China's Subsidized Auto Industry
A fascinating article that highlights the Chinese government's commitment to violating trade agreements to pursue its predatory trade policies.
Putting the pedal to the metal: Subsidies to China
Since 2001, the Chinese auto-parts industry has received about $27.5 billion in subsidies. Over the next decade, China’s central government has committed to disburse an additional $10.9 billion in subsidies for industrial restructuring (mainly outbound mergers and acquisitions) and technological development of the auto-parts industry.
The Chinese auto and auto-parts industries have also benefited enormously from other government policies. China’s central and 24 provincial governments have classified the automotive industry as a “pillar industry.” For the last decade, Chinese government policy for auto parts has been one of extensive institutional support for the acquisition and development of cutting-edge technology, including new energy and green technologies.
While other foreign auto companies operating in China have linked to auto-parts suppliers back home, U.S. auto companies have cut ties with suppliers in the United States or encouraged them to manufacture in China. U.S. global auto strategy currently centers on manufacturing in China and exporting back home. Consequently, China’s exports of auto parts to the United States are three times those of its next highest trading destination, Japan.
Specific subsidies from 2001 to 2011 to Chinese auto-parts manufacturers included approximately $2.3 billion in subsidies (from 2001 to 2009) to 73 companies reported in their annual reports; approximately $1 billion in subsidies for coal (from 2001 to 2010); approximately $0.6 billion in subsidies for electricity (from 2002 to 2010); approximately $0.3 billion in subsidies for natural gas (from 2004 to 2010); approximately $1.6 billion in subsidies for glass (from 2004 to 2010); approximately $3.2 billion in subsidies for cold-rolled steel (from 2003 to 2010); and approximately $18.4 billion in subsidies through technology-development and industrial-restructuring policies (from 2001 to 2011) from the central government and seven local governments.
And when bills are introduced to remove China's Permanent Normal Trade Realtions (PNTR) you can bet your bottom dollar they will be killed.
You should have added this to the current topic of US trade non-competitiveness.
In 2005, then Congressman Bernie Sanders introduced a Bill to end PNTR for China. I don't know if the Bill ever made it to a vote but it never was implemented.
Statement of The Honorable Bernard Sanders, a Representative in
Congress from the State of Vermont
Chairman Thomas, Ranking Member Rangel, and my fellow colleagues, as the author of legislation to repeal Permanent Normal Trade Relations with China which has the support of 52 Democrats and 18 Republicans, thank you for giving me the opportunity to testify today.
Mr. Chairman, as I’m sure you know, Albert Einstein once said that ‘‘The definition of insanity is doing the same thing over and over again and expecting different results’’.
If that is true, then certainly there can be only one way to describe our current unfettered free trade policy: insane.
The simple truth of the matter is that our current trade policy has failed. One of the major reasons why the middle class is shrinking, poverty is increasing, the gap between the rich and poor is growing wider is due to our disastrous unfettered free trade policy. But, I think it is safe to say that if I was a CEO who was making 500 times what the average worker earns, and tens of millions of dollars in total compensation each and every year, I would tell you that our trade policy has been a success. It has
enabled me to throw American workers out on the street, hire workers in China for 20 cents an hour with no benefits to make my products, and ship those goods back into the United States tariff free, or for virtually tariff free. And, that’s why corporate America spent more than $113 million to persuade Congress to grant PNTR to China despite Harris polling showing 79% opposition from the U.S. public. And, that’s why corporate America still supports PNTR today.
But, for the middle class, Normal Trade Relations with China has been a different story. From 1989 until 2004, we have lost at least 1.5 million jobs as a result of our trade relationship with China. PNTR has also had a very negative impact on wage growth. Real wages for the overwhelming majority of U.S. workers are now lower than they were two years ago. And, according to Richard B. Freeman, a Harvard economist, who was quoted in a recent New York Times article said that millions of skilled Chinese, Indian and other Asian workers entering the global labor market will increasingly pull down American wages. ‘‘Globalization is going to make it harder for American workers to have the wage increases and the benefits that we might have expected,’’ he said.
Mr. Chairman, in 2004, we experienced a record breaking $617 billion trade deficit. The U.S. trade deficit with China alone was $162 billion, the largest-ever bilateral trade deficit with any country and roughly equal to our total trade deficit only six years ago. In 1990, our trade deficit with China was only $11.5 billion. Incredibly, the trade deficit with China has increased by 29 percent over the last year
alone and almost 50 percent since the passage of PNTR. Very few experts in this area doubt that the trade deficit will continue to escalate in the years ahead, and in fact, we are headed towards a $700 billion plus trade deficit this year. According to the very conservative National Association of Manufacturers, if we continue our current policy, our trade deficit with China will more than double to
over $330 billion in 2008.
In industry after industry corporate America is shipping our manufacturing plants, our good paying jobs, to China where desperate people are forced to work for wages as low as 20 cents an hour. Anyone who went Christmas shopping this year knows that more and more products on the shelves are made in China: toys, bicycles, computers, televisions, shoes and sneakers, all kinds of clothing and hats,
telephones, furniture, auto parts and even artificial Christmas decorations. Ironically, the little American flags that members of Congress wave around are often made in China, as over 100 million of them have been made there since 2001. In the last 4 years the United States has lost 2.7 million manufacturing jobs, over 16 percent of our entire manufacturing sector. In my small state of Vermont we have lost 20 percent of our manufacturing sector during that period. PNTR with China, and our disastrous trade policies in general, are one of the key reasons for that.
