GOP presidential candidate Mitt Romney has been roundly criticized for insinuating that Chrysler planned to reopen a Jeep plant in China at the expense of U.S. workers in Ohio, but his comments and the reaction they provoked underscore the complex gray areas of international trade and globalization.
Romney said on the campaign trail in Ohio last week and in TV ads that Chrysler was planning shift production out of the state, later softening the message to say the company was sold to Italians who plan to make Jeeps in China. Chrysler CEO Sergio Marchionne, in an email to employees, later felt "obliged to unambiguously restate our position: Jeep production will not be moved from the United States to China."
The accusation flared anew Thursday when real estate mogul Donald Trump took to Twitter to criticize President Barack Obama's rescue of Chrysler in 2009, saying, "He bails out Chrysler and now Chrysler wants to send all Jeep manufacturing to China - and will!" Chrysler's vice president of design, Ralph Gilles, responded on Twitter, saying Trump was "full of s--t!" In a later tweet, he said, "I apologize for my language, but lies are just that, lies."
Even if Chrysler doesn't shift U.S. production, Romney's controversial TV ads call attention to the nuance of corporate decision-making and the question of why cars are made where they are. Why aren't Jeeps made here and exported to China, rather than manufactured there in a plant that's been idle since 2009?
"It would be nice to export there. It would be better for the U.S. economy to export from the United States rather than producing in China. But I think you have to deal with the reality," said Clyde Prestowitz, a former trade negotiator in the Reagan administration who achieved global notoriety in the 1980s for his fierce criticism of trade practices by Japan in the auto sector.
Japan, China and Brazil are among the nations that effectively force foreign car manufacturers to produce in their countries by raising the costs of exporting to them and erecting barriers that provide home-field advantage.
"Brazil and China and Japan and (South) Korea, these guys are all mercantilists. They don't believe in consumption; they believe in production. And they focus on getting production in the country," said Prestowitz, author of the recent book "Three Billion New Capitalists," about the economic rise of China and India. "In a perfect world, the production and trade would follow true comparative advantage. In a perfect world the automakers would say, 'Geez, the U.S. really is the place with the most benefit. Let's move production to the United States.' "
Still, Prestowitz said Romney's comments on Chrysler were "egregious" and "beyond the pale, and he really needs to be slapped (down)."
Businesses expanding in China, which include most Fortune 100 companies, do so with their eye on the future. China is the world's second-largest economy and its most populated nation, and while its standard of living lags the United States and Europe, China is closing the gap with surprising speed.
Importantly, China is already the world's largest car market, said Rebecca Lindland, director of research for IHS Automotive, a leading industry research group.
"People need to recognize and understand that when Chrysler elects to build a product in China, it's for the long-term benefit of the balance sheet, and the financial health of the company overall, because China is the world's largest auto market and will remain so for the foreseeable future," said Lindland. "When we look at virtually any metric that we can measure a company by, there is almost never a downside when you localize production. And the idea that you are somehow taking a job from any American is just not really accurate when it comes to automotive."
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