WASHINGTON - Despite an initial chorus of cheers from the auto industry, a deal to make China a full partner in the world trading community doesn't automatically mean fatter bottom lines for everyone.
Among undercurrents to the deal between the United States and China:
Suppliers who want to export to China probably will benefit sooner than vehicle manufacturers.
The door will be opened for Chinese people to finance vehicle purchases, but estimates of how big and how soon the market will grow remain elusive.
For car companies already doing business in China, the first impact of lower trade barriers is likely to be more competition from other companies rather than more business.
TAKING THE LONG VIEW
Increased competition 'is a negative for our investment,' acknowledged Mustafa Mohatarem, chief economist for General Motors. GM has a joint venture building Buicks in Shanghai. But GM supports the Nov. 15 agreement paving the way for China to become a member of the World Trade Organization because the company takes a big-picture, long-term view of the planet's most populous country, Mohatarem said.
In other words, there will be many more opportunities to do business in China if normal trade relations help it develop a market economy and promote strong, balanced growth.
Mohatarem said he expects GM to sell all kinds of vehicles in China, not just trucks and niche vehicles. He said, for example, that a new class of investors, as well as government officials, will want Cadillacs.
Nevertheless, suppliers remain more likely to be early beneficiaries because Chinese tariffs already are lower on parts than on vehicles, and because the agreement would require China to cut local-content requirements.
Ron Cutler, North American automotive marketing vice president for TRW Inc. and chairman of the U.S. Auto Parts Advisory Committee, said China offers a 'great opportunity for U.S. suppliers to work with Chinese suppliers.'
He said companies are eager 'to start off with a good, fair, level playing field, not like Japan.'
DON'T EXPECT TOO MUCH
But Robert Anthony, senior partner in the automotive practice at the accounting and consulting firm PricewaterhouseCoopers, cautioned against expecting much progress soon in China. Among the problems he cited:
Roads are primitive.
The government will continue favoring local industry.
Business law doesn't yet exist.
There isn't much of a middle class to buy vehicles, even if financing is made available. 'People have to have a means of repaying,' he said.
Stephen Collins, president of the Automotive Trade Policy Council, representing GM, Ford Motor Co. and DaimlerChrysler, said there is a danger in stereotyping the Chinese people as unable to afford vehicles.
He said financing has been the missing, a critical component in enlarging the market there.
But first car companies are going to have to help sell the trade agreement to Congress, which has many members concerned about an already large and growing trade deficit with China, and about allegations of human rights violations by the Chinese government.
Mohatarem of GM said the Chinese people benefit when trade-related economic growth trade lifts them out of poverty, and that GM sees its role in China as providing an example for how employees should be treated.