As bad as that is, we should be very aware that PNTR with China is not only leading to the destruction of traditional manufacturing and blue collar jobs. It is leading to the loss of millions of high-tech, information technology jobs as well. Not only is China rapidly becoming the manufacturing center of the world, it is quickly becoming the information technology hub as well. These are the jobs, we have been told for years, that our children would be inheriting and are being educated for. According to a recent study by Gartner, 30% of our information technology jobs are in danger of being outsourced overseas during the next decade. Andy Grove, the founder of Intel, predicted last year that the United States will lose the bulk of its information technology jobs to China and India over the next decade. John Chambers, the CEO of Cisco, was typical of many high-tech leaders when he said: ‘‘China will become the IT center of the world. . . . What we’re trying to do is outline an entire strategy of becoming a Chinese company.’’ Mr. Chairman, if our manufacturing sector continues to collapse, and we lose the
bulk of our IT jobs to China and India in the next decade, what jobs will be there for our kids? Good question. Let’s get an answer from the Bureau of Labor Statistics ‘‘Jobs of the Future’’. According to this report 7 out of the top ten industries that will experience the most job growth are low wage, low skill, low benefit jobs: nursing aides, orderlies and attendants; waiters and waitresses; janitors and cleaners; cash-iers; food preparers and fast food servers; customer service representatives; and retail
salespersons. What jobs does the BLS study tell us will be lost in the next decade? The study
says that we will lose 18 percent of our aerospace manufacturing jobs, 12 percent of our computer and electronic production workers, 17 percent of our chemical manufacturing jobs, 20 percent of our steel workers, 31 percent of our textile mill jobs, and 69 percent of our apparel manufacturing jobs.
And, Mr. Chairman, we must also not forget, that at the same time that American companies are throwing workers out on the street and shipping our decent-paying jobs to China, they are receiving hundreds of billions of dollars in corporate welfare and tax breaks, and our actually bragging about shipping our jobs overseas. Jeff Immelt of General Electric says: ‘‘When I am talking to GE managers, I talk China, China, China, China, China. You need to be there. . . . I am a nut on China. Outsourcing from China is going to grow to $5 billion.’’ Thomas Donahue, the CEO of the U.S. Chamber of Commerce ‘‘urges’’ American companies to send jobs overseas. Bill Gates, the wealthiest man in America tells us that Communist authoritarian China has created, ‘‘a brand new form of capitalism, and as a consumer it’s the best thing that ever happened.’’
Mr. Chairman in that context, what we have to understand is that our trade policy has failed during Administration after Administration, Congress after Congress, controlled by Republicans and Democrats. I would respectfully assert that we have got to rethink our trade policy and that is why I hope you will join me in supporting my legislation to repeal PNTR with China.
Congressman Bernard Sanders, Vermont
HEARING BEFORE THE COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
APRIL 14, 2005
If anybody knows what happened to this Bill, please share. I can't find it.
What's the big deal? we subsidize our automotive industry too. (Think the buy-out of GM)
The only difference is china gets a better deal out of it by having an industrial policy and cheap labor.
Originally Posted by machinehead61
While the Chinese might, or might not, be violating trade agreements by direct subsidies you can't really fault them for supporting development and research. All countries do that, and trade agreements have openings for that. Spending money on research and development to keep a country's industry on the cutting edge and competitive is one of the major motivations for actually doing research.
Originally Posted by machinehead61
If anything China is doing less than others. They seemingly correctly assess that the advantage gained is highly temporary, and that international companies will bring new technology into China for free when the new discoveries or improvements reach actual production or implementation. Thus my take is more or less the opposite of yours; China is gaining an advantage by not pulling it's own weight in research and development. They let western countries take the bill for that, instead prioritizing an active policy and support towards getting the long term manufacture. Make sense as free flowing international companies will readily play to that tune.
To put that $11 billion over a decade into perspective the European Union plans to spend some $100 billion from 2014 to 2020 on a single program. (Similar programs are running already). Most of it going directly to support research and development in businesses with the explicit motive being to keep competitive and at the technological cutting edge. And there are other, albeit smaller, programs too. The US probably have similar programs?
Seems it would be hard to not do that when the government pretty much owns and controls those companies?
Similar thing here, they get millions to build new plants in which ever province, state, town, tax subsidy, bailouts after bailouts. Difference is China probably gets more return on their investment than we do. Government constantly sinks billions into all sorts of research programs, new start up companies. Apparently gets paid back in taxes and job creation, just heard of a project last week, it will cost 90million(about 30 of which from tax payers) and create 40jobs? nice... except its for some BS useless technology with no future or possible profitability so they'll build the thing and 3yrs later when the light come on its gonna be empty and we'll still be paying the bill.
Good for china, they're clearly smarter.
They've got some rather nice looking dozers, excavators and so on coming out, cummins engines and even has the look alike CAT decals.
Now this is ignorance on steroids and you didn't bother to read the whole article -
Originally Posted by Cornilsn
The Auto Industry Development Policy (AIP), issued by the NDRC with every five-year plan, serves as the blueprint for developing China’s auto industry. The 2004 AIP encouraged local automakers to develop R&D capabilities, to produce vehicles independently, and to increase exports to $35–40 billion by 2010, an amount accounting for around 40–50% of output. The policy also aimed to have auto parts derive from a series of industry clusters, where domestic companies could establish their own brands and compete in international markets, with advanced technology and capital-intensive products accounting for around 60% of exports. The plan has fallen a little short of these targets.
China’s 2004 AIP also formalized some technology-transfer requirements for foreign companies wanting to invest in China’s automotive sector. Pursuant to Article 47 of the 2004 AIP, foreign-investment projects in China’s automotive industry require the establishment of R&D facilities with an investment of at least RMB 500 million. In Annex II of the 2004 AIP, foreign investors seeking approval of new automobile-production plants must file technology-transfer agreements (Trade Lawyers Advisory Group 2007). In 2011, Beijing announced that foreign auto companies that want to expand in China must launch new brands with their Chinese partners. Earlier in 2011, Volkswagen AG received government permission to build a new assembly plant in south China only after it had agreed to create a new brand for its JV with FAW. The government-financed China Automotive Technology and Research Center (CATARC) concluded that, “With this rule, the government hopes to force global automakers to contribute more technology to their joint ventures” (China Automotive Technology & Research Center 2011).
