Economy Auto Parts

China is notorious for not playing by the rules in international trade. While the country demands open access to the U.S. market, it subsidizes its own industries to gain an advantage in the international marketplace. These practices have hurt a number of U.S. industries, but the toll is becoming astronomical in the auto parts sector. The United States lost over 400, 000 jobs in auto parts manufacturing between 2001 and 2011, and it is no coincidence that 2001 was the year China joined the WTO.

According to a study by the Economic Policy Institute, the United States has regained only 60, 000 jobs in the auto parts manufacturing industry since the worst point of the recession in 2009. Auto manufacturing has seen gains, but the influx of cheaper Chinese parts has meant that United States parts manufacturers are not reaping the benefits. In the last decade Chinese auto part exports increased by over 900 percent, putting immense pressure on American competitors. Over that same time period China provided $27.5 billion in subsidies to its auto part manufacturers, even though a large portion of these subsidies were illegal under WTO rules.

President Obama has stated that he is going to create a Trade Enforcement Unit to oversee our trade agreements and ensure compliance. This is a good step, but it will not prevent the destruction of American jobs. The subsidies that China provided may have been illegal by WTO rules, but challenging those subsidies takes time. This time is more than enough for the Chinese to dump cheap parts into the U.S., gain market share and put American companies out of business. By the time any sanctions can be mustered against Chinese actions it may be too late.

Direct subsidies are not the only way China is gaining market share. The Chinese also continue to manipulate their currency to make Chinese-made goods relatively cheaper. With some experts estimating China’s currency to be undervalued by as much as 40 percent this is no small advantage. America needs to label China as the currency manipulator it is and take appropriate action to protect American jobs. Unfortunately House Speaker John Boehner (R-Ohio) has refused to bring a bill that would allow the U.S. to address Chinese currency manipulation to the floor for a vote.

Our auto parts sector has been a vital part of the American economy for years, and now it is at risk of disappearing because of our flawed free trade policies. 6.5 percent of all jobs in Michigan are still in auto parts manufacturing, but if we do not take action those jobs may be lost as well. We have tried free trade, and it has failed us. It is time to go back to what works for Americans.

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