More than 1.6 million American jobs in the nation’s auto supply chain are at risk unless China’s illegal trade practices are curtailed, according to three new reports released today. In a conference call with reporters this afternoon, United Steelworkers (USW) President Leo Gerard said:
China is cheating unmercifully in this sector and we are saying to China—and asking our government to stand up to China and say—“enough is enough.” It is time to enforce our trade policies.
Two reports from the Economic Policy Institute (EPI) and one from Stewart and Stewart, a law firm that has won cases challenging China’s unfair trade practices, detail China’s persistent and growing violations of World Trade Organization (WTO) rules and outline plans by China’s government to use these same tactics to boost their auto parts exports even further.
In the past 10 years alone, China’s auto parts exports to the United States have increased by 850 percent, while jobs in the parts industry declined by more than 400,000. Says Scott Paul, executive director of the Alliance for American Manufacturing (AAM):
Taken together, these three reports show beyond a shadow of a doubt that China’s blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale are undercutting companies in the U.S. auto supply chain. It’s essential that federal action be taken to challenge these abuses before they completely undermine the job recovery under way in the U.S. auto industry.
The products in the U.S. auto-parts trade include tires, engines and electrical and electronic equipment. About 75 percent of jobs in the U.S. auto industry are in the auto-parts sector, with direct and indirect auto parts jobs in virtually every state, according to the EPI report, “Growing Threats to the U.S. Auto-Parts Industry from Heavily Subsidized Chinese Tires and Parts.”
A second EPI report, “Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011,” cites $27.5 billion in government subsidies to the Chinese auto-parts industry and notes that China’s central government has committed to disbursing an additional $10.9 billion in subsidies for industrial restructuring and technological development of the industry.
“Between 2000 and 2010,” the report finds,
imports of Chinese auto parts into the United States increased about eight-fold and are expected to continue to increase.
The Stewart and Stewart study offers evidence that the massive government subsidies given to Chinese producers, which are in violation of China’s WTO commitments, will continue for years to come unless challenged by Congress and the president.
China has achieved astronomical growth in its domestic automotive and parts industry through generous government subsidies, performance requirements for foreign investors, technology transfers, discrimination against imported goods, restrictions on raw material exports, and priority support for exports of vehicles and parts. China plans to devote more resources to these policies over the next five years.
Along with the illegal subsidies, says Paul, China also employs currency manipulation to artificially lower the cost of its exports.
This deliberate mercantilism has the potential to cripple the U.S. auto-parts industry. What’s urgently needed is federal action to address these predatory trade practices before thousands more U.S. jobs are lost.