The chief economist of General Motors, Mustafa Mohatarem, testified before the U.S. House of Representatives on September 30, 2005, accusing Japan of a trade policy that discriminates against American products, automobiles in particular. The silence of the response from Japan was deafening. Even worse was the silent response from our own government.
All Representative Bill Thomas, chairman of the House Ways and Means Committee, could do was rant about Japan's protectionist policies. I guess we have to blame somebody for our huge trade deficit. And the fact that we have to blame someone else is evidence that our elected representatives who form and influence U.S. trade policy really believe it's beyond our control, and there is absolutely nothing we can do. So much for founding American virtues such as independence, self-reliance, and self-sufficiency, as well as controlling our own destiny.
But talk is cheap, and all the U.S. government laissez-faire lip service providers like Representative Thomas can do is whine and warn us about the problems of not getting the desired access to overseas markets. Soon after that, they proclaim once again that we need to keep our market wide open to countries like Japan that remain virtually closed to U.S. products, automobiles in particular. I remember a headline to a news article I read not too long ago about how Chevy had broken a new monthly record for the number of cars it exported to Japan. The figure was only in the 500 or 600 range.
Allow me to make it clear that I am not bashing Japan. Far from it. I admire Japan for their intelligent and well thought out trade policy. Why would Japan abandon protectionism at home while enjoying easy access to America's wide open market? They keep their market for themselves and enjoy taking a greater market share from America where people are eager to quickly bash their own home-based automakers and support foreign companies instead, even though they employ fewer American workers.
The ridiculous rhetoric from foreign car lovers should leave any clear-thinking American wondering how they maintain any sense of credibility. They talk about how foreign car companies are building factories in America but ignore the fact that GM and Ford have nearly five times as many major plants here than do Toyota, Honda, and Nissan combined. They talk about how foreign car companies employ workers in the U.S. but ignore the fact that GM has more U.S. salaried workers than Toyota has total U.S. workers. They talk about how foreign car companies use some domestic parts (the Nissan Maxima has a whopping 5 percent domestic content) but ignore the fact that GM and Ford use more American parts on average. They talk about the reliability of foreign cars while accusing American cars of poor quality, but you'll never hear them mention the following about GM:
- The Chevrolet Malibu/Malibu Maxx is the highest ranked entry mid-size car in initial quality.
- The Chevrolet Suburban is the highest ranked full-size SUV in initial quality.
- The GMC Sierra HD is the highest ranked heavy-duty full-size pickup in initial quality.
- The Buick LeSabre is the highest ranked full-size car in initial quality.
- The Buick Century is the highest ranked premium mid-size car in initial quality.
- The Chevrolet Malibu is the most dependable entry mid-size car.
- The Chevrolet Silverado HD is the most dependable heavy-duty full-size pickup.
- The Cadillac Escalade EXT is the most dependable light-duty full-size pickup.
- The GMC Yukon/Yukon XL is the most dependable full-size SUV.
- The Buick LeSabre is the most dependable full-size car.
- The Buick Century is the most dependable premium mid-size car.
- The Chevrolet S-10 pickup is the most dependable mid-size pickup.
- The Chevrolet Prizm is the most dependable compact car.
The above rankings are all according to J.D. Power & Associates Quality Surveys. I especially like the statistic about the Chevy Prizm, which de-bunks the myth that GM is only good at making "gas-guzzlers." It just so happens that after it was announced that the Chevrolet Tahoe took the top ranking for dependability in its class, the Wall Street Journal confirmed that the Tahoe's 20 mpg rating was three mpg better than the Nissan Armada. In fact, GM already leads the large-SUV segment in fuel economy and is improving their ratings for the 2006 models by an additional mile per gallon (approximately a 5 percent increase.)
When Ford Motor Co. Chairman, Bill Ford, spoke before the U.S. Chamber of Commerce late last year, he suggested government and industry should work in unison to "restore American competitiveness." It makes sense. Since American companies pay more taxes to the U.S. Treasury than foreign companies because they are U.S. based, they should expect some cooperation from their own government. But laissez-faire lovers (who are usually import lovers) who welcome any and all types of foreign, predatory, do-as-they-please competition would probably cry foul. Any policy other than one that gives foreign producers better access to American consumers than American producers is usually fine with them. And should the government intervene to ensure that the rules of competition are the same for all players, or heaven forbid, tilt them slightly in favor of domestic producers, that would be unwise policy.
Even though Chrysler is now foreign-owned, Bill Ford used them to highlight the foundation of the automobile manufacturing sector. Lumping GM, Ford, and Chrysler together, he pointed out that they employ 90 percent of the autoworkers in America. The former "Big Three" make 75 percent of the cars and trucks that are made in the U.S. And in the last 25 years, GM, Ford, and Chrysler are responsible for more than 85 percent of the investment dollars poured into this country. The average domestic content from these three companies is 80 percent, according to Bill Ford, and only 31 percent for Japanese automakers, 5.4 percent for European automakers, and 2.1 percent for Korean automakers.
Free traders advocate open American markets regardless of the circumstances. The thinking is that unless we remain open and accept any volume of imports, we lessen our chances of convincing foreign countries to open their markets to us. But this strategy can only be beneficial when it results in us selling more to them than they sell to us. Even though that hasn't been the case for decades, and free traders know it, they still claim that if we don't buy stuff from foreign countries, then foreign countries won't buy stuff from us. Is it so difficult to see that most foreign countries already aren't buying our stuff? That's why we have a trade deficit instead of a trade surplus.
If free-trade advocates were coaches of football teams, their entire strategy would be formulated upon a strong offense with little regard to defense. Even if they consistently gave up five touchdowns per game and only scored three for themselves, their focus would be an offense that could score more touchdowns. They would probably also reason that if they tried to protect their end of the field by strengthening their defense, it would only encourage the opposing team to do the same, lessening their ability to score more touchdowns.
So in this sort of fantasy free-trade football as it applies to our trade policies, we continue to focus on invading other markets while neglecting to protect our home turf. We are foolishly trying to convince foreigners that they should buy American when it is much easier to convince our own people to do so. If we try to protect our market with tariffs, free traders tell us, then the other side will "retaliate" with tariffs of their own to protect their markets. The import tariff is there and available, but we should never use it. It's almost as if free traders would suggest equipping our police with guns without bullets, because after all, if the police were to shoot their guns then the criminals might "retaliate" and shoot back. The guns are there and available for the police, but they should never use them for fear of retaliation.
Call it the Japanese dream of American free traders. They're making it a reality by advocating continued wide-open American markets while we all hope and pray, someday, Japan will surrender their market like we have hypocritically surrendered ours. Don't look for it to happen anytime soon. Only trade-balancing tariffs advocated by protectionist-leaning politicians and a strategy focused on convincing Americans, not foreigners, of the benefits of buying American can awaken us from the Japanese dream. Only then can we restore what used to be known by Abraham Lincoln, Teddy Roosevelt, and other true protectionist-leaning statesmen as the "American System."