In the 2004 AIP, two significant laws restricted foreign ownership to 50% shares of any vehicle-manufacturing company in China and restricted foreign vehicle manufacturers to two local JV partners. Foreign OEMs have had to set up JVs for vehicle production, a rule that implicitly forces them to cooperate on vehicle distribution with their local partners. The AIP also paved the way for China’s auto-parts industry to become part of the global automotive-purchasing system, and it started to restructure the automotive industry into large groups capable of competing globally. In its 11th Five Year Plan (2006–10) for the automotive industry, the government eliminated the need for state approval for any new investment in auto-parts manufacturing. To create a strong R&D platform in auto parts and to boost technology transfer from foreign companies, Beijing had previously removed the 50% ownership restriction on JVs in auto-parts production. Starting in 2010, auto-parts companies can have 100% foreign ownership and start production without state approval, while auto-assembly companies still cannot.
Please point out when the U.S. Government restricted foreign ownership of U.S. auto producers to 50% or less.
Please point out when the U.S. Government last produced a 5 year plan for expansion of the U.S. auto industry.
Also look at this:
U.S. 'Very Disappointed' By China's New Auto Import Tariffs on Ford, GM, Chrysler Cars | Moneyland | TIME.com
China’s new auto tariffs affect larger U.S.-made cars and SUVs, and would impose duties ranging from 2% to 21.5%, over the course of two years. In 2009, China surpassed the U.S. to become the largest auto market in the world, but the country has struggled to develop its own domestic car industry. The new tariffs, which would make U.S.-made cars more expensive for Chinese consumers, could provide a boost for its own domestic auto producers
Please tell us the last time our Congress passed a 21.5% tariff on imported cars.
Currently auto parts and accessories enjoy lower levels of tariffs than cars (the average tariff is 10-13% for parts/accessories and 25% for cars).
And by comparison, what tariff rate does the U.S. impose?
Motor cars and other motor vehicles principally designed
for the transport of persons (other than those of
heading 8702), including station wagons and racing cars:
8703.10 Vehicles specially designed for traveling on snow;
golf carts and similar vehicles:
8703.10.10 00 Vehicles specially designed for traveling on snow . . . . . . . . 2.5%
Perhaps I'm splitting hairs, but I don't consider tariffs to be subsidies. But, I understand your aurgument.
Originally Posted by machinehead61
And GM is required to repay its TARP funds:
Originally Posted by Cornilsn
Grassley Slams GM, Administration Over Loans Repaid With Bailout Money | Fox News
Are the Chinese auto producers required to repay their subsidies?
Isn't that the definition of a subsidy - it never gets paid back?
If I were gay, I would totally have Bernie's BABY!!! hahahaha
I love Bernie Sanders!!! Why arent more people in pollitics like him ?
He is a No Frills, No Bullshit, Straight shooter...
Just the way we should all be...
B E R N I E S A N D E R S F O R P R E S I D E N T ! ! !
And we don't subsidize our auto industry???
How about tens of billions in congressional loan guarantees? How about the US government BUYING American car companies and running them with a Washington DC checkbook? How is that for a "subsidy"?
If other countries are dumb enough to subsidize their products we should be glad of it: more free and cheap stuff for us.
You say: what about our "work". We only need to work to buy things. If other countries are giving us stuff for free we don't need to work as much. There is no reason for us to do work in an area that another country wants to subsidize. We can work in different areas. No auto companies? Work for a truck company. No truck companies? Work for a mining equipment company, or one that makes aircraft or robotic systems, or whatever.
The country that loses is the one that subsidizes. Winners work in whatever makes sense. The mere fact that you have to subsidize to compete just shows you are uncompetitive in that area.
You may argue that we lose our existing plant when another country forcibly enters an area by subsidy/dumping. This is true, but the dollars we gain from cheaper product is HUGELY greater than the capital amounts a few investors lose on their inactive plant. In many cases the plant can be mothballed and re-activated later or put to other purposes so losses can be minimized.
Just a follow on post..
There are a lot people who see China's targeted industrial activity as a threat, but it is incorrect to see it this way. Targeted industrial activities are in most cases money losers and China is just hurting itself doing it.
What China is doing, is in no ways new. It has been practiced all over the world for thousands of years and is generally known as "mercantilism". This is creating laws and practices to artificially support exporters and accumulate capital. In the old days countries did this so the government and rich merchants could accumulate gold. Nowadays the Chinese are doing to collect paper dollars.
Mercantilism is basically a kind of crony capitalism: it benefits and enriches a small elite and hurts the country as a whole. Adam Smith's "Wealth of Nations" (published in 1776) explains in great detail why mercantilism is so harmful to an economy.
We have nothing to fear from this activity, rather we should be sorry for China's loss.
Just what kind of friggin' planet do you and the likes of Stephen Moore and some others on either Fox business or CNBC come from?
Originally Posted by jscpm
That sentence is word for word the same idiotic bullshiit garbage uttered by most so called economists frequenting the so called "Business News" channels.
Don't get me wrong, I far prefer Fox to any and all other channels virtually any time and any day of the week, but whenever one of them "economists" show up, my wife takes away my shoes and shoves some food into my mouth so I can neither destroy the tv set, spit on it, nor yell at it endlessly with foaming mouth.
Tell me oh great one, just why do I give a flying f@#ck how little a Chinese TV set costs if I cannot afford it from my unemployment check?
How many cheap new cars will I buy on a Walmart cashier's salary?
How am I going to pay for my kid's education for a better future when I'm stuck with a grocery clerk job instead of some manufacturing one and struggling just to make ends meet?
And no, I'm neither unemployed, have not been inside Walmart in years nor am I a grocery clerk. I do however know folks in each of those positions who's been laid off from one or another now extinct decent paying jobs.
