China

America’s Failed Mole-by-Mole Trade Policy

Leo Gerard — Tue, 07 Feb 2012 10:11:20 -0500

Last week several groups, including the United Steelworkers, petitioned the federal government to whack the latest trade mole – illegally traded auto parts from China.

With President Obama announcing creation of a new trade enforcement unit in his State of the Union Address, the feds probably will investigate. But even if they whack down the auto parts mole, experience has shown a new mole will pop up.

Mole-by-mole trade enforcement isn’t the solution to America’s massive trade deficit. Although conservative candidates revel in ridiculing Western Europe, America could learn crucial economic lessons from Germany, which doesn’t rely on Whack-a-Mole and maintains trade surpluses, including one with China in auto parts.

The Steelworkers – along with the United Auto Workers, the Alliance for American Manufacturing and Campaign for America’s Future – explained why the federal government must smack down the latest trade problem that has raised its ugly head.

China and several other countries promote their auto parts manufacturers by providing subsidies and engaging in additional practices banned by the World Trade Organization (WTO). As a result, the United States imports more auto parts than it produces, a situation that kills manufacturers and manufacturing jobs here. For example, over the past 11 years, as the U.S. auto parts trade deficit increased by 867 percent, the Unites States lost 45 percent of its auto parts jobs – a total of 419,000.

The reason the groups sought action against China specifically is that its exports of auto parts to the United States have increased faster in the past three years than any other country’s and China supports its auto parts industry in ways that violate its commitments to the WTO.

For example, China provided $27.5 billion in subsidies to its auto parts industry between 2001 and 2010. It’s fine with the WTO if countries subsidize industries that sell their products domestically. But it forbids subsidies for exported products because that distorts the free market, wrongly destroying jobs and industries in the countries that buy those artificially low priced goods.

Beijing also aggressively limited import of American-made auto parts. This is hardly startling. In December, China imposed steep tariffs on imported American-made sports utility vehicles and other large cars. And the WTO affirmed last week that China violated its trade commitments by restricting export of key raw materials. Earlier, the WTO supported President Obama’s imposition of tariffs on tires imported from China because Beijing had violated international trade rules.

China has prospered by breaking the rules. Electronics manufacturing is a good example. In a story about Apple’s experience, The New York Times described how America lost these jobs to China. Worker wages, while achingly low in China, were not the lure. And they were not the issue for Apple, a company that makes $400,000 in profit for every worker. It was a combination of other factors including the Asian supply chain and Chinese subsidies.

An example is the Chinese company that bid on supplying glass for the iPhone. When Apple executives visited, they found the company already constructing a wing where the iPhone glass would be cut. The company built it with subsidies from Beijing, subsidies that never would be provided by the United States to American companies, subsidies that are of questionable legality under WTO rules because they were for exported goods. Apple gave the contract to the Chinese firm, of course. Here’s how the Times described it:

“The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.”

Beijing is a serial trade rule violator. The USW has won trade cases against China for violations involving paper, steel pipe, tires and other products. The Steelworkers filed for protection of the U.S. green energy sector against Chinese encroachment abetted by WTO violations and already has won negotiated settlement of several aspects of that case.

The USW and others that file trade cases often win. But this is Whack-a-Mole trade enforcement. A union or industry wins a case, whacks down that individual annoyance, but immediately another surfaces. America is losing, and far more is at stake than in an arcade game.

America can win. But it’s got to deal with trade differently. It needs a game changer, like Germany’s manufacturing policies.

Germany accounts for nearly 17 percent of America’s auto parts trade deficit. Germany sells more auto parts to China than it imports from China. German auto parts manufacturers accomplish this while paying higher wages and benefits than their American counterparts.

An analysis by the Economic Policy Institute notes that Germany actively enforces its industrial policy. This, EPI noted, stands in stark contrast to the United States, which doesn’t even have an industrial policy.

Germany encourages a sector of banks that is devoted to financing small and medium firms – the size that auto parts manufacturers are likely to be. In addition, Germany favors stakeholder capitalism, and corporate boards of directors there are populated by equal numbers of managers and workers. This changes the focus from profits benefitting only the 1 percent to company operation in the interest of the community, the country and the workers, as well as the executives and stockholders.

Republicans and Americans of the World War II generation might choke on the idea of learning something from Germany. But, frankly, this Western European country has prospered in manufacturing and trade with sophisticated state and corporate planning – not with the arcade-economics of Whack-a-Mole.

China Cheating Costs 400K Auto Parts Jobs

Dave Johnson — Thu, 02 Feb 2012 14:21:26 -0500

This week three new reports described even more continuing damage to our economy caused by China's trade cheating -- and our own lack of response. Even as the auto industry recovers and auto-assembly jobs are returning, the auto-parts industry and jobs are not.

The reports, one from the Stewart and Stewart law firm along with two reports from the Economic Policy Institute (EPI) make the case that China is cheating, that it is costing lots of US jobs, and detail the national numbers and individual state costs.

