A Massey University academic has created a political story in the US media and political circles with her recent report on the American subsidies to the automobile parts industry in China.
Professor of International Business Usha Haley is currently in the US not only answering queries and clarifying issues raised but also to pursue her new research on Chinese subsidies to manufacturing.
Her report ‘Putting the pedal to the metal: Subsidies to China’s auto-parts industry 2001 to 2011,’ has ruffled a few feathers since its appearance in a publication of the ‘Economy Policy Institute,’ a powerful Think Tank based in Washington DC.
Extracts of the Report has since appeared in almost all important mainstream media organisations and publications including AFP, Reuters, Bloomberg, BBC, Business Week, New York Times and Financial Times.
Stirred to action
Senators, political lobby groups, coalition of industry groups, trade lawyers and others have brought pressure on US president Barack Obama to file trade-case actions against China through the US Department of Commerce, the US International Trade Commission and the World Trade Organisation.
According to Professor Haley, US subsidies to the Chinese auto-parts industry amounted to US$27.5 billion since 2001, in addition to government support in acquiring cutting-edge technology, including green technologies.
The Chinese government has also committed to a further US$10.9 billion in subsidies, the report said.
Experts said the publication of the report as timely, since Mr Obama’s recent announcement that he would take a tougher stance on Chinese subsidies.
“We are in a once-in-a-generation moment in global business. Trade flows have swung dramatically in favour of China and some other emerging markets, and theories of comparative advantage and labour costs no longer explain these shifts,” Professor Haley said.
She said such imbalances should be corrected, since as they have sweeping effects on what products we use, where we make them, and how much we pay for them.
“These are civilisational shifts that may not work out to our advantage because of inaction,” she said.
World leader
She said that China overtook the US for the first time in January 2009 to become the largest car market in the world.
Her comments are supported by statistics.
“As Chinese government subsidies and other policies spurred demand, auto companies sold 13.8 million vehicles in China, an increase of 48% over 2008, compared with 10.4 million cars and light trucks sold in the US, the lowest level in 27 years.
“According to estimates, China produced about one-seventh of the world’s vehicles in 2010, second only to Japan in passenger-car production and the US in commercial vehicle production,” she said.
While auto sales in the rest of the world slumped during the 2008 recession, the Chinese central government cut sales taxes on smaller, fuel-efficient cars and spent US$730 million on subsidies for buyers of larger cars, pickup trucks, and minivans, she said.
NZ warned
Professor Haley has also cautioned the New Zealand government over the subsidies granted to the solar industry.
“Solar is an important industry for New Zealand, not only because it provides abundant and potentially cheap energy sources, but also because of the quality of jobs it creates. Yet, Chinese subsidies will affect where the solar panels are manufactured, which technologies become the standard, and where these jobs will be created,” she said.
She will be present a lecture on the solar-panel industry at Massey’s Albany campus on March 7 as a part of the university’s public lecture series.
Professor Haley’s previous investigations included subsidies in the Chinese paper, steel and glass industries.