So why don't you, Stephen Moore and the rest of his ilk take a flying leap of some high cliff instead of spewing the same retarded nonsense over and over again.
Foaming at the mouth?
In all honesty I actually don't own a TV so I am unfamiliar with what commentators on TV might be saying.
Most of what I know about economic theory is based on having read Adam Smith and Ricardo and other economists who wrote over 100 years ago.
Imagine if we banned all imports into the US so Americans could only buy US-produced goods. Some countries have actually done things like this or had it forced onto them by boycotts. In fact, during the 1930s the US instituted huge import tariffs designed to favor American manufacturers. History has shown exactly what economists will tell you: the result is BAD. If you want a taste of the result go to Mexico. The Mexicans are into high import tariffs. They love to force their citizens to buy Mexican. Mexico has a real unemployment rate of about 30% of able-bodied workers.
At the end of the day it is simple math: cheaper goods and materials translate to a stronger economy. What this means for employment is more work opportunities and higher wages.
Luckily for us, the nerds in the treasury eventually figured this out, so for the last 40 years we have actually had minimal tariffs. If you compare our tariff schedules today to those of 100 years ago the difference is incredible. We used to ban all kinds of stuff from coming into the country, but eventually the bureaucrats who do this stuff realized how damaging this was to the economy (and eventually to tax revenues and eventually to getting RE-ELECTED) so they quietly removed all the old tariffs. Nowadays the only tariffs are on high profile items or on stuff made by REALLY connected producers like sugar manufacturers, who are embedded like ticks into Washington.
Seriously, if you think your livelihood depends on selling over-priced crescent wrenches to an unwilling population you need to re-evaluate your economic outlook, because you are part of the problem, not part of the solution.
I have a question-
Since we know that China subsidizes their auto industry, and we also know that GM has factories in China and is selling a million cars a year in China, does that mean that, indirectly, China is subsidizing the US Auto Industry?
I mean, if GM and their partners get these subsidies, then the Chinese are actually subsidizing us to some degree.
Oh, and Ford has three factories in China too.
Chrysler only has a distribution center in Shanghai, no factories. Think they get any freebies from the Chinese?
Oh, what tangled webs we weave...
I think you are talking about something different... You used the word banned and ban.
Originally Posted by jscpm
I dont remember a 10% or even 12% tariff being the same thing as banning imports.
No one said we need to put a 100% tariff on anything... Its all about balance, not polarising.
Right now we tariffing 2.5% on average... How about making that 12.5% to give at least a small insentive to make things in this country again... Im not talking about BANNING the UNIVERSE... Just raise the teriffs a little bit to compansate for un-ethical chinese practices.
Like paying people wages that cant be lived on... No overtime pay... To health insurance... No Retirment funds... No workmans comp insurance... No 8 hour maximum per day for laboring... Also, talking about the government negatively then you just dissapear...
Those are not good things... Did you know that IRAN is the second highest in executing the death penalty in
the world... They hang people ALL THE TIME... for things like fraud, and rape...
Do you know that IRAN is only second in that regard because China is #1...
The free trade aggreement with china is a total JOKE!!! Its only for the rich to get richer... PERIOD!!!
There is no benefit to the average US consumer... You've been fed a bullshit sandwich, and you ate the whole thing... But dont try to feed me that same thing, and expect me to even take a single bite.
The rich love tariffs. Who do you think is checking out rooms at the Mayflower at $400 a night to get backdoor tariff deals? Not guys from Consumer Reports.
Just one typical example: in the 1880s the US tariff on ALL forgings was 45% minimum. That is typical of the kinds of tariffs we had before the 1950s. In the old days many tariffs were designed to be prohibitive. Currently forgings are at 2%-5%, which is more of a nuisance rate.
Economically speaking ANY tariff is damaging. Hindering imports just damages the economy and ultimately results in a net loss of wealth and productivity to the country. So saying only X% or Y%. It does not matter. Even 1% is damaging. In fact, just the hassle of having duty inspectors is a hidden cost to trade, even if the item is duty free.
If you are a worker ANY tariff ultimately results in you making less money and having to accept a lower wage. The only beneficiary of tariffs are people who have equity/capital positions in a protected business. This is because their income depends on profits. The worker only receives a prevailing wage, so they benefit only when the whole economy becomes stronger, not an individual sector or business.
For example, lets say you are a machinist. A skilled machinist in the US will make perhaps $60k-$90k a year depending on different factors. This amount remains the same no matter how profitable the business. For example, take an insanely profitable business, like Cabot Corporation. They make so much money they could afford to pay their machinists $500k a year if they wanted to. Obviously, they do not do that. They pay a prevailing wage plus enough to get the cream of the crop.
The benefits of protectionism go to the owners, not to the workers. Everyone else, the consumers, the tax collectors, the workers, are all losers.
You can see this process every day in Mexico where a few privileged manufacturers and business owners are rich and the prevailing wages are low and the prices for goods are high. The cost of everything is high in Mexico, toaster ovens, tools, you name it, because of tariffs that benefit a few rich business owners. Our system is no different, just less extreme.
THOSE LOANS HAVE TO BE PAYED BACK.
Originally Posted by jscpm
SUBSIDIES DON'T GET PAYED BACK.
Thank God our leaders didn't think like you before WW II -
Originally Posted by jscpm
“When I announced the appointments, 7 months after Pearl Harbor, a 30-billion-dollar Ordnance construction and production program was already well advanced. At that time the Ordnance Department had under construction or in production 35 new powder, explosives, and pyrotechnic plants, 3 new ammunition proving grounds, 25 new ammunition loading plants, 2 new gun plants, 3 new tank and combat-vehicle plants, and 14 new small-arms-ammunition and machine-gun plants. The new facilities program alone was estimated to cost in the neighborhood of 3 billion dollars, and this figure did not include the cost of production orders already placed with a great many of the plants. A large number of the new facilities were in full operation, and each month found additional facilities beginning on much-needed munitions of the types which could not be placed immediately with existing industrial plants.
