The motor vehicle manufacturing sector stands as a cornerstone of American industry, second only to food processing in employment within the U.S. manufacturing landscape. Within this sector, auto parts and tires are the primary drivers of direct employment, accounting for nearly two-thirds of the workforce. Spanning across all 50 states, the auto parts industry, encompassing both parts and tire manufacturing, indirectly and directly supports 1.6 million American jobs. This makes the health and competitiveness of the Us Auto Parts Car industry crucial to the overall economic well-being of the nation.
Despite a notable resurgence in the U.S. auto manufacturing sector since the 2009 government-led restructuring of General Motors and Chrysler, where sales have surged by 29.1 percent, this recovery has not mirrored in the us auto parts car industry. The most telling indicator, job creation, reveals a concerning trend. Since the depths of the 2009 recession, the industry has only managed to add 60,000 jobs, a modest 13.8 percent increase according to the Bureau of Labor Statistics (2011). This figure pales in comparison to the staggering 400,000 direct jobs lost in the us auto parts car sector between November 2000 and November 2011, highlighting a significant employment gap that needs to be addressed.
The disparity between rising auto sales and sluggish job growth in us auto parts car manufacturing is partly attributed to the escalating imports of auto parts, particularly from China, which has emerged as the fastest-growing source of these imports into the United States.
China’s auto parts exports have witnessed an explosive growth of over 900 percent from 2000 to 2010. This surge is largely fueled by substantial subsidies provided by the Chinese central and local governments to their domestic us auto parts car industry, totaling $27.5 billion between 2001 and 2010 (Haley 2012). Many of these subsidies are in violation of World Trade Organization (WTO) regulations (Stewart, et al. 2012). Furthermore, Chinese auto parts manufacturers benefit from China’s currency manipulation, an illicit practice that artificially reduces the cost of their products by an estimated 25 to 30 percent (Scott 2011b, 2–3). Unfair trade practices extend beyond China; other Asian nations like Japan and South Korea also engage in currency manipulation and other protectionist policies to boost their us auto parts car exports. Japan, in particular, maintains one of the most closed markets globally for us auto parts car imports, largely due to the influence of its Keiretsu system, intricate networks of suppliers closely linked with major Japanese auto assemblers.
These unfair trade practices pose a significant threat to the future of employment within the us auto parts car industry in the United States and the broader motor vehicle sector. While the complete demise of this industry is improbable, it is accurate to assert that every American job within the us auto parts car sector is potentially at risk from these unfair trade practices originating from China.
However, this situation is not inevitable. Despite trade deficits with China in us auto parts car, the United States and its NAFTA partners, Canada and Mexico, are not alone in this predicament. Countries like Japan, Germany, and South Korea, which actively manage trade in autos and parts, have consistently maintained trade surpluses with China in us auto parts car since 2005. Unlike NAFTA nations, automakers in these countries have prioritized and supported their domestic auto parts suppliers. The United States must learn from and emulate the successful, lawful trade and industrial policies implemented by countries like Germany to safeguard its us auto parts car industry.
This report aims to quantify the scale of employment within the us auto parts car industry in the U.S., encompassing both auto parts and tires, to demonstrate the potential widespread repercussions of unfair trade competition and the shortcomings of current U.S. trade policies.
Our key findings include:
- U.S. Motor Vehicle Sector Still Trails Despite Recent Growth: In 2011, total U.S. motor vehicle sector sales remained 48.1 percent lower than in 2000, primarily due to decreased overall demand and a substantial long-term loss of market share.
- Vulnerability of the U.S. Auto Parts Industry: The U.S. trade deficit in us auto parts car surged from $9.5 billion in 2000 to $31.2 billion in 2010. While exports support domestic jobs, imports displace domestic production and employment, contributing to increased unemployment when trade deficits occur.
- Threat from Chinese Practices: Subsidized auto parts from China have driven a larger increase in the U.S. trade deficit with China than with any other nation. In 2010, the U.S. us auto parts car trade deficit with China reached $9.1 billion, representing nearly a third (29.3 percent) of the total U.S. deficit in this sector.
- Job Risks from Subsidized Chinese Imports: The rapid growth of subsidized and unfairly traded us auto parts car imports from China endangers every job, both directly and indirectly, within the U.S. auto parts industry. In 2010, U.S. imports of tires and auto parts from China outstripped exports to China by 725 percent.
- Significant Potential State-Level Job Losses: The ten states most vulnerable to job losses in the us auto parts car industry, based on 2009 employment figures, are Michigan (249,989 jobs), Ohio (189,039 jobs), Indiana (132,769 jobs), Illinois (98,748 jobs), Tennessee (79,225 jobs), Texas (74,942 jobs), California (70,883 jobs), Kentucky (58,745 jobs), New York (58,429 jobs), and North Carolina (54,540 jobs).
- Auto Parts Jobs as a Major Share of State Employment: The ten states where us auto parts car employment constitutes a significant portion of overall state employment in 2009 are Michigan (6.5 percent), Indiana (4.8 percent), Ohio (3.7 percent), Kentucky (3.3 percent), Tennessee (3.0 percent), Alabama (2.2 percent), South Carolina (1.9 percent), Illinois (1.7 percent), Wisconsin (1.6 percent), and North Carolina (1.4 percent).
The Decline of the U.S. Motor Vehicle and Auto Parts Sector (2000–2011)
Globalization, escalating import competition, and the economic downturn following 2007 have significantly eroded the market for vehicles manufactured in the U.S. The demand for autos and other durable consumer goods was severely impacted. Domestic car and truck sales from U.S. automakers plummeted from 11.5 million units in 2000 to a crisis-point of 4.6 million units in 2009 – a staggering 60 percent reduction (Ward’s Automotive Group 2012).
