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Global ties make auto aid tricky

Friday, February 6, 2009

Daniel Howes: Commentary

Global ties make auto aid tricky

It should be enough to make Alabama’s own Richard Shelby, the Republican that Detroit loves to hate, choke on one of his gassy opening statements:

In the space of roughly a month, the official Washington that spent four congressional hearings lecturing Detroit’s automakers, hectoring them about corporate jets and criticizing their alleged sins on fuel economy now is stacking up "we-love-Detroit" incentives like a good ol’ boy from ‘Bama stacks firewood.

Amazing what a little economic reality, coupled with the burden of leadership, can do — which, in this case, feels less like American free-trading and more like last-generation France or Germany protecting their "national champion" companies and stoking a trade war. The only thing missing is an old-style European "scrappage scheme," though a bill co-sponsored by Michigan’s own Debbie Stabenow gets mighty close.

The Lansing Democrat and Sen. Tom Harkin, D-Iowa, are backing legislation that could be labeled the "Slippery Slope Act." It would offer consumers a rebate of $10,000 for trading cars and trucks at least 10 years old for new ones assembled in the United States.

As the Germans might say, schon gemacht— already done, without the made-in-Germany part. They’ve been offering incentives for buyers to trade their aging metal for new, cleaner cars. Early reviews are positive, Ford Motor Co. execs said last week, proving yet again that some targeted socialism has a place in the service of tarnished capitalism.

Another case in point: Sen. Barbara Mikulski, D-Md., engineered an $11 billion tax break that would allow buyers of new cars and trucks to deduct sales taxes and interest payments — estimated to be a savings of $1,500 on a $25,000 vehicle.

Another case: President Barack Obama’s stimulus package includes a proposal to spend $600 million to replace government-owned vehicles with advanced-technology vehicles. Ostensibly the move would a) reduce fuel costs and b) potentially stimulate demand for the new technologies by showcasing them and c) bolster sales for an auto industry under almost unprecedented pressure.

Perfectly understandable, considering the dire economy, a rising unemployment rate and a nearly flat-lining auto industry — first, take care of your own. Which is why the Germans, in the person of Chancellor Angela Merkel, and the representative of at least one Japanese automaker are complaining loudly.

Who insisted there be confirmation that any German funds loaned to General Motors Corp.’s Adam Opel AG unit in Germany be certified as staying in the country? Merkel’s Germany, even as she protested that Washington’s loans to GM and Chrysler LLC violated international trade rules.

Who’s whining that the Harkin-Stabenow clunker replacement bill, with a made-in-the-USA requirement that could help Toyotas from Texas and hurt Chevys from Mexico, amounts to the kind of "protectionism" that prolonged the Great Depression? A lobbyist for Mazda, a longtime affiliate of Ford that assembles its bellwether midsize sedan … in Michigan, with union labor.

Protectionism did prolong the Great Depression. But, then, foreign automakers didn’t control more than half of the U.S. market, didn’t occupy a broad band of states from South Carolina, Georgia and Alabama to Mississippi, Tennessee, Kentucky and Texas — all of which employ American workers to produce cars and trucks on American soil.

Today’s GM and Ford, to name two, are global players that use relatively unfettered global trade to their advantage. You want to use government tax policy to boost vehicle sales and pump dollars into a wheezing economy? Fine.

You want to play the kind of parochialism that pits pieces of the companies against themselves — and the foreign governments they need to support foreign operations? Not a good idea, senators, because the cure may prove as bad as the disease.

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