These new facilities could not have been planned, constructed, or operated without the patriotic cooperation of Industry. Indeed, it was long recognized that the six Ordnance manufacturing arsenals could produce, in time of war, only about 4 or 5 per cent of the critical requirements for weapons, ammunition, fire-control instruments, aircraft bombs, and mechanized equipment. Now that we were in the midst of a war of unprecedented magnitude, Industry would have to take over 95 to 96 per cent of the armament manufacturing program.
Without the invaluable assistance of Industry, we of the Ordnance Department would be in the position of General Robert E. Lee when he heard that Stonewall Jackson had lost his left arm. General Lee's message was: "You have lost your left arm, but I have lost my right."
Lt. Gen. Levin H. Campbell Chief of Ordnance United States Army, 1942-1946
The Industry-Ordnance Team, 1946
On two occasions, the brain power, the man power and the machine power of U.S. Steel have been thrown without stint or reserve into the production of steel, the sinews of war, to help defend the freedom of America and our democratic form of government.
Both World Wars settled down, in the long run, to a battle of industrial production. The might of America's economic machine, thrown into the conflict, ultimately settled the issue in each case. In World War I, the emergency value of large, efficient industrial units was demonstrated for the first time. They switched from making articles of peace to making articles of war and produced them in such quantities that the Allied Forces were able to bring Kaiser Wilhelm's armies to their knees.
World War II was essentially the same story, except that production was on a vastly greater scale for a war of global dimensions. For magnitude and speed of production, the record of private industry in World War II is unsurpassed in history. At a time when France was prostrate under Hitler and Great Britain was constantly under the merciless bombings of the Luftwaffe, and the Russians were reeling under the first Nazis onslaughts, America changed from a peace footing to the Arsenal of Democracy and more than doubled its industrial output, producing over 186 billion dollars worth of ships, planes, guns, and other war material in five years, from July 1, 1940 to July 31, 1945.
Douglas A. Fisher, Office of Assistant to Chairman, United States Steel Corporation
Steel Serves the Nation, 1901-1951, The Fifty Year Story of United States Steel, 1951
The traditional method for making tin plate has been to dip a sheet of steel in molten tin, This is known as the hot-dip method. Since the United States is dependent on foreign sources of tin, the known reserves of which are limited, the Corporation many years ago began to concern itself with the problem of tin conservation. It launched itself upon the formidable task of developing a process whereby tin could be deposited on steel sheets electrolytically, with a more economical use of tin. After the successful operation of an experimental pilot plant, U.S. Steel in 1937 installed the first commercial electrolytic tinning line in America, at Gary, Indiana. The anticipated savings in tin were fully borne out. The new process was found to use 60 percent less tin than the hot-dip method. An electrolytic tinning line is a complicated apparatus about 200 feet long and costs millions of dollars.
A GODSEND TO THE COUNTRY
The electrolytic tin plating process proved to be a godsend to this country in World War II. The rapid conquest of the Malay States and the Dutch East Indies by the Japanese cut off 92 percent of our tin supply. The situation became serious. Our armed forces and those of our allies required very large quantities of canned foods. The limited stock pile of tin in America was not enough for both military and civilian needs, and the Army and Navy naturally had first claim on the existing reserves. So critical was the situation in 1942 that the Government planned to send all canned goods exclusively to our armed forces and to allied armies through Lend-Lease. The home front would have had little or no foods preserved in tin cans but for U.S. Steel's foresight and labors of research, which were responsible for the successful commercial application of the new process.
In the emergency, U.S. Steel suggested to the Government that more electrolytic tinning lines be built as rapidly as possible and offered to share its knowledge about the new process with other tin plate manufacturers. U.S. Steel built nine new electrolytic lines and other companies also installed them, making a total of 27 electrolytic tin plating units in this country during the war.
It has been estimated that U.S. Steel's electrolytic process saved sufficient tin in four years, form 1942 to 1945, to produce more than four and a half billion cans for packing food. That enabled the Government to spare tin for civilians, and that is why the home front, although strictly rationed, was able to buy any foods preserved in tin cans.
Douglas A. Fisher, Office of Assistant to Chairman, United States Steel Corporation
Steel Serves the Nation, 1901-1951, The Fifty Year Story of United States Steel, 1951
I might add that we wouldn't even have had a tin plate industry if it weren't for tariffs:
A glance at the history of prices of tin plate for twenty years past will make clear the necessity and propriety of the McKinley tariff, and, at the same time, illustrate the characteristic policy of British free trade manufacturers. "In 1873, British importers advanced the price of tin plate to $12 a box, in American markets ; and at once, American tin-plate factories commenced operations. British importers within three years reduced the price to $4.50 per box, and our mills had to shut down. When this was done British importers advanced prices to $9 and $10 per box, and under this stimulus, in 1879, American mills again started up. As soon as they were well at work, British importers again reduced the price to $4 per box ; and then made a standing offer or more properly a threat, to sell their tin plate twenty-five cents a box cheaper than the American product, no matter what the price of the latter might be. Of course, this action completely finished the American industry, and prices were at once advanced from $4 to $7 per box."
The McKinley tariff put an end to this outrage and robbery, and this fact alone is sufficient justification for its enactment.