While total vehicle sales in the United States, encompassing both domestic and imported vehicles, remained stable at over 16 million units annually from 1994 to 2008, the recent recession triggered a sharp decline. Even with a recovery in the past two years, reaching 12.7 million units in total sales in 2011, the U.S. light-vehicle market (comprising the majority of domestic and imported motor vehicles sold in the U.S.) in 2011 was approximately 22.4 percent smaller than the average annual market volume of the 15 years preceding the crisis (Ward’s Automotive Group 2012).
Between 1994 and 2008, despite stable overall car and truck sales, U.S. automakers experienced a steady decline in market share, a trend that accelerated post-2007, culminating in sales and market share reaching their lowest points in 2009. However, since the restructuring of GM and Chrysler in 2009, U.S. auto producers have witnessed a significant sales rebound. The combined market share of U.S. automakers increased by 3.3 percentage points between 2009 and 2011, and their 2011 light vehicle unit sales rose by 29.1 percent compared to 2009 sales (Ward’s Automotive Group 2012).
Despite reaching nearly six million units in 2011, total U.S. automaker sales remained 48.1 percent below 2000 levels, a consequence of both reduced overall demand and a substantial long-term loss of market share by U.S.-based manufacturers.
Employment Trends in the U.S. Auto Parts Industry
The primary driver of employment in the us auto parts car industry is the demand for original equipment manufacturer (OEM) parts for auto assembly plants located in the United States. Reflecting the broader trends in the motor vehicle sector (Office of Transportation and Machinery 2011, 9), direct employment in the U.S. auto parts industry has suffered a significant decline in recent years. Between November 2000 and November 2011, the industry shed 419,600 jobs, a 45.8 percent decrease (Figure A).
In November 2011, the us auto parts car industry directly employed 496,000 workers, a significant drop from 915,600 in November 2000 and 651,600 in November 2007, just before the recession. Direct employment bottomed out at 436,000 in July 2009, coinciding with the GM and Chrysler restructuring, which severely curtailed parts demand. Between November 2000 and July 2009, the industry lost a total of 479,600 direct jobs, a 52.4 percent decline, as depicted in Figure A. From the mid-2009 low point to November 2011, 60,000 jobs were recovered, a 13.8 percent increase. However, total employment in the us auto parts car industry remained 155,600 jobs (23.9 percent) below pre-recession levels in 2007.
The recent recovery in vehicle sales compared to the recession’s trough contrasts sharply with the employment situation in the us auto parts car industry. Sales of U.S.-based automakers have increased more than twice as rapidly as direct us auto parts car employment since 2009. This divergence is partially explained by the rapid growth of unfairly traded us auto parts car imports from China.
Escalating Direct Threats to Jobs in the U.S. Auto Parts Sector
Trade deficits in both assembled autos and us auto parts car are major contributors to job losses in both the motor vehicle sector and the auto parts industry. The U.S. motor vehicle sector has consistently experienced a substantial global trade deficit, currently at $106.7 billion, over the past decade. The share of auto parts in this total deficit has steadily risen, from 8.4 percent in 2000 to a record high of 29.2 percent in 2010, as shown in Figure B.
In monetary terms, the United States exported approximately $58 billion worth of us auto parts car in 2010 but imported $89 billion, resulting in a $31.2 billion trade deficit encompassing both OEM and replacement parts (United Nations 2012). This marks an increase from a $9.5 billion deficit in 2000, as illustrated in Figure B.
Several factors contribute to the rapid expansion of the us auto parts car trade deficit. Firstly, as U.S. automakers’ share of the domestic vehicle market has declined over the past decade, so has the demand for domestically produced parts. Historically, vehicles manufactured by U.S. automakers have had a higher proportion of domestically sourced parts compared to foreign-made autos.
Secondly, the number of vehicle assembly plants in the U.S. owned by foreign companies has increased. Production at these plants rose from 2.6 million light vehicles in 1999 to over four million in 2007 (24.3 percent of total U.S. light vehicle sales). While production in these “transplant” facilities reached 3.4 million light vehicles in 2010, their share of total U.S. light vehicle sales had grown to 28.9 percent (Office of Transportation and Machinery 2011, 11; Ward’s Automotive Group 2012). These transplant facilities utilize a higher percentage of imported us auto parts car in their production, leading to rising auto parts trade deficits as their production share in the U.S. market increases. This trend negatively impacts U.S. employment. The U.S. Department of Commerce’s U.S. Automotive Parts Industry Annual Assessment notes that the proportion of workers in foreign-owned transplant facilities compared to U.S.-owned facilities has steadily increased over the past 14 years. For every new employee hired at a foreign-owned transplant facility, U.S. companies lay off 6.1 employees (Office of Transportation and Machinery 2011, 16).
A third factor driving the U.S. us auto parts car trade deficit is the significant penetration of foreign-affiliated auto parts suppliers into the U.S. supplier market. This has occurred through acquisitions, sales to transplant automakers, and sales to U.S. automakers (Office of Transportation and Machinery 2011, 11). For example, more Japanese and Korean vehicle assembly plants are operating in the U.S., and they are sourcing parts from their affiliated parts suppliers located within the United States. These trends in the us auto parts car industry mirror a broader pattern of increasing U.S. trade deficits across industries due to the reliance of U.S. affiliates of foreign multinationals on imported inputs.
As a result of these and other trends, the United States faces a rapidly growing trade deficit in us auto parts car. While exports of auto parts support domestic jobs, imports displace them. Overall, large and increasing trade deficits in autos and us auto parts car are significantly responsible for the job losses experienced in the auto parts sector over the past decade (Scott 2011a, 8).
Figure C provides a breakdown of the U.S. us auto parts car trade deficit with selected countries between 2000 and 2010. The countries contributing most significantly to the U.S. trade deficit in auto parts in 2010 were:
- Japan ($12.3 billion, 39.7 percent of the total U.S. auto parts trade deficit)
- Mexico ($9.5 billion, 30.3 percent)
- China ($9.1 billion, 29.3 percent)
- Germany ($5.3 billion, 16.9 percent)
- South Korea ($4.5 billion, 14.5 percent)
The United States had a us auto parts car trade surplus with Canada of $9.3 billion in 2010. However, it also had a trade deficit in finished autos with Canada, resulting in an overall deficit in vehicle and parts trade with that country (United Nations 2012).
