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‘Marshall Plan’ Needed for U.S. Auto Industry |
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We all know U.S. manufacturing is under siege from cheap imports from countries such as China. Now, a major sector of the nation’s manufacturing, autos and auto parts, is in jeopardy of being pulled under by Chinese imports.
Over the past two years, China’s production of vehicles and automotive parts has grown rapidly. Unless fundamental changes are made in U.S. trade policy, those vehicles soon will be flooding the country and washing away U.S. auto jobs, says UAW President Ron Gettelfinger.
Two years ago, the UAW suggested changes in trade policies that would save U.S. auto jobs. The union also endorsed a “Marshall Plan” that would stimulate U.S. investment in and production of advanced-technology vehicles and their components, giving U.S. workers and producers an edge over Chinese and other foreign suppliers.
But so far, the Bush administration has done nothing to curb the expanding Chinese car imports, Gettelfinger says, allowing them to grow at the expense of U.S. workers:
The Bush administration has the responsibility to ensure that the U.S.-China economic relationship is improving living standards for Americans. But the administration has simply abandoned this responsibility, leaving multinational corporations in charge of that relationship. The results speak for themselves—an unprecedented U.S. overall trade deficit with China of $201 billion in 2005 and a steadily rising automotive trade deficit.
From 2003 to 2005, the U.S. automotive trade deficit with China, fueled primarily by U.S. imports of auto parts, doubled to $4.5 billion and is still climbing. Through April 2006, the automotive trade deficit is up by 26 percent, led by a 30 percent increase in imports of automotive parts.
Last year, China produced 6 million vehicles, becoming the fourth-largest manufacturer of vehicles in the world. Of that number, 5.7 million were sold in China, making it the third-largest automotive market in the world.
Equally important, China’s production capacity is expected to jump to 20 million vehicles in 2010, while car sales in China are only expected to grow to about 10 million. Gettelfinger told the U.S.-China Economic and Security Review Commission last week he was gravely concerned about the potential impact of such a large surplus of Chinese-made cars:
Chinese vehicle imports, which could easily reach 1 million units quickly, would add to the growing U.S. automotive trade deficit with China and to the already record-setting overall U.S. automotive trade deficit. The growing share of imports in total U.S. vehicle sales is depressing employment in the U.S. auto industry and contributing to the falling market shares of the largest U.S. producers—General Motors, Ford and DaimlerChrysler.
Adding imported vehicles from China to the current mix of imports will affect U.S. auto parts production and employment, in addition to eliminating the jobs of thousands of assembly workers. Employment in the U.S. auto parts industry has already fallen by about 200,000 in the past five years, and that number will grow dramatically when the many companies that have filed for bankruptcy implement their job-cutting plans. Further job losses in the auto parts industry will be devastating to many communities across the nation, as well as to affected workers.
Rather than take strong action to protect auto jobs, the White House is pushing programs to retrain laid-off auto workers. The Bush Labor Department has touted Career Advancement Accounts (CAAs) demonstration projects as an innovative response to dislocations by Ford and General Motors in nine states. But a study released today by the National Employment Law Project (NELP) and the Economic Policy Institute (EPI) found that CAAs are a poorly targeted and woefully inadequate response to auto industry dislocations. The study found the projects were driven by ideology and fail to help the workers and communities most in need.
Two Chinese auto companies, Chery and Geely, have already announced plans to export vehicles to the United States within the next three years, but that may be only the beginning, Gettelfinger says.
DaimlerChrysler is considering importing subcompact vehicles from China, and several of the Chinese auto companies now in joint ventures with U.S., Japanese, European and Korean companies have made it clear they intend to export vehicles to the United States and other developed countries.
This increase in Chinese imports comes when U.S. carmakers and auto parts companies are struggling to increase sales and stay afloat. Delphi Corp., the nation’s largest auto part supplier, filed for bankruptcy in October and immediately began calling for concessions from union members. And while demanding concessions from workers, Delphi is rewarding its executives with $98 million in bonuses this year and hosting lavish cruises.
More and more frequently Delphi and other companies are using the bankruptcy process to impose deep wage and benefit cuts that already were rejected by workers during contract talks. Before filing for bankruptcy, Delphi sought wage cuts of nearly 40 percent, but UAW members have insisted that solving the company’s problems must be based on the principle of equality of sacrifice—not by forcing rank-and-file workers to pay the entire price for management mistakes. Yet Delphi is one of the companies that is producing and exporting parts from China to the U.S. in order to use excess capacity in China and take advantage of lower wages, Gettelfinger says.
The Bush administration could address the situation, in part, by accepting the AFL-CIO’s petition on China’s unfair trade practices and currency manipulation and implementing the remedies proposed. On July 21, the Bush U.S. Trade Representative rejected for a second time the AFL-CIO petition demanding that China’s government stop denying workers their rights.
The petition showed how systematic violation of workers’ rights in China provides an unfair advantage to products made in China.
Meanwhile, another AFL-CIO report shows China’s fixed currency rate artificially lowers the price of Chinese goods by 40 percent and subsidizes exports, putting U.S. companies at a disadvantage. The lack of currency flexibility has been a major factor in American job losses and the trade deficit with China.
Combined with the dangerous health and safety conditions facing Chinese workers, including the deaths of thousands of workers in 2005 in mining accidents alone, it is clear that the situation of workers in China is bleak and that strong, democratic, independent unions are desperately needed to fight for the interests of workers, Gettelfinger says.
But Gettelfinger warned that none of these measures will work unless the Bush administration acts forcefully when Chinese auto imports start flooding in:
With the growth of excess production capacity in China’s automotive vehicle and parts industries, we are likely to see a surge of Chinese exports to the U.S. that would cause serious, and potentially permanent, injury to U.S. workers and producers in the near future. When an import surge occurs, the Bush administration must be prepared to act forcefully and quickly.
If the administration fails to take such actions, we are ready to mobilize intense pressure from workers, the public, Congress and the industry to ensure that the administration takes the most effective actions permitted by the law.
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