It puts a duty on tin plate so high that it will probably soon transfer the most of that great industry to this country. Already many large plants are in process of erection, or have been completed, and are producing a superior tin plate, at Brooklyn, Pittsburgh, Chicago, St. Louis, and other places, and others will soon go up. The largest mines of tin in the world have lately been found in the Dakotas, California, Texas and Virginia ; so that it is morally certain that in the near future we shall be able to produce at home the full supply of tin and tin plate that we need, and which now amounts to over $30,000,000 in value annually,
When this is accomplished it will afford a new business that will annually pay to American labor not less than $23,000,000 ; it will require from iron ore miners not less than 1,000,000 tons of iron ore more than they now produce ; from limestone quarries 300,000 tons more of limestone ; from coal mines and coke ovens 2,000,000 tons more of coal and coke ; from blast furnaces 400,000 tons more of pig iron ; from lead mines and smelting furnaces 5,500,000 pounds more of lead ; from slaughter and packing houses 13,000,000 pounds more of tallow and oil; from chemical factories 40,000,000 pounds more of sulphuric acid ; from lumber yards 12,000,000 feet more of lumber ; and will give constant work to at least 35,000 persons. Indeed, it is already (1892) in large part fulfilled.
D. G. Harrimon
American Tariffs From Plymouth Rock To McKinley, 1892
PROTECTION FOR TIN PLATE.
John Sherman's Plea of Justification
Sixteen Years Ago.
A shipping merchant from Cardiff, who is largely concerned in Welsh tin plate mills, has just completed a tour of the principal tin plate plants of Pennsylvania and the Central West. To a representative of the " Sun" he gave these impressions of the industry :
" When l visited this country immediately after the passage of the act of July 1, 1891, which was intended to foster tin plate making. I did not believe that the United States would be able to supply its wants in tin plates in less than thirty years. On that visit I called upon President Harrison and told him that on my return to Wales it was my intention to lay the state of the conditions in America before the tin plate workers of Great Britain.
" Among other questions. I asked the President to be good enough to tell me why so large an impost had been laid upon tin plates, as there seemed little reason for belief that capital would be attracted to a business which might be cut down by the action of a Congress hostile to high Protection. Just as I had begun to speak upon this matter Senator Sherman was announced, and to him the President referred my questions as to why the country had placed a higher impost on tin plates. He said:
It is a long story. The gist of it is that the higher duty was placed out of consideration for the vast number of farmers who raise products for the canning industry, and for the benefit of the other interests, as products of the fisheries and from oyster beds and clam banks, that make a good part of the materials canned along our coast and by our rivers. We are dependent upon Great Britain for tin plate. In the event of a war in which that country should lose command of the seas we could not get tin plate for our canning interest.
Our navy is insignificant. In such a war we could not protect the small tonnage of shipping under our flag. The consequence would be that for want of tin plate millions of our farmers would be forced to see products rotting on the ground. Our thousands of canneries would be closed. The vast oil industry, which exports so largely in tin cans, would be brought to a standstill, and we should lose billions of dollars—all for want of tin plate. So we passed the act which will create mills that within a few years will make us independent of foreign producers.
" The chief manager of the largest tin plate mill in the West told me the other day that the output of tin plate from all American mills for 1906 will be not less than 12,000,000 boxes. The amount of tin plate made and consumed by interests which take the sheets without being boxed is certainly not less than the equivalent of 3,000,000 boxes. When the McKinley Tariff was passed the American output was only a few thousand boxes a year. So we see that what is without doubt the greatest degree of
development in the American steel industry was brought about by a measure based upon the idea that a combination of Powers might make England unable to protect her commerce by sea."
January 4, 1907
If you don't want to learn from history and insist upon repeating its mistakes, don't drag me down with you.
Go move to your free trade utopian island and wait to be invaded when you have no industry to defend yourself with.
So what is your point? It's wonderful that we forced millions of American farmers to pay extra high prices for tin plate between 1880 and 1907? The "self reliance" argument is just one of many bogus propaganda rationales for convincing people to accept economic blunders and graft. In North Korea they have an entire cult of self reliance called "Juche". It hasn't helped their economy much. They are starving and are one of the poorest countries in the world... but they are self reliant!!!
I feel sorry for your ignorance....
Originally Posted by jscpm
The French Commission, in their report of the Centennial Exposition in 1876, declared “that under the shelter of a prohibitory system the people of the United States have organized a powerful industry which rivals England in cheapness.”
The German Commission also stated that “the present condition of American manufactures show the fallacy of the free trade doctrine, that the products of a country are raised in price by Protective duties.
Before the Tariff of 1828 English axes sold here for from $2 to $4. By the Tariff a duty of 35% was levied on axes. In 1836 foreign and home-made axes were selling side by side at from $1.25 to $1.35 each, and in 1876 they sold for 80 cents each, a decrease to one-quarter of the price of 1828, as a result of home industries fostered by a Protective Tariff.
In 1840 the English furnished us our saws at from $15.75 to $19 per dozen; with a Tariff of 45% on saws they sell at from $5 to $10 per dozen, which is a saving of one-half the price of a saw to every farmer and mechanic. Beside, the superior methods which we have devised in the manufacture of saws enable us to undersell England in her own markets.
The average price of the salt per barrel, made at Saginaw during the year 1866, was $1.80, the duty being 34 cents per barrel; in 1882 the average price had been reduced to 74 cents per barrel, or but 40 cents more than the duty. Is the duty added to the price of the commodity ? Is the consumer not benefited by the Tariff which enables us to produce annually 40,000,000 barrels of salt and sell it at less than one-half its former price ?
An importer of such goods (crockery) testified before the Tariff Commission: “I have here a tumbler, known to the trade as a whiskey tumbler; six years ago, when American manufacturers commenced to make them, they were imported by the case at $1.40 per dozen; we made some, the first price was $1.25. They now sell for 40 cents.” The duty levied was 40%; as a result we have the article for 16 cents less than the duty upon the original cost before home production began. Not only has the price decreased, but a large industry has been built up which employs thousands of men and millions of capital, making a home market for our products and increasing the wealth of the country.
Before the Tariff of 1860 steel for locomotive tires cost 30 cents per pound; today, with a tariff of 2 ½
cents per pound, they are selling for 5 ½ cents. Wagon tires which sold for 16 cents per pound, with no duty, now sell for 7 cents with a duty of 3 cents per pound.
