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Making News: Podcast of Last Night’s John Batchelor Show Appearance on the Chinese-Made Buicks GM Will Soon Sell in the U.S.

10 Thursday Dec 2015

Posted by Alan Tonelson in Making News

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Tags

autos, Buick, China, General Motors, GM, Gordon Chang, imports, Making News, manufacturing, offshoring, Peter Navarro, The John Batchelor Show, Trade

I’m pleased to present the podcast of my appearance last night on John Batchelor’s nationally syndicated radio show. Click on this link; this specific segment starts at about the 12-minute mark.

I hope you agree that John, co-host Gordon Chang, and co-guest Peter Navarro were in rare form – and that we made clear why it’s important that General Motors will soon be supplying the American auto market from factories it co-owns in China.

(What’s Left of) Our Economy: GM’s China Buick Sourcing Casts Shadow on Obama’s Pacific Trade Credibility

13 Friday Nov 2015

Posted by Alan Tonelson in (What's Left of) Our Economy

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Tags

Al Gore, automotive, Buick, Canada, General Motors, imports, Jobs, Labor Force Participation Rate, manufacturing, Mexico, North American Free Trade Agreement, Obama, offshoring, rules of origin, TPP, Trade, Trans-Pacific Partnership, wages, {What's Left of) Our Economy

In his sales pitch for his new Pacific Rim trade agreement, President Obama repeatedly has tried to establish his street cred to a skeptical Congress and many even more skeptical Americans by acknowledging past trade policy failures. “I’m the first person,” he typically insists, “who will say that past trade agreements haven’t lived up to their promise.”

This record of unjustified hype has taken on new importance this week with The Wall Street Journal’s report that General Motors is planning to import into the United States Buicks it’s currently making in China – and with a Chinese government-owned partner. The Buick news, which GM has not denied, represents an example of a trade promise that was not only flagrantly broken, but that was patently false from the get go.

When it was announced in 1997, GM’s Buick factory in China – owned in tandem with the Shanghai Automotive Industry Company – was set to be the largest foreign joint venture in the country. And the clear message sent by the Detroit automaker and by President Clinton’s administration was that it vividly confirmed their claims that the expansion in U.S.-China trade they championed and lobbied for was a slam dunk, win-win proposition for America’s domestic economy, including its workers.

At a lavish signing ceremony presided over by no less than Vice President Al Gore and Chinese Premier Li Peng, then GM Chairman John Smith promised, “This joint venture will support U.S. jobs by generating almost (U.S.) $1.6 billion in exports for the United States over the next five years” – presumably of parts and auto manufacturing equipment. What he failed to mention is that Chinese law at that time required the factory to achieve 80 percent Chinese content in its vehicles five years after start up. Indeed, the law required new factories to incorporate 40 percent local content at the onset of operations. Nor did GM announce that it was procuring non-Chinese parts for the Shanghai factory from Japan and South Korea, as well as parts from the United States.

Now GM has decided to supply the U.S. market with these vehicles – largely because sales in ballyhooed China market have slowed. The company, which of course, was bailed out by the U.S. government during the financial crisis, has invested in significant new domestic American production. But although its U.S. employment is up from recent crisis-era bottoms, it remains low compared with historic levels. Moreover, despite improvement this year, automotive wages during the current American economic recovery have fallen much faster in real terms (by 4.66 percent) than manufacturing wages overall (0.19 percent).

So if GM decided to build these Buicks in the United States, demand for auto workers would rise much faster, along with wages. This development could even finally help push America’s labor force participation rate up from multi-decade lows.

But those domestic gains seem further away than ever, because GM’s China Buick decision looks certain to mark simply the beginning of this latest chapter of American manufacturing’s long-running offshoring story. According to The Wall Street Journal, it “signals the beginning of a strategic production shift for the Detroit auto giant and a bold experiment that will be closely followed by other auto companies that have said they would eventually consider such a move.”

Moreover, Mr. Obama’s Pacific Rim trade deal is certain to make supplying the American automotive market from abroad more attractive than ever. For among its many provisions granting duty-free treatment for products made largely outside the new free trade zone (e.g, from China) are measures that loosen requirements set by the North American Free Trade Agreement that freely traded automotive products consist mainly of content from the United States, Canada, and Mexico.

In other words, President Obama keeps telling Americans that he’s part of the solution to the harm they and their economy have suffered from recent free trade agreements and related policies. But the GM Buick decision reminds vividly that his record is a big part of the problem.

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The Snide World of Sports

  • (What's Left of) Our Economy
  • Following Up
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  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
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  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Guest Posts

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
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Current Thoughts on Trade

Terence P. Stewart

Protecting U.S. Workers

Marc to Market

So Much Nonsense Out There, So Little Time....

Alastair Winter

Chief Economist at Daniel Stewart & Co - Trying to make sense of Global Markets, Macroeconomics & Politics

Smaulgld

Real Estate + Economics + Gold + Silver

Reclaim the American Dream

So Much Nonsense Out There, So Little Time....

Mickey Kaus

Kausfiles

David Stockman's Contra Corner

Washington Decoded

So Much Nonsense Out There, So Little Time....

Upon Closer inspection

Keep America At Work

Sober Look

So Much Nonsense Out There, So Little Time....

Credit Writedowns

Finance, Economics and Markets

GubbmintCheese

So Much Nonsense Out There, So Little Time....

VoxEU.org: Recent Articles

So Much Nonsense Out There, So Little Time....

Michael Pettis' CHINA FINANCIAL MARKETS

New Economic Populist

So Much Nonsense Out There, So Little Time....

George Magnus

So Much Nonsense Out There, So Little Time....

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