The Domestic Auto Industry’s Problem? Dumb Trade Policy!

In my previous post, I laid out the reasons why the Big 3 are in trouble, and how to help them.  Briefly, their problems boil down to one thing:  dumb trade policy that gives away our domestic auto market for almost nothing in return. 

Perhaps some fresh, cold, hard data will help.  Trade data was released this morning (November 13th) for the month of September, 2008.  The following is the data for our major trade “partners” for motor vehicles and auto parts:

Country    Exports ($MM)    Imports ($MM)    Pop. Density (people/sq. mile)

Mexico             1,620                   3,903                            141

Germany              949                   1,565                            600

Japan                   155                   4,158                            878

Korea                    85                      692                            1,257

Canada            4,584                   4,673                                30

We import 2-1/2 times as many cars from Mexico as they import from us.  With Germany, it’s almost the same.  We import eight times as many cars from Korea as they import from us.  And we import almost 27 times as many vehicles from Japan as they buy from us!  For contrast, look at Canada and you’ll see almost perfect balance.  I’m showing you this data to make two points:

  1. Notice how well the data correlates with population density.  (The population density of the U.S. is 85 people per square mile.)  Korea is a relative newcomer to the auto market (compared to Germany and Japan), so we can expect the imbalance with them to worsen dramatically as time goes on.  Clearly, free trade with grossly overpopulated nations is a sure-fire loser.  (The data for Canada is provided for contrast.  Notice that our trade in motor vehicles with Canada is almost perfectly balanced.)
  2. Is it any wonder our domestic auto makers are having trouble?  We gave away over half of our market and got virtually nothing in return from the likes of Japan and Korea.  That would be acceptable if they made up for this imbalance by importing more of some other category of product, but they don’t.  Our overall trade imbalance with Japan is enormous, second only to China for manufactured products and, while our trade deficit with Korea is relatively smaller, it’s growing fast. 

Folks, this is just idiotic trade policy.  The word “trade” is defined by Webster’s as a mutually beneficial exchange.  That means that each party gets something in return for what they are trading.  What are we getting from these countries?  In some cases, like Mexico and Germany, we are not getting enough.  In the case of Japan and Korea, we’re getting virtually nothing.  This isn’t trade; it’s global welfare.  It’s a huge lie being perpetrated on the American work force, telling us to compete harder and be more productive, all the while knowing that we don’t have a chance.  They’re not going to buy our products.  They’re not stupid.  They have far too many idle workers in their bloated labor forces to be kept occupied to keep their societies from collapsing.  They’re playing Americans for fools.

Will we ever wake up to what’s being done to us – to our country?  There was a time when Americans stood up for themselves and fought when they were being used and taken advantage of.  Is that time past? Have we evolved into a nation of sheep?  Like dumb mules, we take our beating and just keep trudging along with our heads down.  Frankly, the whole situation makes me sick.

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