This week three new reports described even more continuing damage to our economy caused by China's trade cheating -- and our own lack of response. Even as the auto industry recovers and auto-assembly jobs are returning, the auto-parts industry and jobs are not.
The reports, one from the Stewart and Stewart law firm along with two reports from the Economic Policy Institute (EPI) make the case that China is cheating, that it is costing lots of US jobs, and detail the national numbers and individual state costs.
The reports describe Chinese trade violations and calculate the damage done to our economy:
- Growing Threats to the U.S. Auto-Parts Industry from Heavily Subsidized Chinese Tires and Parts, from EPI. The report concludes that “every one of these [1.6 million U.S.] auto-parts jobs is individually at-risk from this unfair trade competition.” With 75% of auto-industry jobs in the auto-parts sector, this means a lot of jobs are at risk even as our auto industry recovers.
- Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011, conducted for EPI by Usha C.V. Haley, says there are $27.5 billion of Chinese government subsidies to their auto-parts industry with an additional $10.9 billion in subsidies for industrial restructuring and technological development of the industry coming.
- China’s Support Program for Automobiles and Auto Parts Under the 12th Five Year Plan, by the law firm Stewart and Stewart says China's subsidies to their auto-parts companies are in violation of China’s WTO commitments, but will continue unless we enforce trade rules.
I joined a call discussing these reports, with Leo Gerard of the United Steelworkers, Robert Scott of EPI, Scott Paul of the Alliance for American Manufacturing and CAF's Robert Borosage. The call detailed the many ways that China helps companies, even things like a tax on rare-earth mineral exports. So Chinese companies don't pay the tax, this is one more way their costs are lower, while US companies, already facing currency-rate manipulation, lose the competitive battle.
The Chinese government subsidizes energy costs, land, financing, labor, labor training and many other things, while our government does not. There are so many ways that China incorporates a national industrial policy to help capture vital and strategic industries, while our government does not. Our government barely begins to even enforce trade rules, which enables and encourages competitors to cheat while forcing out honest actors. Some of this is smart policy on China's part coupled with really not-smart policy on our part. We are blocked by ideologues from having a good, coordinated national industrial policy. Some of that is helped along by the beneficiaries of this lack of policy. With all the causes, the result is that Americans are losing jobs, factories, companies industries and our economy.
Meanwhile the China Daily warns us not to fightback, calling enforcement of trade violations "protectionism." From Protectionism won't help,
Trade protectionism against China is on the rise in the United States. The Obama administration has brought trade cases against China at nearly twice the rate of the previous administration, and it is also creating a trade enforcement unit to investigate the "unfair trade practices" of China and other countries.
Nevertheless, are these protectionist measures the right remedy for solving the US' grim unemployment problem?
Well, the answer to the question is yes.
The punch line comes in what can only be described as a "Freudian slip" at the end of the China Daily piece:
Resorting to protectionist measures hinders international trade, outsourcing and investment, and ultimately harms all.
Why yes, enforcing trade laws just might hinder outsourcing. Yes, that's the point.
Auto Parts Manufacturers Are Being Undercut
Through a range of unfair, illegal, and predatory trade practices, China is seeking to corner yet another industry and drive American workers out of their jobs. This time, the target is the auto parts manufacturing sector, and the pattern is the same as we have seen in sector after sector.