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Monday, October 30, 2006
Free Trade: The 12-cent deal
Last week the Bush administration announced a wonderful new program: It will pay up to $6,000 for retraining programs for autoworkers in Michigan and four other states.
Interesting timing, because on Friday, Ford Motor Co.'s chairman announced the company will double its buying of parts from China in order to cut $6 billion in production costs by 2010.
"We are only scratching the surface in China," Bill Ford told Bloomberg News from Beijing. "China is key to our global sourcing strategy."
That key strategy boils down to this: Ford needs a cheaper supply chain, and workers in China earn about 10 percent of what a union worker in Michigan would make.
The context for this announcement is that the business model for the automobile industry is quickly disintegrating (if you want proof, look at the length of the zero-interest, long-range loan programs). Ford reported a third-quarter loss of $5.8 billion -- and its competitors at General Motors and DaimlerChrysler AG have already announced they will be buying more auto parts from China.
Alan Tonelson, author of "The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards," says China is a one-way trading partner. "The amount of U.S. auto parts exports for every dollar of parts imports, 2005: Canada: $1.45; Mexico: 46 cents; and, China: 12 cents."
Free-traders (such as the P-I Editorial Board) need to start asking tougher questions about what's fair when nations trade.
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