Shadowproof

America’s Failed Mole-by-Mole Trade Policy

This American Car Enthusiast Makes The Point

Last week several groups, including the United Steelworkers, petitioned the federal government to whack the latest trade mole – illegally traded auto parts from China.

With President Obama announcing creation of a new trade enforcement unit in his State of the Union Address, the feds probably will investigate. But even if they whack down the auto parts mole, experience has shown a new mole will pop up.

Mole-by-mole trade enforcement isn’t the solution to America’s massive trade deficit. Although conservative candidates revel in ridiculing Western Europe, America could learn crucial economic lessons from Germany, which doesn’t rely on Whack-a-Mole and maintains trade surpluses, including one with China in auto parts.

The Steelworkers – along with the United Auto Workers, the Alliance for American Manufacturing and Campaign for America’s Future – explained why the federal government must smack down the latest trade problem that has raised its ugly head.

China and several other countries promote their auto parts manufacturers by providing subsidies and engaging in additional practices banned by the World Trade Organization (WTO). As a result, the United States imports more auto parts than it produces, a situation that kills manufacturers and manufacturing jobs here. For example, over the past 11 years, as the U.S. auto parts trade deficit increased by 867 percent, the Unites States lost 45 percent of its auto parts jobs – a total of 419,000.

The reason the groups sought action against China specifically is that its exports of auto parts to the United States have increased faster in the past three years than any other country’s and China supports its auto parts industry in ways that violate its commitments to the WTO.

For example, China provided $27.5 billion in subsidies to its auto parts industry between 2001 and 2010. It’s fine with the WTO if countries subsidize industries that sell their products domestically. But it forbids subsidies for exported products because that distorts the free market, wrongly destroying jobs and industries in the countries that buy those artificially low priced goods.

Beijing also aggressively limited import of American-made auto parts. This is hardly startling. In December, China imposed steep tariffs on imported American-made sports utility vehicles and other large cars. And the WTO affirmed last week that China violated its trade commitments by restricting export of key raw materials. Earlier, the WTO supported President Obama’s imposition of tariffs on tires imported from China because Beijing had violated international trade rules. [cont’d.]

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