On Thursday, the United States and the European Union announced that they were filing a joint complaint with the World Trade Organization protesting China's tariffs on car parts. On Friday, Delphi, the largest automotive parts maker in the United States, asked a judge to cancel all its union contracts and benefit packages, as part of its larger bankruptcy reorganization.
It's easy to connect the dots here. Free trade has been tough enough for American workers, but when you combine that with unfair trade practices by China, the blow is extra deadly. So globalization is killing Delphi. Whether any action on the China car parts dispute will occur fast enough to save Delphi from doom is questionable, but somewhere in the Midwest, there may be a UAW member who is saying finally the Bush administration is taking action!
Too bad it's not the right kind of action. Let's take a closer look at the WTO complaint. China charges a higher tariff for fully assembled cars than it does for car parts. But if China determines that car companies are importing more than 60 percent of the parts necessary to make a whole car, it charges the full-car tariff on all the parts. This is against WTO rules, say the U.S. and E.U.
There's been a ton of coverage of this, but only one reporter I've found managed to explain the larger context. Asia Times' David Lenard explains that China came up with the 60 percent rule after it discovered that foreign car companies were importing complete car kits in order to get around the full car tariff. In other words, foreigners were trying to game the rules, so China gamed them back. Funny how that information didn't make it into the press release from the United States Trade Representative.
Sure, one can argue that a 28 percent tariff on imported cars is still unfair, but that doesn't seem to be part of the formal complaint.
Meanwhile, the argument that Chinese competition is killing the American car parts industry has some weaknesses. Detroit's woes have a lot more to do with healthcare costs, gas prices and horrible strategic decisions than they do with Chinese tariffs. When G.M. spun off Delphi in 1999, Wall Street applauded, and everybody was happy as G.M. pumped out the SUVs and pickup trucks. But now nobody wants to buy those cars, and since Delphi does about $15 billion a year of business with G.M., its fortunes are intimately tied to G.M.'s stupidity. That's not globalization's fault.
By filing a complaint with the WTO, the U.S. gets to look tough. But if Bush really wanted to help out Detroit, he'd be fighting for a civilized healthcare plan that would allow G.M. and Delphi to focus on their actual business, rather than their dental plans. Even more to the point, he would long ago have mandated stringent fuel economy standards, thereby forcing Detroit to manufacture cars that had a chance of being attractive to buyers in an energy constrained world.
Amazing how it all fits together, huh? We could decrease our dependence on oil, decrease greenhouse gas emissions, and increase the competitiveness of American industry by showing a little enlightened foresight. Maybe, instead of complaining about China's efforts to build its own economy, we should be copying them instead. China's fuel economy standards are higher than the United States' pathetic new regulations, and China has even passed a law requiring that 10 percent of all energy consumed in China by 2020 come from renewable sources. A generation from now, we'll all be buying Chinese cars not because they're cheaper, but because they're better.