Recently, the United States has become the focus of Sino-U.S. trade on China's tires, not only relates to the employment of about 100,000 people in China, but also whether there is a stable trade environment between China and the United States, but also relates to the maintenance of the normal order of international trade. The big problem of economic globalization. The US International Trade Commission’s June 17 support of the US Steel Workers Union’s special insurance application (hereinafter referred to as the “Applicationâ€) was basically based on the fact that from 2004 to 2008, the number of tires imported from China increased by a significant 215%. Market share dropped by 14.3 percentage points and employment dropped by nearly 10%.
However, as long as the analysis is carried out in a more detailed and scientific manner, it is easy to find the mistake of this reason.
I can't blame China's head
First of all, the root cause of unemployment in the US tire industry is the international financial crisis and economic recession. The common sense of economics tells us that the primary factor in determining employment is the economic cycle, not the other.
The statistics provided by the "Application" show that in 2008 compared with 2005, the number of people employed in the tire production industry in the United States decreased from 35,959 to 33,382, a decrease of 2,577, or 7.17% (not nearly 10% as claimed by the "Application"). However, compared with the overall reduction in employment in the automotive and parts industries, it is slight. In the same period, the number of employees in the US automobile and parts manufacturing industry decreased from 1.0851 million to 89.29 million, a decrease of 17.7%. In the same period, China’s auto parts exports to the United States also grew, but there was no group in the United States that required special protection for auto parts imported from China.
The reason for the sharp decrease in employment in the automotive and parts industries is very simple. That is, the sales of automobiles caused by the financial crisis and economic recession have been greatly reduced. In 2008, the United States sold about 13 million passenger cars and light trucks for the year, a decrease of 23% over the previous year's approximately 17 million.
It is worth noting that the situation in 2009 was even worse. In July 2009, the number of cars sold was 5,867,600, which was 32.1% less than the 8,854,300 units sold in the same period last year. In July, the number of people employed in the automotive and parts manufacturing industry decreased drastically by 232,200, a decrease of 26.0%, and the overall manufacturing employment also decreased by 12.2% over the same period.
These problems are obviously the scourge of the economic crisis in the United States, affecting vehicle tires, and we cannot blame China. However, these simple facts and truths, "Application" completely avoided.
It was actually the 2009 report released by the American Tire Manufacturers Association on August 10th to tell the truth. The report predicts that passenger car replacement tire production in 2009 will fall by 9% (or 18 million) to 176 million; light-card replacement tire production will drop by 18% to 24 million. In 2010, it will increase by 3% and 8% respectively. The report boils down to four reasons: drastic drop in car sales, low consumer confidence, high unemployment and a depressed housing market. No blaming imports from China.
This is really a very strange thing: The tire manufacturing industry itself does not think that the import from China has caused damage to the US related industries. So where does the U.S. Steel Workers Union find qualification?
Second, there are productivity changes including product changes that affect employment.
The "Application" failed to show the changes in per capita productivity and wages of the tire manufacturing industry in the United States in 2004-2009. Because this is a more critical issue than the number of jobs. During this period (based on July), the total number of U.S. manufacturing employment decreased from 14.333 million to 11.811 million, a decrease of 17.55%. However, wages increased from $16.18 to $18.28, an increase of 13.0%; productivity increased by 7.78%.
The simple logic is that the total output will remain unchanged, the output per capita will increase by 10%, and the number of people employed must decrease by 9.1%. Employment in the tire manufacturing industry has been reduced, but productivity has not improved. No increase in wages? The "Application" did not say. In 2005, the number of tyres per capita in the tire manufacturing industry involved was 4,824, and in 2008, it was 3,781. However, it also shows that in 2007 the United States became profitable.
Is it because productivity decline leads to profitability? Obviously impossible. The problem is in the product. It just shows that during this period, U.S. tire manufacturing products have largely turned to higher-priced first- and second-tier products, and the production of third-tier products has been transferred to foreign countries (including China), which has resulted in a smaller number of products. High benefits, that is, increased productivity and reduced employment.
Third, there is no inevitable logical relationship between the increase in imports and the reduction in domestic employment. The "Application" also cannot prove how the reduced 2577 employees have been taken away by Chinese products.
Since the "Application" does not provide figures, it is worth referring to similar examples. In 2001, employment in the US textile and apparel industry decreased by 39,500, a decrease of 11.3%. So the US National Council of Textile Organizations blamed the import of Chinese products. However, at a closer look, the industry’s trade deficit with China only increased by US$202 million that year, equivalent to 0.073% of US retail sales in the industry. In 2003, its trade deficit with China increased to 1.597 billion U.S. dollars, accounting for 0.58% of retail sales, while employment in the industry decreased by 27,700. Therefore, it is difficult to say that there is a positive relationship between the two.
The author believes that a major problem with the "Application" is that it cannot reverse prove the relationship between imports from China and domestic employment in the United States. Since 2009, the employment of the entire US manufacturing industry, including automobiles and parts (including vehicle tires), has accelerated. Then according to the logic of “applicationâ€, the number of tyres imported from China should have been accelerating year-on-year, but the fact has just declined.
In fact, the current globalization of production is a normal phenomenon. Many manufacturing sectors in the United States are plagued by various factors in the country. In order to save costs, they gradually shift their production to foreign countries and make global arrangements. Goodyear, one of the largest tire manufacturers in the United States, has announced that it will cut some of its high-cost production capacity in the United States and convert it to foreign countries, thereby saving US$1 billion. And China is only one of the regions where Goodyear converted. Its tires sold in North America accounted for only 2% of those produced in China. In this regard, the U.S. applicant is actually very clear. Tom Conway, vice president of the United States Product Federation, one of the applicants for tyre special insurance, said: "How can these companies claim that those cheap imports hurt them? They actually gave up the existing market."
This is another great thing: The applicant himself does not recognize that "cheap imports hurt them" but he has to file a special insurance application.
It can be seen that the reasons for tire special protection proposed by the US Steel Workers' Union are very poor, and the logic cannot withstand scrutiny. The conclusions reached are naturally untenable.
Dangerous signal
Although it is untenable, why is it proposed? One possible explanation is that in the context of economic recession, importing as a scapegoat for unemployment is a means to easily confuse people.
So the author thinks that if the United States tire special security case is finally approved, it will provide a dangerous precedent. Many industries in the United States that are seriously unemployed can follow suit. This will damage China-U.S. trade and related industries in both countries and will be large-scale and profound.
In other words, if there is a reduction in employment in a certain country's industry, then import penalties will be taken. Then what is the need for international trade? What future is there for internationalization? That can only mean a regression of globalization. The infamous Smoot-Hollyfa law in the 30s of the last century drastically raised tariffs, which reduced European exports to the United States by 71% between 1930 and 1933, and because of European retaliation, US exports to Europe also decreased by 62%. Global trade has therefore shrunk dramatically. The unemployment rate in the United States rose from 7.8% before the implementation of the bill to 25.1% in 1933!
If you listen to the Tire Special Safeguard Case and take China as a scapegoat, you can almost be sure that similar trade protection actions will follow. This will deal a heavy blow to the world economy that has just shown signs of recovery. Although the Chinese economy will pay a price, the biggest loser must be the United States itself.
(The writer is a former Commercial Counsellor of the Chinese Embassy in the United States and a member of the China American Economic Association)
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