When the English controlled our market they sold us cast steel for 17 ½ cents per pound which they now sell us at 10 ½ cents, although in their near market in France they get 12 ½ cents for the same article. The reason is that the duty of 45% has so developed our industries that we control our market and fix the price 2 cents lower than it is in France, and the English must sell at our price or not at all.
When the Tariff was removed in 1846 iron rails were selling at $50; the English immediately reduced the price to $40, until our mills were closed; then they advanced the price to $60, finally to $75 a ton; between 1850 and 1854 England sold us 800,000 tons at $75; all of which we might have produced with a Tariff of $10 and kept the price down to $50, and saved $20,000,000 to American railroad owners. In 1867 steel rails sold at $166 currency, with no Tariff, we produced but 2,277 tons. In the year 1883, with a Tariff of 1 cent a pound in force for 15 years, we produced 1,500,000 tons at $40, and the importation of steel rails has decreased from 182,135 tons in 1882 to 2,395 in 1885. It is estimated that we have produced $1,800,000,000 worth of rails since we began their manufacture; this is so much added wealth to the country, which has given just that much encouragement and profit to our labor, mines, farms and other manufactures. A like increase in product and decrease in price can be shown in all departments of our iron industry.
The development of our bituminous coal beds under a Tariff of 75 cents a ton enabled us in 1884 to put out a product worth $143,700,000, much of which was sold at the mouth of the pit for $1 a ton, while the English paid $1.18 for the same grade of coal. Does this not show that it will profit a nation to grant a protective Tariff, or even a bounty, on any industry if thereby her own abundant resources may be developed ?
April 28, 1890
I bet you never heard of "price fixing".....
“By the late 1980's, Japan dominated America's television and consumer electronics markets. The logical next step was to squeeze extra profits from this dominant position.
In 1989, New York Attorney General Robert Abrams revealed that Panasonic and Technics (both subsidiaries of Japan's Matsushita) had mounted a verticle price-fixing scheme in America. Matsushita, of course, was a founding member of the television cartel. The Panasonic/Technics scheme was hauntingly reminiscent of what the Home Electric Appliance Market Stabilization Council had pulled off in Japan in the 1950's.
Abrams revealed that between March 1988 and August 1989 the Japanese companies had forced their American retailers – among them, Best Products, K Mart, Montgomery Ward, Circuit City – to charge fixed minimum prices for their products. Though his charge referred only to the sixteen most popular products of Panasonic and Technics – VCR's, camcorders, cordless telephones, answering machines, and stereo equipment, among other items – Abrams said that the firms had, in earlier efforts, tried to set fixed prices on all three hundred items they sold in the United States.
Through their scheme, the firms artificially had raised their U.S. prices by 5 to 10 percent. Abrams said the price-fixing was administered “through an elaborate nationwide scheme involving scores of [Panasonic and Technics] sales executives pressuring thousands of retailers to comply with the scheme and monitoring the prices they actually charged.”
To enforce this price-fixing effort, Panasonic directed its executives to keep all U.S. retailers of Panasonic goods in step with the firm's policies. Panasonic told its employees that “those dealers not adhering to company policy could 'create chaos in the marketplace' and would allow Panasonic to 'lose face with the entire industry.' “
The question that lingers is whether the rest of “the entire industry,”as Panasonic called it, really did know about Matsushita's price-fixing activities. If they did not, then how could Panasonic “lose face”? More important, were other consumer electronics companies participating in similar verticle price-fixing schemes?
When Abrams confronted Panasonic and Technics, they immediately agreed to a settlement – without actually acknowledging wrongdoing. The settlement required the companies to stop price-fixing, to repay $16 million in overcharges to nearly 700,000 customers, and to pay another $2 million to the state for settlement administration costs.
The settlement also revealed:
Lechmere, Inc., a retailer with stores in New York and other northeastern states, was told by Panasonic that it would “make an example of dealers charging below the 'go' price [the fixed price] and would terminate all or part of its shipments to noncomplying dealers.”
When Luria and Sons, a Florida retailer, undercut Panasonic's fixed price on a cordless telephone, four different Panasonic representatives threatened that Panasonic would cease doing business with noncomplying retailers.
As in Japan, this sort of price-fixing allows the manufacturer to gain an earned monopoly profit, which can then be used to subsidize dumping and other anti-competitive behavior.
But the Japanese were able to extort monopoly profits from American consumers because America's own television industry in effect had been destroyed by two decades of illegal, anti-competitive behavior by the Japanese.”
Agents Of Influence, 1990
“After several years of lengthy and detailed studies and hearings concerning the problem of sharply increasing fastener imports and the impact that this has had on the U.S. fastener industry, the International Trade Commission recommended to President Carter that higher tariffs be imposed. On February 10th, President Carter rejected the ITC's recommendation, saying that fastener tariffs would be inflationary and not in the nation's best economic interest.
But then, just a few weeks after the fastener decision, the President approved, reportedly without hesitation, a more than triple increase in tariffs on CB radio imports, from the current 6% to 21%. Apparently, President Carter believes that CB radios are more important to our nation's economic well-being than a healthy fastener industry.
Anyone who has followed the fastener import situation with anything more than casual interest will quickly point to the hundreds of pages of well-documented evidence showing how Japanese fastener firms, over a period of years, have invaded and captured U.S. markets for standard nuts, bolts and screws. No, I am not blaming the Japanese for taking advantage of what they correctly perceive to be an enticing opportunity to enhance their own best national interests. But what does concern me is that while we remain innocent as doves extolling the virtues of free trade, we're being devoured by other industrialized nations that go after markets with a killer instinct. The facts are clear: Uncle Sam is taking a beating and coming out the loser.