The most striking trend is the fact that heavily subsidized us auto parts car from China have caused the U.S. trade deficit with that nation to grow more, in total, than any other bilateral deficit, as illustrated in Figure C. The expansion of this deficit has significantly harmed employment in the U.S. auto parts industry.
Threats from Unfairly Traded Chinese Auto Parts Imports
U.S. imports of us auto parts car from China and South Korea have increased more rapidly in the past three years than imports from any other country. While trade deficits with all countries decreased in 2009, a more pertinent comparison is to analyze trade changes since 2007, the year preceding the recession. Between the last business cycle peak in 2007 and 2010, the shares of the U.S. us auto parts car trade deficit attributed to China and South Korea rose sharply, while those of other major producers declined:
- China’s share increased by 5.8 percentage points.
- South Korea’s share increased by 4.5 percentage points.
- Japan’s share decreased by 2.2 percentage points.
- Mexico’s share decreased by 3.5 percentage points.
- Germany’s share decreased by 4.1 percentage points.
Exporters from China and South Korea capitalized on the recession to gain market share in the U.S. us auto parts car market, displacing producers from other exporting nations. In China’s case, this was facilitated by $27.5 billion in subsidies to the auto parts industry through subsidized coal, electricity, natural gas, glass, and steel between 2001 and 2010 (Haley 2012), as well as by China’s illegal currency manipulation, which reduces the cost of Chinese auto parts by an additional 25–30 percent (Scott 2011b, 2-3).
Many of the subsidies provided by China to its auto and us auto parts car industries violate its WTO obligations (Stewart et al. 2012). Furthermore, China has imposed performance requirements on foreign investors, mandating technology transfer to local joint-venture partners, discriminated against imported goods, and restricted exports of rare-earth minerals and other critical raw materials – all giving unfair advantages to its domestic us auto parts car producers. Each of these policies appears to contravene China’s WTO commitments (Stewart et al. 2012).
The rapid growth of China’s subsidized us auto parts car exports has reinforced the global sourcing strategies of U.S. automakers. Klier and Rubenstein (2009, 4) examined trends in U.S. auto parts imports by country between 1996 and 2008, categorizing auto parts based on origin from high- or low-wage countries. Low-wage countries increased their share of total U.S. us auto parts car imports by 25 percentage points between 1996 and 2008, accounting for 69 percent of the growth in auto parts imports during this period. Moreover, total auto parts imports as a share of material costs in light-vehicle assembly rose from 29 percent to 36 percent between 1997 and 2002 alone. China’s share of total U.S. us auto parts car imports grew more rapidly than any other country in their study, increasing from approximately 1 percent in 1996 to over 10 percent in 2008 (Klier and Rubenstein 2009, Figure 4).
It is crucial to acknowledge that simply measuring the nominal dollar value of Chinese us auto parts car may underestimate their actual impact on U.S. auto parts output and employment. This can lead to a significant underestimation of the real value of imports (Houseman 2011). If us auto parts car from China displace domestic goods (or even parts from higher-cost trading partners like Canada or Germany) with a much higher unit value, trade flow measurements will underrepresent the true impact of Chinese imports on the domestic auto industry. For example, if tires or brake shoes from China cost 50 percent less than equivalent domestic products, $100 worth of imports would displace $200 worth of domestic output and the labor required to produce $200 of domestically made goods.
China’s Growing Influence in the Global Auto Parts Industry
Driven by extensive subsidies, Chinese production and exports of us auto parts car have expanded dramatically over the past decade (Haley 2011, Figure B). In fact, China’s exports of auto parts increased more than tenfold between 2000 and 2010, rising from $3.9 billion in 2000 to $41.2 billion in 2010, as shown in Figure D (United Nations 2012). By 2009, China had become the fourth-largest exporter of auto parts globally, trailing only Germany, the United States, and Japan (Office of Transportation and Machinery 2011, Table 9). China’s imports of us auto parts car have also increased sharply due to the rapid growth of auto production and consumption within China. China’s auto parts imports rose from $3.8 billion in 2000 to $32.1 billion in 2010 (United Nations 2012), also depicted in Figure D. As China’s auto parts exports grew faster than imports, it achieved a global trade surplus in auto parts in 2005, a surplus that exceeded $9.0 billion by 2010.
However, tire exports alone constitute the majority of China’s us auto parts car trade surplus (see Methodology section). Excluding tires, China actually had a global trade deficit in auto parts in seven of the past ten years, including a $100 million deficit in 2010. Thus, aside from tire trade, the rest of the world held a substantial trade surplus in auto parts with China for most of the past decade. Despite this, China has maintained large and growing trade surpluses in us auto parts car (both including and excluding tires) with the United States. In 2010, U.S. imports of auto parts (including tires) from China exceeded exports to China by 725 percent (United Nations 2012).
Contrasting Outcomes from Managed Trade in Auto Parts
Due to its rapid growth in us auto parts car exports, China has become a major supplier of parts for vehicles assembled in the United States, Mexico, and Canada. However, a stark contrast exists between China’s auto parts trade relationship with these NAFTA countries and its relationships with major trading partners in Asia and Europe. Figure E illustrates this contrast, providing a snapshot of China’s auto parts trade with key countries in 2010. In that year, China had a significant trade surplus of $8.8 billion with the United States, and smaller surpluses with Mexico and Canada. These North American nations generally adhere to open trade policies and are parties to the North American Free Trade Agreement. Their trade and industrial development approach is based on a “neoliberal” or market-driven model.
In contrast, China does not demand the same trade performance from its Asian and European partners, many of whom have employed managed-trade approaches and active industrial policies. In 2010, China had us auto parts car trade deficits with Japan ($7.9 billion), Germany ($6.2 billion), and South Korea ($1.3 billion), as shown in Figure E. These deficits between China and its managed-trade partners have persisted since at least 2005, as shown in Figure F. In particular, Japan and Germany have maintained substantial trade surpluses with China throughout this period. South Korea has also generally sustained trade surpluses, with a brief dip in 2008.
