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301 13 The Rising Tide of Imports Just about all electronic subcomponents now originate in China or Korea or Singapore . . . You are more aware and you buy better when you are where the action is.1 The national origin of the parts installed on vehicles assembled in the United States can be divided into three portions: parts made in the United States at factories owned by U.S.-based companies, parts made in the United States in foreign-owned factories, and parts imported from other countries. This chapter examines the magnitude of imports and exports, the specific types of parts that are being imported into and out of the United States, and the countries of origin and destination. Imported parts captured one-fourth of the U.S. new vehicle market in the early twenty-first century, and foreign-owned factories in the United States another one-fourth. That left U.S.-owned factories in the United States with the remaining one-half. But with the domestic share declining by several percent per year, the three sources were positioned to hold approximately equal shares of the market by 2010. At the same time, some of the parts produced in U.S. plants have been exported to other countries. Exports and imports expanded at about the same level during the 1990s, but after 2000, imports of parts into the United States continued to increase rapidly whereas exports stagnated. As a result, the United States opened up a substantial trade deficit in car parts in the twenty-first century. The changing fortunes of carmakers in the United States have been responsible for the widening trade gap. The principal exporters have been the Detroit 3 carmakers, which ship parts to their final assembly plants in Canada and Mexico. As the Detroit 3 have lost market share, their assembly plants in these countries have needed fewer U.S.-made parts. Meanwhile, foreign-owned carmakers have been meeting increased demand for their vehicles primarily through assembling more vehicles in the United States. Although a growing share of their parts has come 302 Klier and Rubenstein from U.S. suppliers, foreign-owned carmakers continue to import a higher percentage of parts than the Detroit 3 (Figure 13.1). For their part, the Detroit 3 have relied more on foreign-made parts to reduce their costs as they try to compete with the foreign-based carmakers (Klier and Rubenstein 2007). NATIONALITY OF LARGEST SUPPLIERS Consumers have long since recognized the blurred national origin of vehicles sold in the United States. Foreign-owned companies have been selling some vehicles classified by the U.S. government as foreign and some classified as made in the United States. At the same time, some of the vehicles that Chrysler, Ford, and GM sell in the United States are classified as domestic, but they have actually been assembled in Canada and Mexico. Figure 13.1 Production-Weighted Domestic Content of Light Vehicles Source: Adapted by authors from the National Highway and Traffic Safety Administration and Ward’s AutoInfobank. 0 10 20 30 40 50 60 70 80 90 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Domestic content (%) Detroit 3 Foreign producers The Rising Tide of Imports 303 Distinguishing between U.S. and foreign origins has in some respects been easier for parts than for finished vehicles. Ultimately, each individual part has been manufactured either in the United States or in another country, whereas every assembled vehicle is a blend of thousands of parts made in many countries. In reality, classifying national origin of parts is a complex task because of the sheer magnitude of individual parts and companies that must be tracked and because of limitations on the sources of data. Each of the thousands of individual parts in a motor vehicle could be made by a U.S.-owned company in a factory it operates in the United States or in a factory it operates abroad, or it may be made by a foreign-owned company either in the United States or abroad. Canadian analyst Dennis DesRosiers has estimated that 41 percent of parts used in the United States in 2005 for both original equipment and aftermarket were made in the United States by U.S.-owned suppliers , 30 percent were made in the United States by foreign-owned companies, and 29 percent were imported into the United States. The share held by U.S.-owned firms has declined rapidly, according to DesRosiers . In 1997, 68 percent of parts...


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