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Why the Bicycle Industry Went Flat

Thursday, December 9, 2004; Page A32

The Dec. 3 front-page story "A Rough Ride for Schwinn Bicycle" attributed Schwinn's demise to "global economic forces" and the company's "ultimately flawed" determination to stay American-made. However, low-wage competition alone cannot explain the U.S. bicycle industry's collapse.

Notwithstanding low-wage import competition, U.S. bike production soared in the early 1990s because of high productivity and innovations such as the mountain bike. But in 1994, the Clinton administration implemented the North American Free Trade Agreement and the World Trade Organization pact, cutting tariffs on imports of consumer items. The promise was better jobs through stronger U.S. exports.

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But a peso crisis followed almost immediately, slashing prices on Mexican imports. China then strategically devalued its currency, making Chinese imports cheaper. The Asian financial crisis in 1997 caused the dollar to appreciate dramatically against most Asian currencies, cutting prices on imports from Asian countries. U.S. exporters were unable to capitalize on the lower tariffs called for by the NAFTA and WTO agreements, while imports were given a nearly insurmountable price advantage in the U.S. market.

Rather than addressing these competitive imbalances, the Clinton administration embraced the "strong dollar policy" for the benefit of consumers, as well as major importers such as Wal-Mart.

The overvalued dollar greatly accelerated the decline of the U.S. industrial base, as epitomized by the bike sector, contributing to a massive, unsustainable trade imbalance that now threatens a ruinous devaluation of the dollar. If the value of the dollar collapsed, prices for imported bikes and everything else would increase, and the American middle class could lack both good-paying manufacturing jobs and access to cheap imports.



Griff Witte's story about Schwinn bicycles revived the fond memory of receiving a surprise for my seventh birthday in February 1992: a glossy blue Schwinn Gremlin bicycle. My working-class parents always wanted the best for me and my siblings.

These days I have a Trek bike, but the article reminded me of the gold I possessed in my marvelous, shiny Schwinn. That bike, long ago donated to charity, was more than just a worldly possession. It was a symbol of a better America, since outsourced to countries with poorer working conditions.



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