Auto suppliers from managed-trade countries, especially Germany, Japan, and South Korea, prioritize maintaining employment in their domestic motor vehicle sectors. This is partly reflective of stakeholder relationships and differences in the institutional governance structures of their private manufacturing corporations. Employment is supported, in part, by maintaining a positive trade balance with both China and the United States. Firms from these countries maintain cost competitiveness by emphasizing innovation and product quality, a strategy they have pursued for many years. Additionally, us auto parts car suppliers from Japan and South Korea have benefited from their governments’ policies of managing currency values to protect export competitiveness and actively discriminating against auto parts imports – practices that the United States does not and should not emulate directly. However, the U.S. should actively confront currency manipulation and illegal trade barriers wherever they occur, especially in us auto parts car, given the large number of jobs at stake.
German firms offer a positive alternative model for supporting domestic manufacturers. German automakers have thrived despite high wages and excellent worker benefits. German manufacturers practice “stakeholder capitalism,” where corporate boards include equal representation from managers and workers (Meyerson 2011). Germany also has a robust sector of banks dedicated to financing small and medium-sized firms, reducing their reliance on private capital markets and lessening pressure to prioritize short-term profits. Furthermore, Germany has a highly effective school-to-work job training system for non-college-educated workers, far superior to U.S. job training and displaced-labor-assistance programs. As a result, Germany has maintained a large and growing trade surplus over the past decade, even with low-wage countries outside the Eurozone. It has also sustained its competitiveness in global export markets, with exports dominated by autos and other high-value, durable manufactured goods.
As a consequence of a managed-trade approach, the European auto industry as a whole experienced net employment growth during the past decade, despite the rapid expansion of China’s us auto parts car exports and auto exports from Japan and Korea. Total direct employment in the European motor vehicle sector rose from 2,282,000 in 2001 to 2,294,000 in 2007, a 0.5 percent increase (European Automobile Manufacturers’ Association 2011).
This contrasts sharply with the U.S. experience during the same period. Between 2001 and 2007, the United States lost 241,300 jobs (an 18.6 percent decline) in the overall motor vehicle sector, including auto assembly, bodies and trailers, us auto parts car, and tires (Bureau of Labor Statistics 2011). Job losses in us auto parts car and tire production accounted for the vast majority of U.S. job displacement in the motor vehicle sector during this period, with 189,600 jobs lost, a 22.1 percent decrease.
These divergent outcomes suggest that the United States should learn from and emulate the successful trade and industrial policies developed by Germany and other successful Northern European democracies. The advantages of managed-trade countries are particularly evident when comparing U.S. us auto parts car trade with these nations to U.S. trade with its NAFTA partners. For example, U.S. us auto parts car imports from China exceeded exports by 725 percent in 2010 (United Nations 2012). For Germany, this ratio exceeded 400 percent; for South Korea, over 970 percent; and for Japan, one of the most closed markets globally, over 1,000 percent. Conversely, U.S. us auto parts car imports from Mexico exceeded U.S. bilateral exports by only 46 percent. Simultaneously, the United States had a trade surplus in auto parts with Canada, with exports nearly twice as large as imports, despite an overall trade deficit with Canada in vehicles and parts in 2010.
Job Loss Risks Across All States
In 2009, the us auto parts car industry (formally known as the motor vehicle parts and tire industries) supported 1,584,503 jobs directly and indirectly, according to a report by Hill, Menk, and Cooper (2010). The rapid increase in imports from China puts these jobs at risk. Tables 1, 2, and 3 detail the total number of jobs directly and indirectly supported by the U.S. auto parts industry in each state. Table 1 ranks states by total jobs, Table 2 by job share of total state employment, and Table 3 lists states alphabetically with total job figures.
As shown in Table 1, the ten states most vulnerable based on total us auto parts car industry employment in 2009 are Michigan (249,989 jobs), Ohio (189,039 jobs), Indiana (132,769 jobs), Illinois (98,748 jobs), Tennessee (79,225 jobs), Texas (74,942 jobs), California (70,883 jobs), Kentucky (58,745 jobs), New York (58,429 jobs), and North Carolina (54,540 jobs).
Table 2 indicates that the ten most at-risk states, measured by us auto parts car employment as a share of total state employment in 2009, are Michigan (6.5 percent), Indiana (4.8 percent), Ohio (3.7 percent), Kentucky (3.3 percent), Tennessee (3.0 percent), Alabama (2.2 percent), South Carolina (1.9 percent), Illinois (1.7 percent), Wisconsin (1.6 percent), and North Carolina (1.4 percent).
The job figures in these tables include both direct us auto parts car industry jobs and indirect jobs supported in related sectors such as steel, aluminum, plastics, electronics, accounting, engineering, and other manufacturing, service, and commodity-providing industries. These estimates exclude re-spending or “expenditure-induced” jobs, which fluctuate with economic conditions and business cycles.
Conclusion
U.S. us auto parts car suppliers have not proportionally benefited from the sales increase of U.S. automakers since 2009. This is due to increased sourcing of auto parts production to China, Mexico, and South Korea, coupled with a rapidly growing trade deficit in auto parts and the rising share of U.S. vehicles (both imported and U.S.-assembled) with minimal domestically produced content.
The U.S. us auto parts car trade deficit with the world increased by 65.4 percent between 2009 and 2010, reaching $31.2 billion. The deficit with China alone reached $9.1 billion in 2010, accounting for 29.3 percent of the total U.S. auto parts trade deficit. China’s share of the U.S. auto parts trade deficit has grown faster than any other country’s since 2007. U.S. auto parts manufacturers face a direct threat from rapidly increasing imports of auto parts from China, which benefited from $27.5 billion in subsidies between 2001 and 2010. Chinese us auto parts car makers also gain an unfair advantage from China’s illegal currency manipulation, reducing their costs by an additional 25 to 30 percent.
