EconoMonitor

Peterson Institute for International Economics

Will the US Auto Rescue Disrupt Global Trade?

Gary Clyde Hufbauer sees the Chrysler and GM bailouts as running counter to decades of American catechism for other countries and very likely to lead to lawsuits and retaliation by trading partners. Recorded June 9, 2009. © Peterson Institute for International Economics.

Steve Weisman: This is Steve Weisman at the Peterson Institute for International Economics. Gary Clyde Hufbauer, senior fellow at the Institute, is here to talk on Peterson Perspectives about the global impact of the extraordinary sequence of events in the auto industry, following American intervention in the financial sector.

Gary, I understand that you have strong feelings about the reverberations that these actions are going to have around the world. Thanks for joining us today.

Gary Clyde Hufbauer: Thank you. Yes, and I do have strong feelings.

Steve Weisman: Specifically on the GM and Chrysler bailouts, the American public was focused on the merits or defects of taking action, and putting taxpayer money into these ailing companies and sectors. But around the world, there was also quite an extraordinary reaction.

Gary Clyde Hufbauer: Well, there was. Virtually every country with a significant auto industry has come in to help that industry overcome these hard times. But the United States is the only country that has effectively nationalized firms that were once private firms. So we’ve gone a great deal further, and the money amounts are much larger, as you might expect given the size of the American economy. And this called into question a model of international competition and international integration in an industry that has been quite an international industry for, well, at least the past three decades or so.

But all this government activity and intervention calls that into question. It also calls into question whether this will go back to being a private industry or will be more like what many countries are familiar with in electric utilities, water supplies, telephones. Not so long ago these were all government monopolies.

Steve Weisman: Is there any specific action that Congress or the US government have taken, or are pressing the automobile industry to take, that are going to send up red flags or flares internationally?

Gary Clyde Hufbauer: Yes, there are couple of things that have been done. There was a rumor last week when I was in Brazil and it may not be an accurate rumor…

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