In all the discussions about the auto industry's struggles, I've seen a lot of comparisons to foreign-based companies operating here, and many comments about health and retirement costs, but not a clear look into what direct role US trade policy may be playing, if any, in bringing these two issues together.
After finally making many overdue structural changes and long-term investments, the big three are now strapped, just in time for a serious economic downturn. While it may very well be true that the management has a lot of blame for this situation, spite, arrogance, and ideological opportunism seem to be taking a larger role in the discussion than trade policy and the current recession.
Earlier this year I attended a meeting where the lunchtime speaker was Donald Trump. I've never been a big admirer of his, but I have to admit that he's perceptive, extremely well-connected, and a very entertaining speaker. On this occasion, he spent the entire hour in a rant about the poor leadership and ineffective trade negotiations coming out of the Bush administration. He related that many friends of his are negotiators for other countries, and they tell him they have been literally embarrassed by the amazing deals they have been able to get from our government; that they are never asked to make concessions, essentially getting everything they ask for.
(He further emphasized that top foreign investors he meets with have stopped investing here, citing our crumbling infrastructure as their primary reason. While much of his focus was on the crony ambassadors that Washington sends into financial negotiations, even Condi Rice did not escape harsh criticism for her poor negotiating skills.)
Lately, I've thought a lot about that lunch in light of Detroit's woes.
While domestic & foreign automakers do use a few of the same parts, foreign companies are generally allowed to ship a majority of the components manufactured at home (often with subsidized labor and govt health care) to be simply assembled here and sold as American-made, in order to avoid import tariffs. They have the luxury of choosing the lowest-wage locations that will offer them the best tax deals or subsidies.
The American auto market is the world's largest and most important, so even if Detroit had this same opportunity overseas they would still be at a disadvantage, until states begin competing to lure them with tax incentives and new factories, and their retiree burden is relieved.
Further, there are claims, including recently from Gettelfinger of the UAW (which I frankly don't know how to verify, although this seems to undercut) that South Korean manufacturers are allowed to ship approximately 20 times the vehicles to the US than vice versa, based on our trade agreements. This adds an access imbalance to the structural cost imbalance, both by way of government agreement.
This is not about protectionism, but competence and priorities: Based on their focus over the past 7 years, can any of you imagine that the Bush Administration has insisted on a level playing field for American workers, especially unionized ones?
What creates such emotion in the auto bailout discussion that distracts us from basic trade issues, or even from our focus on the particular impact this recession is having on ALL automakers? Even if we ignore the anti-union Republicans, a cursory read of most of the well-intentioned "advice" for the big three is usually either contradictory or redundant. We hear the popular idea that they should focus on small cars, while eliminating their brands that build the best ones, or hear "new" ideas for changes that are already being implemented, such as cutting products to shift into small cars and improved or new technology.
Is it our familiarity with the product, or a past bad experience? Our lack of belief in American capability? Are we buying into the Republican idea of incompetent and lazy unions?
Thanks to the changes of the last few years, the American auto industry's problem is not even quality, but is reputation. Bankruptcy would further decimate that reputation, to the delight of anti-union Republicans. For them, the failure would provide an object lesson in the dangers of worker organization.
An American auto industry failure would be yet another Republican ideological success at the expense of Americans.
Over the past eight years, they have demonstrated
- we cannot trust government in the case of a natural disaster (due to their lack of preparedness).
- we cannot trust government regulations (due to their lack of enforcement).
- we cannot afford to improve our healthcare system (due to their lack of will).
Will their last act before January 20 be a deliberate demonstration that we cannot afford unions, due to their lack of good faith negotiations?