Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
GM caves again -- will build Cadillacs in China
In December, the British newspaper The Guardian reported that the Chinese government raised its already high 25% tariff upon American-made vehicles, concerned that a few American cars were still being purchased by Chinese consumers:
This month, that measure had the desired effect. In a May 2 Huffington Post commentary (Commies in Cadillacs: GM Turns Chinese), economists Peter Navarro and Greg Autrey reported that GM will build its luxury cars in China in order to sell to the Chinese market. They began:
And don't forget that on September 16 the Wall Street Journal reported (Road Gets Bumpy for GM in China) that the Chinese government was pressuring GM to give away its proprietary electric car technology. At that point GM was refusing. Here's a selection:
Then, just one week later, on September 22, the NY Times reported (GM to develop electric cars with Chinese automaker) that GM had caved to the Chinese government demand:
This is Obama's car company we are talking about. GM (Government Motors), the company that Obama saved from having to pay its pension benefits, the company that Obama saved from being owned by its bondholders, the company that Obama saved from break-up into its constituent parts, the company whose saving Obama claims as his biggest accomplishment. Here it is giving its made-in-America technologies to its Chinese partner/competitor. Why?
The reason is simple. Manufacturers know that they can produce in China and sell to the United States, but they can't produce in the United States and sell to China. All because the Obama administration does not have the intelligence or will to invoke the WTO rule for trade deficit countries invoked by President Nixon on August 15, 1971, when he imposed an across-the-board 10% tariff which balanced U.S. trade by 1973.
Perhaps the next President will invoke that WTO rule. We recommend that he demand trade reciprocity (we buy your products; you buy ours) by imposing a trade-balancing scaled tariff upon imports from all the countries with which the U.S. has a trade deficit. Such a tariff would go up when the U.S. trade deficit with a country goes up, down when it goes down, and disappear when trade with that country approaches balance.
If the United States were to require reciprocity, then GM would be able to produce its Cadillacs and Volts in America and still have access to the Chinese market. Not only that, but it could preserve its proprietary technologies for its own use, instead of having to share them with its Chinese competitors.
Comment by Ray Edwards, 9/9/2012:
In Nov you have a choice
Comment by , 9/14/2012:
Well, if you can't beat them, join them, I always say. It's true, the costs for American cars on the Chinese market is high and it's wiser to develop a car there rather then export it from US. I want to donate car USA and get a new, electric one. It's more environmentally friendly and cheaper to charge.
Comment by Robin Onaca, 10/3/2012:
I can't believe that GM chose to sacrifice the quality of their flagship model, the Cadillac by outsourcing their production to China. I know that other major car manufacturers, like Mercedes have already done so, and with excellent economic results, but they also invested heavily in quality control. I'd hate to see the Cadillac turn into another production line car.
Journal of Economic Literature:
Atlantic Economic Journal: