TodayApril 17, 2022

The China Syndrome

US-China relations

Since the end of the cold war, China has systematically been gathering industrial trust and economic prowess from American industries.

Chinese Premier Wen Jiabao, in November, called the US-China relations “the most important state-to-state relations in our world”. Chinas trade surplus is a hot political issue in 2004. Its an election year and Bush is already smarting from a net loss of 2.6 million jobs. He is not making points with the unions, who see job losses to China as a big concern. The Unions have sent a petition to the United States Trade Representatives, focusing on the exploitation of the workers in China. What they leave out is more notable than the reason they are petitioning the USTR.

It’s disingenuous that the UAW is petitioning the USTR now that it has finally hit them. As long as I can remember, I have known that China does not have the same work standards as the UAW made available to its workers back in the 30s. The UAW managers have to realize that if they were a commodity traded on the stock market that their price per share would be down. Does the UAW want to unionize the Chinese workers? There is not an automotive manufacturing plant that has been opened by any of the foreign manufacturers that use unions. UAW has to be feeling the heat.

It is being proven all over the world that the UAW is not needed to build cars. Not that Unions arent needed, it just depends on the commodity. According to the Wall Street Journal, one Union is making a comeback, the Steel Union. Just like oil, steel is a commodity. The commodities are in short supply. China is actually coming to Minnesota’s Iron Range looking for steel, creating jobs in that area. The UAW, in my opinion, would be smarter to appeal to the American people. According to Bill Ford, for every one job created in automotive manufacturing, seven more jobs are created in the workforce. Why not work that angle?

The reality is, China is just the newest player in the game. And in some ways, they’ve played it safe by waiting so long. China will be playing the same role Japan did over a decade ago. Foreign companies coming into the U.S. and selling cars here was seen as unpatriotic. Now, we have U.S. companies going to China and selling their products. The hitch this time is that some Americans feel we are taking jobs away from the U.S. Actually, Chinas car sales, import and foreign, were up 180% over 2003.

It reminds me of the time Arnold Schwarzenegger (an actor turned politician) was asked if he minded that there were so many good movies coming out at once and he said, “No, the more good movies there are, the more people go out to see them. If they can’t see the one they went for, maybe they will see mine.” Chinese probably went out to buy a Geely, which ranges in price from $4,000 to $19,000. They may have ended up buying an American made car built in China which could have been just as inexpensive if they were able to get zero-percent financing. How? The cars they are building don’t include health care costs or union wages.

At the Detroit Auto Show in January, General Motors CEO Rick Wagoner said, “The biggest thing that haunts me about our ability to compete to be successful are health care costs. It is a real competitive disadvantage.” At the Chicago Auto Show, Ford’s CEO, Bill Ford said, “Health care costs alone makes one want to disinvest in the U.S.” Both companies are speaking with their wallets and their jobs. General Motors has an alliance with Shanghai Auto, a multi-conglomerate automotive company. GM also has four plants in China that build the cars they are selling to the Chinese. While this means more money for GM, it is a loss of jobs for the U.S. But not a loss of profits. General Motors reported a $447 million profit from China sales in 2003.

In recent years China has been trying to convince the U.S. and the rest of Asia, that China can be a trusted partner. Why? China is relying on demand from the wealthy U.S. industries to maintain their rapid growth needed to reform its economy. What most people don’t realize is that the U.S. needs China just as much. U.S. companies have turned to China as a way to cut costs, increase sales and pump up the profits they need to continue to try to dominate in the U.S.

According to John McElroy, Autotalk Detroit, China has a little over four times the population of the United States. So all it has to do is reach one-fourth the per-capita income of the US to match the size of the American economy. And it will do that in the next decade. The per-capita income in the US (measured on a purchasing power parity basis) is $36,300. Chinas per-capita income is currently $4,700. All China has to do is raise it’s per-capita income to $8,250 to have its gross domestic product equal that of the US.

Of course, the US isn’t exactly sitting still. But somewhere around 2015 China will catch the United States, economically speaking.

Lou Ann Hammond

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a founding member of the Women's World Car of the Year #WWCOTY, and board member of the Women in Automotive.

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