In the case of the U.S. fastener industry, imported standard fasteners already are taking about 50% of our domestic markets. As a result, close to 8,000 U.S. jobs have been lost. Industry profits have dropped sharply and a number of fastener plants have either shut their doors or sharply curtailed operations. Ironically, U.S. fastener manufacturers are the most efficient found anywhere in the world. And fastener company presidents do not oppose free trade and open markets. But they can't compete against foreign companies that work in collusion with their governments with subsidized and planned strategies for capturing our markets. George Meany says that free trade is a joke and myth. I think he's right.
The important question that each of us, in our own way, must answer is: “Can we as a nation allow our fastener industry to erode and wither away without putting ourselves in an intolerably vulnerable position?” A Federal Preparedness Agency study already has concluded that fasteners are vital to national defense, and a continuation of our dependence upon imports will make it unlikely that we will be able to count on domestic suppliers alone in the event of a wartime emergency. But we could become vulnerable in still another way. We've already seen the devastating effects of an oil embargo and the pricing tactics of OPEC nations. Why then should we put ourselves in the same vulnerable position with respect to fasteners? The Japanese already have demonstrated how quickly fastener prices can increase when they have a market monopoly (400% increase for some fasteners during 1973-74). While President Carter is concerning himself with inflation, I hope that he will give serious consideration to this possibility.
The outcome of the fastener import situation may, in part at least, rest in your hands. Under the provisions of the Trade Act of 1974, Congress can override a presidential decision that runs counter to ITC recommendations. A congressional vote is expected some time in July. Once again you have the opportunity to let your congressmen know how you feel about this important issue. It's up to you.
Bob Kelly, Editorial Director
“Let's Get Our Act Together on Trade”
Assembly Engineering, May 1978
Nov 26, 2007
EU fines Japanese manufacturers for Betacam videotape price fixing
The European Commission has fined Sony, Fuji and Maxell nearly 75 million euros ($109.8 million) for fixing prices on Betacam SP and Digital Betacam cassettes for professional use.
“Between 1999 and 2002, Sony, Fuji and Maxell managed to raise or otherwise control prices through a series of regular meetings and other illicit contacts,” said European Competition Commissioner Neelie Kroes.
Sony’s fine was increased by 30 percent to just over 47 million euros after it obstructed the investigation. The fines for Fujifilm and Hitachi Maxell were reduced by 40 percent and 20 percent respectively — to 13.2 million and 14.4 million euros — after they co-operated with the investigation, Reuters reported.
The commission began an investigation with raids on EU subsidiaries of Sony, Fuji and Maxell in May 2002. The raids found “abundant evidence of cartel activities” according to the report, although a Sony employee refused to answer questions by EU officials, and another employee shredded documents during the raid, the commission said.
Reuters reported that Sony acknowledged its involvement only after receiving a formal charge sheet from the commission.
The cartel covered the two most popular professional videotape formats at the time — Betacam SP and Digital Betacam. In 2001, the formats, mainly sold to broadcasters and independent television producers, had total annual sales of 115 million euros in the EU and other European countries.
Sony, Fuji and Maxell controlled more than 85 percent of the professional videotape market. The trio “organized three successful rounds of price increases and endeavored to stabilize prices whenever an increase was not possible,” the commission said. The companies also regularly monitored the implementation of price agreements and had at least 11 meetings at which they organized the cartel.
March 11, 2009
by Anne Szustek
Hitachi Will Plead Guilty in LCD Price-Fixing Case
Hitachi has admitted to the U.S. Department of Justice that it conspired to keep prices artificially high on LCD screens intended for use with Dell desktop and laptop computers. As part of its plea agreement, the Japanese technology manufacturer is paying $31 million in fines.
"This case should send a strong message to multinational companies operating in the United States that when it comes to enforcing the U.S. antitrust laws we mean business," Acting Assistant Attorney General said in a statement quoted by the Associated Press.
According to the Department of Justice, Hitachi took part in meetings held in Japan, the United States and South Korea to discuss setting prices on the LCD screens in question from April 1, 2001 to March 31, 2004. "Hitachi also shared information on its sales of the LCDs sold to Dell as a way to show that it stuck to the agreed-upon prices," the IDG News Service reports.
Hitachi is the fourth technology manufacturer to enter an agreement with the Department of Justice in connection with price fixing on LCD screens in recent months.
Sources in this Story
Computerworld (IDG News Service): Hitachi pleads guilty, to pay fine in LCD price-fixing probe
AP: Hitachi to admit to fixing LCD prices
findingDulcinea: Price-Fixing Scandal, Economic Winds Weigh on Electronics Prices
In November, South Korea’s LG Display, Japanese technology manufacturer Sharp and Taiwanese company Chunghwa Picture Tubes pleaded guilty to fixing prices on flatscreens for use in cell phones, televisions and personal computers.
Assistant Attorney General Thomas Barnett, who heads up the Justice Department’s antitrust division, told Bloomberg in November that LG and Chunghwa, along with other companies, met several times from 2001 to 2006 in what were called “crystal meetings” to negotiate price-setting.
Price deflation is common as technology evolves; however the current tight market has accelerated price declines. According to statistics from the International Herald Tribune cited by findingDulcinea, the price of a 15.4-inch panel for use in a laptop computer dropped by roughly one-third from $97 to $63 over the six months leading up to the November agreement. During the same period, the cost of a 32-inch LCD screen for a television has plummeted to $223 from $321.
The Hitachi deal pushes the total fines levied in connection with the recent LCD price-fixing cases above $600 million, with LG responsible for $400 million of that total; as such, LG is paying the second-highest fine ever levied by the Justice Department’s antitrust division. Swiss pharmaceutical titan F. Hoffman-La Roche still holds the unsavory top spot in that category, with $500 million paid in 1999 in connection with a price-fixing case on vitamins.
Private class-action lawsuits have also been filed against the flatscreen producers, paving the way for consumer compensation.
You are pretty silent about the American consumer getting price-gouged by foreign price fixing - aren't you?
Or doesn't that matter?