed to erase years of losses: The United States lost more than 400,000 direct jobs in auto parts between November 2000 and November 2011.

… Chinese auto-parts exports increased more than 900 percent from 2000 to 2010, largely because the Chinese central and local governments heavily subsidize the country’s auto-parts industry; they provided $27.5 billion in subsidies between 2001 and 2010 (Haley 2012).

It’s The Trade Deficit

Teamsters President James P. Hoffa drove the point home in March, well before the bankruptcy, in “It’s the Trade Deficit, Stupid“:

The root cause of the nation’s budget crisis is the same as Detroit’s. In both cases, decades of misguided trade policy hollowed out our manufacturing base, caused wages to fall and starved our governments of revenue. In both cases, our trade imbalance is masquerading as debt crises.

Detroit and its people are suffering collateral damage from decades of bad trade deals and trade concessions. For decades, the Motor City was the greatest manufacturing city in the world. Then the U.S. government started to dismantle the nation’s industrial base in order to achieve foreign policy objectives.

A Trade Imbalance Masked As Debt Crisis

This was echoed a few days later in Teamster Nation, in “Detroit’s problem: Trade, not debt“:

Detroit’s financial troubles are a trade imbalance masquerading as a debt crisis. Detroit and its people are suffering collateral damage from decades of bad trade deals and trade concessions.

$12 Billion/Month Auto Trade Deficit Ignored By Media

Finally, here is Dr. Charles McMillion writing at Manufacturing and Technology News the other day, “Motor City Dies, But The Big Wheels Keep On Turning“: (emphasis added, for emphasis) (Please click through and read the whole thing. It’s important.)

Ignored by the media, the U.S. Commerce Department routinely records $12 billion monthly trade losses for the country’s auto industry. There was no reporting earlier this year when it was officially noted that auto trade losses — including trucks and parts — rose last year to an annual world record of $146.9 billion. Since 2000, auto industry trade losses total $1.7 trillion as low-wage or heavily subsidized foreign-produced imports continue to devastate highly productive American jobs and wages, slash tax revenues and public services, and undermine U.S. financial independence requiring massive domestic as well as foreign borrowing. Especially in America’s Motor City, families, businesses and communities have been devastated. Now, with Detroit’s bankruptcy, more dreams and promises are being broken and debts unpaid.

Detroit has been singled out as uniquely corrupt and financially inept. Yet it is the small globalist financial community that has been in or near a constant state of failure, corruption and public bail out since promoting deregulation and a new form of globalization 30 years ago. Almost as absurdly, Detroit is ridiculed for not adequately adapting to the low-wage global and subsidized “market,” with New York Times columnist Paul Krugman literally raising the cliche of “buggy whips,” blithely urging Detroit to find a new competitive advantage. (Who wants to buy autos today?)

Over the past 30 years of lobbying by the financial sector in Washington and support by naive academics for “free” trade, the normal, small U.S. trade surplus in goods and services has turned into an unbroken torrent of 30 consecutive annual deficits that now total an astounding $9 trillion of which $7.7 trillion is for manufactured goods.

Detroit Not Alone

Detroit is not alone. The terrible trade imbalance is wiping out the middle class and entire regions of our country. Yes, it is making a few already-wealthy people fabulously wealthier, and yes, they have tremendous influence over our politicians. But we can do something about it. We the People have to stop being distracted by the lies. If we continue to pump hundreds of billions out of our economy every year with these massive trade deficits — caused by these terrible “free trade’ agreements — it will just keep getting worse and worse.

Call your member of Congress and tell them to stop the trade giveaways. Demand that we take steps to balance trade so we can get the jobs back.

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