Consequently, all 1.6 million jobs in the U.S. us auto parts car and supplier industries are at risk due to rapidly growing auto parts imports.
A significant disparity exists between the impact of China’s practices on the us auto parts car industry in the United States and their effects on industries in countries that actively manage their trade, such as Germany, Japan, and South Korea. These nations prioritize balanced growth to maximize domestic employment, output, and innovation, and they are not experiencing the same job losses in the auto parts sector as the United States, which lost 419,600 auto parts jobs between November 2000 and November 2011. While these countries face the same unfair trade practices from China, they appear to be managing them more effectively. Some, like Japan and South Korea, have resorted to unfair trade policies that the U.S. should challenge. Germany, however, has successfully employed industrial and labor market policies to better manage its trade with China and the world, suggesting that the United States has considerable room for improvement in developing more effective policies to support its manufacturing sector. The most crucial initial steps are to combat unfair currency manipulation and illegal subsidies and trade barriers imposed by China and other nations.
— The authors extend their gratitude to Mark Anderson, Josh Bivens, Christopher Traci, and Mike Wessel for their insightful comments.
— EPI gratefully acknowledges the Alliance for American Manufacturing for their support of our research and publication programs.
Methodology
To analyze international trade flows between the United States and China, we utilized the United Nations Commodity Trade Statistics Database (2012). Our analysis of auto parts and motor vehicle trade flows employed the Harmonized Tariff Schedule codes (HTS). Our definition of the auto parts industry for international trade encompasses electrical and electronic equipment, parts, engines, tires, belts, seats, vehicle clocks, and speed indicators. To ensure precise measurement for motor vehicles, we primarily used detailed, six-digit HTS codes, with the exception of five four-digit HTS codes. Four of these are strictly for motor vehicles, and the fifth, “Instrument panel clocks for vehicles, aircraft, etc.,” may slightly overstate the category. All trade data presented in Figures B through F are in nominal dollars, not adjusted for price or inflation. Appendix A provides the complete list of HTS codes constituting the auto parts industry.
Notably, our analysis includes tires, which represent the largest subset of auto parts in China’s trade with all countries. Currently, tire exports account for 23 percent of China’s total exports globally. We included four six-digit codes for tires, covering tires for personal vehicles, buses, and new tires with and without herringbone tread.
Our definition of assembled motor vehicles, which are combined with auto parts to derive overall motor vehicle sector figures, primarily consists of four-digit HTS codes, with one exception of a six-digit code used because the parent four-digit code, “Special purpose motor vehicles,” was deemed too broad. We include motor cars, passenger transport vehicles like station wagons, public transit vehicles, goods transport vehicles, and fire-fighting vehicles. Appendix B lists the HTS codes for assembled motor vehicles.
United Nations Commodity Trade Statistics Database (2012) data are also used to illustrate U.S. auto parts trade with other countries (Figures C, D, E, and F), specifically North American partners Mexico and Canada, Asian competitors China, Japan, and South Korea, and European competitor Germany. These countries were selected due to their high volume of auto parts trade with the United States and their ability to best demonstrate the relationships between the U.S. and the rest of the world in this sector. We also use these countries for comparisons of China’s trade in Figures E and F.
State-level employment data is derived from a tri-annual report by Hill, Menk, and Cooper (2010) from the Center for Automotive Research, which collects employment data for the auto parts industry. The study reports data on both direct employment in the auto parts industry (parts suppliers, motor vehicle assemblers, and new vehicle dealership operations) and indirect employment, which includes jobs outside of auto parts that are a consequence of employment and production in the various auto parts industries. Hill, Menk, and Cooper calculate direct employment using data from the Bureau of Economic Analysis, the Bureau of Labor Statistics (BLS), the U.S. Census Bureau’s County Business Patterns, the Rubber Manufacturers Association, and the Battery Council International, utilizing North American Industry Classification System (NAICS) four-, six-, and seven-digit codes (NAICS was developed by the U.S. Census Bureau). The specific subsector industries, in addition to auto parts, that manufacture parts exclusively for the auto parts industry include tire manufacturing, motor vehicle plastics and instruments, hose manufacturing, and motor vehicle hardware such as locks, light bulbs, and batteries for motor vehicles (Hill, Menk, and Cooper 2010, 32–33). Indirect employment at the state level is employment that results from the direct employment industries listed above, calculated using an inter-industry model created by Regional Economic Models, Inc. (REMI). The REMI analysis incorporates demographic and industry-specific information for each region, as well as trade flows, migration patterns, and commuter flows for each state.
National employment figures are sourced from Bureau of Labor Statistics data for NAICS four- and five-digit industry codes for assembled vehicles, bodies and trailers, auto parts, and tires. While BLS data are less granular than Hill, Menk, and Cooper’s data, they are similar in that they also use NAICS 3363 (auto parts), which comprises approximately 76 percent of their definition of direct employment and also includes tires (NAICS 32621). This national time series data provides a telling snapshot of employment trends in the auto industry over the last decade, as shown in Figure A.
