Jobs in Michigan require a level playing field for trade
By Scott Paul
Aug. 22, 2013
The city of Detroit has temporarily tapped out. In this case, municipal bankruptcy is more than just relief from debt obligations; it represents a huge psychic wound for the heart of American industry. Michigan makes things. So how could it have gotten this rough?
It’s bad, but there is hope. The Big Three, only a few years out of their deathbeds, are back in the black. GM, Ford, and Chrysler have produced profits that measure in the billions, despite the prewritten obituaries that appeared in 2009.
Despite their turnaround, the Big Three still face significant hurdles in getting their goods into Japan, and face import competition subsidized by currency manipulation. In fact, imports from all countries, including the U.S., account for only 6 percent of Japan’s auto market. Meanwhile, America has one of the most open auto markets in the world.
And it matters that the American auto parts sector –which, as recently as 2009, employed 6.5 percent of Michigan’s workforce –remains under siege by Chinese companies that have flooded our market with state-subsidized parts, aided by currency manipulation. In fact, independent analysis suggests that in recent years, the Chinese government has dumped more than $30 billion into its auto parts sector in an effort to artificially increase market share.
The result? Auto parts imports from China surged nearly 50 percent in 2012 from 2010 levels, according to U.S. International Trade Commission data, and the Obama administration requested consultations at the World Trade Organization over just one of Beijing’s many questionable subsidies.
Unfortunately, the administration has been virtually silent on its WTO action since it was unveiled in the run-up to the 2012 election. And what’s more, the auto parts trade case didn’t say a thing about the single most damaging subterfuge that America’s trade rivals employ: Currency manipulation.
Both China and Japan hoard massive reserves of American dollars, which helps inflate the value of the dollar while artificially lowering the value of their own currencies. Doing so acts as a hidden tax on American goods entering lucrative Asian markets and a subsidy for Chinese and Japanese goods entering the U.S.
This isn’t an economic theory, it’s an economic fact: By distorting the market with rigged currency, our economic rivals have run up America’s trade deficits to the tune of hundreds of billions of dollars annually. It is our companies and our workers who pay the price.
Now here’s a bit of good news: Our politicos are starting to get serious about cracking down on trade cheats. While the administration negotiates the terms of a massive new Trans-Pacific Partnership, 230 members of Congress signed a letter to President Barack Obama urging him to ensure its benefits would not be eroded by Japan’s currency manipulation. Almost every member of Michigan’s Congressional delegation added their name to that letter.
But our lawmakers have it in their own power to do more. They need to co-sponsor the bipartisan Currency Reform for Fair Trade Act, which would allow businesses to file trade cases based on injury from China’s currency manipulation.
Passing it would produce immediate results. If we want a free and open market in which American companies can compete, we have to fight for it. Michigan’s delegation has signaled they understand the importance of this issue. Now they need to stick to their commitment.
Scott Paul is President of the Alliance for American Manufacturing.