Auto parts sector in trouble
By Scott Paul
Special to The Vindicator
We are well past the results of last year’s presidential contest. But what hasn’t completely faded from memory is the desperate struggle for footing in the months and weeks leading up to Election Day.
There were contentious prime-time debates, and attack ads from both sides. And there was a major declaration from President Barack Obama at a campaign rally last September:
“These are subsidies that directly harm working men and women on the assembly lines in Ohio and Michigan and across the Midwest. We are going to stop it. It is not right, it is against the rules, and we will not let it stand.”
The president was trying to distinguish himself from Gov. Mitt Romney, by talking about his administration’s announcement that it had requested consultations at the World Trade Organization (WTO) regarding China’s automotive and auto parts export subsidies. It was a pledge welcomed by America’s auto parts suppliers and the roughly 1.6 million workers they employ.
Now that we’re in the second term of an Obama Administration, however, some VIPs in Washington chalk up that campaign rhetoric to a heat-of-the-moment electoral battle.
Was the president’s rhetoric crowd pleasing? Sure. But it was also justified: Independent analysis suggests that Beijing has dumped more than $30 billion into its auto parts sector in an effort to artificially increase market share. In Ohio, where the auto parts sector provides 3.7 percent of all employment in the state, that’s a real cause for concern.
President Obama’s trade case announcement was a welcome development. Since American manufacturers first took issue with the widening auto parts trade gap with China in January 2012, the problem has grown worse. The most recent data shows imports from China surged nearly 50 percent in 2012 from 2010 levels.
Unfortunately, the administration has been virtually silent on the WTO action since the election. Meanwhile, China flouts the rules, and manufacturers in the American heartland feel the pressure.
Now Japan has decided to jump into the game, too, with a policy of currency devaluation that hurts America’s carmakers. And not only is Japan brazenly manipulating its currency, but it is doing so at the very moment that the Obama administration is welcoming Tokyo into negotiations for a massive Trans-Pacific Partnership trade deal.
When our trading partners practice currency manipulation, America’s manufacturers suffer. And because America’s automotive manufacturers and their auto parts suppliers constitute a major portion of the nation’s overall industrial sector, the larger U.S. economy feels the effect.
Consider this: Trade between China and the United States clocked in at half a trillion dollars last year, but the U.S. still ran a goods deficit with Beijing of $315 billion. American companies looking for market access in China regularly complain about forced technology transfer. And every major East Asian economy manipulates its currency, which acts as both a subsidy on their manufacturing exports and a tax on the American-made goods we’re trying to sell there.
The Administration must pursue its auto parts case against Beijing with every tool at its disposal, and back up its talk with action. Washington must offer an ultimatum to Beijing and Tokyo: Do you want continued access to the largest and freest market in the world? Then halt your currency manipulation.
Scott Paul is president of the Alliance for American Manufacturing, an advocate for U.S. manufacturing and “Buy America” policy.