Appendix A. Harmonized Tariff Schedule (HTS) codes used to identify auto-parts industry for international trade flows
| HTS Code | Definition |
|---|---|
| 8511 | Electrical ignition of starting equipment of a kind used for spark-ignition or compression-ignition internal combustion engines, e.g., ignition magnetos, magneto-dynamos, ignition coils, etc. |
| 8512 | Electric lighting or signaling equipment (excluding lamps of heading 8539), windscreen wipers, defrosters and demisters, of a kind used for cycles or motor vehicles; parts thereof |
| 8706 | Chassis fitted with engine for tractors, motor vehicles for the transport of ten or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705 (excluding those with engines and cabs) |
| 8708 | Parts and accessories for tractors, motor vehicles for the transport of 10 or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705, n.e.s. |
| 9104 | Instrument panel clocks etc. for vehicles, aircraft, vessels, and other vehicles |
| 401031 | Endless transmission belts of trapezoidal cross-section ‘v-belts,’ of vulcanized rubber, v-ribbed, of an outside circumference > 60 cm but |
| 401032 | Endless transmission belts of trapezoidal cross-section ‘v-belts,’ of vulcanized rubber, of an outside circumference > 60 cm but |
| 401033 | Endless transmission belts of trapezoidal cross-section ‘v-belts,’ of vulcanized rubber, v-ribbed, of an outside circumference > 180 cm but |
| 401034 | Endless transmission belts of trapezoidal cross-section ‘v-belts,’ of vulcanized rubber, of an outside circumference > 180 cm but |
| 401035 | Endless synchronous belts, of vulcanized rubber, of an outside circumference > 60 cm but |
| 401036 | Endless synchronous belts, of vulcanized rubber, of an outside circumference > 150 cm but |
| 401039 | Transmission belts or belting, of vulcanized rubber (excluding endless transmission belts of trapezoidal cross-section ‘v-belts,’ v-ribbed, of an outside circumference > 60 cm but 60 cm but |
| 401110 | Pneumatic tires new of rubber for motor cars, including station wagons and racing cars |
| 401120 | Pneumatic tires new of rubber for busses or lorries (excluding tires with lug, corder or similar treads) |
| 401169 | New pneumatic tires, of rubber, having a herring-bone/similar tread (exclusive of a kind used on agricultural or forestry and construction or industrial handling vehicles and machines, on motorcars, station wagons, racing cars, buses, lorries, aircraft, motorcycles, and bicycles) |
| 401199 | [Pneumatic tires, new, of rubber (excluding having a ‘herring-bone’ or similar tread and pneumatic tires of a kind used on agricultural or forestry and construction or industrial handling vehicles and machines, on motorcars, station wagons, racing cars, buses, lorries, aircraft, motorcycles, and bicycles)](http://www.smartexport.com/en/Pneumatic_tyres_new_of_rubber_(excl._having_a__herring-bone__or_similar_tread_and_pneumatic_tyres_of_a_kind_used_on_agricultural_or_forestry_and_const.401199.html) |
| 401310 | Inner tubes, of rubber, of a kind used on motor cars, including station wagons and racing cars, buses, and lorries |
| 830120 | Locks used for motor vehicles, of base metal |
| 840734 | Spark ignition reciprocating piston engines of a kind used for the propulsion of vehicles of chapter 87, of a cylinder capacity of >1000cc |
| 840820 | Compression-ignition internal combustion piston engine “diesel or semi-diesel engine,” for the propulsion of vehicles of chapter 87 |
| 840991 | Parts suitable for use solely or principally with spark-ignition internal combustion piston engine, n.e.s. |
| 840999 | Parts suitable for use solely or principally with compression-ignition internal combustion piston engine, n.e.s. |
| 841330 | Fuel, lubricating or cooling medium pumps for internal combustion piston engine |
| 841520 | Air conditioning machines of a kind used for persons, in motor vehicles |
| 848210 | Ball bearings |
| 848220 | Tapered roller bearings, incl. cone and tapered roller assemblies |
| 848240 | Needle roller bearings |
| 848250 | Cylindrical roller bearings (excluding needle roller bearings) |
| 848310 | Transmission shafts, including cam shafts and crank shafts, and cranks |
| 850132 | Dc motors and dc generators of an output > 750 w but |
| 850710 | Lead-acid accumulators of a kind used for starting piston engine “starter batteries” (excluding spent) |
| 850790 | Plates, separators, and other parts of electric accumulators, n.e.s. |
| 852721 | Radio-broadcast receivers not capable of operating without an external source of power, of a kind used in motor vehicles, including apparatus capable of also receiving radio-telephony or radio-telegraphy, combined with sound recording or reproducing apparatus |
| 852729 | Radio-broadcast receivers not capable of operating without an external source of power, of a kind used in motor vehicles, including apparatus capable of also receiving radio-telephony or radio-telegraphy, not combined with sound recording or reproducing apparatus |
| 854430 | Ignition wiring sets and other wiring sets for vehicles, aircraft or ships |
| 902920 | Speed indicators, tachometers, stroboscopes |
| 940120 | Seats for motor vehicles |
Source: EPI compilation from United Nations Commodity Trade Statistics Database (United Nations 2012), accessed January 2012
Appendix B. Harmonized Tariff Schedule (HTS) codes used to identify motor-vehicle sector for international trade flows
| HTS Code | Definition |
|---|---|
| 8702 | Motor vehicles for the transport of 10 or more persons, including the driver |
| 8703 | Motor cars and other motor vehicles designed to transport people (other than public-transport type), including station wagons and racing cars |
| 8704 | Motor vehicles for the transport of goods |
| 870530 | Fire fighting vehicles |
Source: EPI compilation from United Nations Commodity Trade Statistics Database (United Nations 2012), accessed January 2012
References
Anderson, Thomas. 2011. “U.S. Affiliates of Foreign Companies: Operations in 2009.” Survey of Current Business. vol. 91, no. 8, pp. 211-226. http://bea.gov/scb/pdf/2011/08%20August/0811_affiliates.pdf
Bureau of Labor Statistics. 2011. Current Employment Statistics, “Employment, Hours, and Earnings from the Current Employment Statistics Survey (National),” Excel spreadsheets accessed November–December 2011 at http://data.bls.gov/pdq/querytool.jsp?survey=ce. Specific Excel spreadsheets accessed for this report include: for all data, “Not Seasonally Adjusted (NSA)”; for tires, NAICS 32621, series ID: CEU3232621001; for motor vehicles, NAICS 3361, series ID: CEU3133610001; for motor-vehicle bodies and trailers, NAICS 3362, series ID: CEU3133620001; and for motor-vehicle parts, NAICS 3363, series ID: CEU3133630001.
Eisenstein, Paul A. 2011. “Hyundai May Add Second U.S. Assembly Plant: Maker Can’t Meet Demand for Sonata, Other Models.” TheDetroitBureau.com, the Voice of the Automotive World (blog), January 17. http://www.thedetroitbureau.com/2011/01/hyundai-may-add-second-u-s-assembly-plant/
European Automobile Manufacturers Association. 2011. Employment, “Employment 2001-2007,” PDF file accessed December 11 at http://www.acea.be/images/uploads/files/20100902_Employment_2001-2007.pdf.
Haley, Usha C. 2012. Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011. Economic Policy Institute Briefing Paper #316, Washington, D.C.: EPI. http://www.epi.org/publication/bp316-china-auto-parts-industry
Hill, Kim, Debbie Menk, and Steven Szakaly. 2007. Contribution of the Motor Vehicle Supplier Sector to the Economies of the United States and Its 50 States. Ann Arbor: Center for Automotive Research. http://www.cargroup.org/documents/MEMA-Final2-08-07.pdf
Hill, Kim, Debbie Maranger Menk, and Adam Cooper. 2010. Contribution of the Automotive Industry to the Economies of all 50 States and the United States. Ann Arbor: Center for Automotive Research. http://www.cargroup.org/pdfs/association_paper.pdf. “Appendix A: State Level Employment Contributions, ALL JOBS – PARTS” is the source for tables 1–3 in this report.
Houseman, Susan. 2011. “Research Spotlight, Offshoring and Import Price Measurement: Selected Research from the Conference on ‘Measurement Issues Arising From the Growth of Globalization.’”Survey of Current Business, vol. 91, no. 2, pp. 7-11. http://www.bea.gov/scb/pdf/2011/02%20February/0211_napa.pdf
Hyundai Motor Manufacturing Alabama. 2011. Hyundai, “About HMMA.” Corporate webpage accessed December 2011 at http://www.hmmausa.com/?page_id=79/
Kia Motor Manufacturing Georgia, Inc. 2011. KIA, “About KMMG.” Corporate website accessed December 2011 at http://www.kmmgusa.com/about-kmmg/our-history/
Klier, Thomas J. and James M. Rubenstein. 2009. “Imports of intermediate parts in the auto industry – a case study.” Paper presented at a conference on Measurement Issues Arising from the Growth of Globalization, W.E. Upjohn Institute for Employment Research and the National Academy of Public Administration. http://www.upjohn.org/measurement/klier-rubenstein-final.pdf
LMC Automotive. 2011. Public Data, “China Light Vehicle Sales – October 2011,” PDF file last revised November 15, accessed at http://lmc-auto.com/wp-content/uploads/2011/10/China-Monthly-Sales-Report-Nov11.pdf. Note: LMC Automotive acquired the automotive forecasting division of J.D. Power and Associates (a business unit of The McGraw-Hill Companies) on November 1, 2011.
Meyerson, Harold. 2011. “Back from China.” The American Prospect, vol. 10, no. 22, November 29. http://prospect.org/article/back-china
Office of Transportation and Machinery, U.S. Department of Commerce. 2011. “On the Road: U.S. Automotive Parts Industry Annual Assessment,” PDF file accessed at http://trade.gov/static/2011Parts.pdf
Scott, Robert E. 2011a. Growing U.S. Trade Deficit with China Cost 2.8 Million Jobs Between 2001 and 2010: Hundreds to Thousands of Jobs Displaced In Every U.S. Congressional District. Economic Policy Institute Briefing Paper #323, Washington, D.C.: EPI. http://www.epi.org/publication/growing-trade-deficit-china-cost-2-8-million/
Scott, Robert E. 2011b. The Benefits of Revaluation: Full Revaluation of the Chinese Yuan Would Increase U.S. GDP and Employment, Reduce the Federal Budget Deficit, and Help Workers in China and Other Asian Countries. Economic Policy Institute Briefing Paper #318, Washington, D.C.: EPI. http://www.epi.org/publication/revaluing_chinas_currency_could_boost_us_economic_recovery/
Stewart, Terrence P., Elizabeth Drake, Philip A. Butler, Jumana Misleh, Ping Gong, Jessica Wang, Ni Y. Meggers, and David DePrest. 2012. Trade Flows from Stewart and Stewart, China’s Support Programs for Automobiles and Auto Parts Under the 12th{{ }}Five-year Plan. Washington, D.C.: Law Offices of Stewart and Stewart. Forthcoming (scheduled for release on January 31). http://www.stewartlaw.com/stewartandstewart/Publications/tabid/119/language/en-US/Default.aspx
United Nations. 2012. United Nations Commodity Trade Statistics Database, “Data Query, Basic Selection: comtrade_trade_data,” Excel spreadsheets accessed January 12 at http://comtrade.un.org/db/dqBasicQuery.aspx
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Ward’s Automotive Group. 2012. WardsAuto: Public Data, Excel spreadsheets accessed January 11 at http://wardsauto.com/public-data. Specific Excel spreadsheets accessed for this report: “U.S. Vehicle Sales Market Share by Company, 1961-2010,” http://wardsauto.com/keydata/historical/UsaSa28summary ; “U.S. Car and Truck Sales, 1931-2010,” http://wardsauto.com/keydata/historical/UsaSa01summary; “U.S. Light Vehicle Sales Summary, December 2011,” http://wardsauto.com/keydata/USSalesSummary
Endnotes
1. Hill, Menk, and Cooper (2010, 8) report that the motor-vehicle assembly and parts manufacturing industry “is the second largest employer within the subset of manufacturing.” Data suggest that jobs in auto parts and tires account for nearly two-thirds or more of total direct jobs in the motor-vehicle sector: Jobs in auto parts and tires were responsible for at least 64.3 percent of total direct employment in the motor-vehicle sector in 2010 (Bureau of Labor Statistics 2012), but this figure does not include jobs in the affiliated industries, such as motor-vehicle plastics, that were included by Hill, Menk, and Cooper (2010, 32–33) in the 1.6 million jobs noted earlier.
2. We don’t have comparable data for sales or output in auto parts. Since employment typically makes up about 70 to 80 percent of output in most industries, the number of employees is an excellent indicator of the level of output in auto parts.
3. U.S. auto sales are estimated from three spreadsheets obtained from Ward’s Automotive Group (2012). “U.S. Vehicle Sales Market Share by Company, 1961–2010” was used to obtain the combined market share of U.S.-based automakers (GM, Ford, and Chrysler). “U.S. Car and Truck Sales, 1931–2010” includes U.S. total car and truck sales of domestic and foreign-based automakers. These data were combined with the market share of U.S.-based automakers to estimate their total vehicle sales for the years 1994–2010. “U.S. Light Vehicle Sales Summary, December 2011” was used to calculate total annual sales of U.S.-based automakers in 2011, and their share of total light vehicle sales. These data were used to estimate changes in U.S.-based automakers sales and market share over the 1994–2011 period.
4. See Methodology section for details on sources of data and calculations for all Figures in this report. Employment data in Figure A are not seasonally adjusted—seasonally adjusted employment data are not available from the Bureau of Labor Statistics at this level of industry detail. Hence, we have chosen to compare employment in the same month in 2000, 2007, and 2011 in Figure A to eliminate seasonal factors from the analysis. For 2009, data from July were used, as that was the low point of industry employment in the 2009 crisis.
5. The total U.S. trade deficit in autos and parts declined from $112.8 billion in 2001 to $106.7 billion in 2010 (United Nations 2012). This small decline reflects a shrinking deficit in assembled motor vehicles almost entirely offset by a sharply rising deficit in auto parts, as shown in Figure B. Thus, auto parts’ rising share of the total motor-vehicle sector trade deficit reflects both an absolute rise in the auto-parts deficit, and an absolute fall in the value of motor-vehicle imports.
6. Hill, Menk, and Szakaly (2007, 8), provide the following examples of U.S. automakers’ growing reliance on foreign suppliers: Siemens, a German supplier, which had no share of audio systems in North America in 2003, had grown to 25 percent share by 2005. Also, Denso Corporation, now the largest supplier in the world, reported that its sales to the Detroit 3 were rising and that the North America market represented about 40 percent of its total sales, while Toyota accounted for another 40 percent of Denso’s business in North America. In August 2008, Chrysler named Denso Corporation as its first “Supplier of Choice.” This means Denso is the default supplier with whom other suppliers must compete to win contracts, and Denso will not have to compete to keep current orders.
7. The Korean auto-parts trade deficit has also grown rapidly, as transplant production has accelerated in 2010 and 2011 after the opening of a second Hyundai Motor Group assembly plant in Georgia in late 2009. Hyundai Motor Group makes and markets vehicles under the Kia and Hyundai brand names. Hyundai’s first U.S. assembly plant, located in Alabama, opened in 2005 (Hyundai Motor Manufacturing Alabama 2011). A Kia assembly plant began production in Georgia in late 2009 (Kia Motor Manufacturing Georgia, Inc. 2011). Hyundai is currently considering opening a third U.S. assembly plant (a second plant making Hyundai brand products) (Eisenstein 2011).
8. In 2009, U.S. affiliates of all foreign multinationals were responsible for more than half (52.3 percent) of the total U.S. goods trade deficit. Anderson (2011, Table 8) reports the total goods imports and exports of U.S. affiliates of foreign multinational companies. These firms had an overall trade deficit of $264.7 billion in 2009. The Census Bureau (2011) reports that the total U.S. goods trade deficit in 2009 was $505.9 billion. Foreign affiliates’ share of this deficit was 52.3 percent.
9. Figure C excludes re-exports—which are goods produced in other countries, imported into the host country, and then re-exported to China. See Scott (2010a, Table 1; notes 4 and 5, pp; 6–9; and Appendix, p. 19) for further details.
10. Trade data are annual, but employment data are monthly, and this paper compares employment in November (in most years) to correct for seasonality in the data.
11. Trade deficit shares in 2007 and 2010 were calculated using country trade data from Figure C, relative to the total auto-parts trade deficit from Figure B.
12. Chinese production and consumption of light vehicles has increased significantly over the past decade. Haley (2011, Figure A) showed that sales of cars in China increased 600 percent between 2000 and 2009, and production increased 1100 percent. In 2010, China was the largest market in the world for light vehicles, with total sales of 17.2 million units (LMC Automotive 2011).
13. Figures C, E, and F report two slightly different estimates of the bilateral U.S.-China auto-parts trade balance in 2010: Figure C reports that the United States estimates that its trade deficit in auto parts with China was $9.1 billion, but Figures E and F report that China estimates that its trade surplus in auto parts with the United States was $8.8 billion. Many factors could contribute to the slight variation in these two estimates. The most important may be timing differences (the date a shipment leaves China can be weeks or months before that shipment arrives in the United States, and vice versa; hence particular import and export shipments can be included in the data for 2010 for China and 2011 for the United States, for example. Also, as pointed out in note nine, Figure C excludes re-exports from the United States to China, while Figures D and E do not (due to data limitations). Exclusion of re-exports results in a slightly larger estimate of the bilateral U.S.-China trade deficit in Figure C. There may also be differences in the way shipments are valued in each country. Finally, reporting problems, especially on the export side, may result in an under-estimate of one or both partners’ exports.
14. Re-exports were included in Figure F, unlike Figure C, due to data limitations. Re-exports were negligible in the case of U.S. trade with China in Figure C, amounting to less than $200 million in every year between 2000 and 2010.
15. The total U.S. auto sector includes direct employment for auto assembly (NAICS 3361), auto bodies and trailers (3362), auto-parts (3363), and tires (32621). Employment data in Figure A and discussed elsewhere in this report covers only the auto-parts and tire industries. Total U.S. auto-sector employment is discussed here for comparison with comparable European employment data only.