The reports describe Chinese trade violations and calculate the damage done to our economy:

Growing Threats to the U.S. Auto-Parts Industry from Heavily Subsidized Chinese Tires and Parts, from EPI. The report concludes that “every one of these [1.6 million U.S.] auto-parts jobs is individually at-risk from this unfair trade competition.” With 75% of auto-industry jobs in the auto-parts sector, this means a lot of jobs are at risk even as our auto industry recovers.
Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011, conducted for EPI by Usha C.V. Haley, says there are $27.5 billion of Chinese government subsidies to their auto-parts industry with an additional $10.9 billion in subsidies for industrial restructuring and technological development of the industry coming.
China’s Support Program for Automobiles and Auto Parts Under the 12th Five Year Plan, by the law firm Stewart and Stewart says China's subsidies to their auto-parts companies are in violation of China’s WTO commitments, but will continue unless we enforce trade rules.

I joined a call discussing these reports, with Leo Gerard of the United Steelworkers, Robert Scott of EPI, Scott Paul of the Alliance for American Manufacturing and CAF's Robert Borosage. The call detailed the many ways that China helps companies, even things like a tax on rare-earth mineral exports. So Chinese companies don't pay the tax, this is one more way their costs are lower, while US companies, already facing currency-rate manipulation, lose the competitive battle.

The Chinese government subsidizes energy costs, land, financing, labor, labor training and many other things, while our government does not. There are so many ways that China incorporates a national industrial policy to help capture vital and strategic industries, while our government does not. Our government barely begins to even enforce trade rules, which enables and encourages competitors to cheat while forcing out honest actors. Some of this is smart policy on China's part coupled with really not-smart policy on our part. We are blocked by ideologues from having a good, coordinated national industrial policy. Some of that is helped along by the beneficiaries of this lack of policy. With all the causes, the result is that Americans are losing jobs, factories, companies industries and our economy.

Corporate media coverage of these reports is telling, with the LA times describing them as "left-leaning" and the Detroit News describing them as "liberal-leaning."

Meanwhile the China Daily warns us not to fightback, calling enforcement of trade violations "protectionism." From Protectionism won't help,

Trade protectionism against China is on the rise in the United States. The Obama administration has brought trade cases against China at nearly twice the rate of the previous administration, and it is also creating a trade enforcement unit to investigate the "unfair trade practices" of China and other countries.

Nevertheless, are these protectionist measures the right remedy for solving the US' grim unemployment problem?

Well, the answer to the question is yes.

The punch line comes in what can only be described as a "Freudian slip" at the end of the China Daily piece:

Resorting to protectionist measures hinders international trade, outsourcing and investment, and ultimately harms all.

Why yes, enforcing trade laws just might hinder outsourcing. Yes, that's the point.

Take Action

Click here to Tell Congress and the White House to Stop China's Illegal and Unfair Trade Practices

Auto Parts Manufacturers Are Being Undercut

Through a range of unfair, illegal, and predatory trade practices, China is seeking to corner yet another industry and drive American workers out of their jobs. This time, the target is the auto parts manufacturing sector, and the pattern is the same as we have seen in sector after sector.

Democracy v. Plutocracy, Unions vs. Servitude

Dave Johnson — Thu, 26 Jan 2012 21:25:38 -0500

Servitude: "a condition in which one lacks liberty especially to determine one's course of action or way of life"

Democracy: "a government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections"

Plutocracy: government by the wealthy

Labor union: an organization of workers formed for the purpose of advancing its members' interests in respect to wages, benefits, and working conditions

You may have seen the recent flurry of stories about how high-tech products are made in China. The stories focus on Apple, but it isn't just Apple. These stories of exploited Chinese workers are also the story of how and why we -- 99% of us, anyway -- are all feeling such a squeeze here, because we are suffering the disappearance of our middle class. Our choice is democracy or servitude.

Working In China

A collection of excerpts from the Charles Duhigg and David Barboza story, Human Costs Are Built Into an iPad and the Charles Duhigg and Keith Bradsher story, How the U.S. Lost Out on iPhone Work both from the NY Times:

Rousted from dorms at midnight, told to work:

Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“Work hard on the job today or work hard to find a job tomorrow.”

Banners on the walls warned the 120,000 employees: “Work hard on the job today or work hard to find a job tomorrow.”

(How close is that to the very definition of servitude?)

Long shifts, legs swollen from standing:

Shifts ran 24 hours a day, and the factory was always bright. At any moment, there were thousands of workers standing on assembly lines or sitting in backless chairs, crouching next to large machinery, or jogging between loading bays. Some workers’ legs swelled so much they waddled. “It’s hard to stand all day,” said Zhao Sheng, a plant worker.

Write confessions if late:

Mr. Lai was soon spending 12 hours a day, six days a week inside the factory, according to his paychecks. Employees who arrived late were sometimes required to write confession letters and copy quotations. There were “continuous shifts,” when workers were told to work two stretches in a row, according to interviews.

Injuries from speed-up toxics:

Investigations by news organizations revealed that over a hundred employees had been injured by n-hexane, a toxic chemical that can cause nerve damage and paralysis.

Employees said they had been ordered to use n-hexane to clean iPhone screens because it evaporated almost three times as fast as rubbing alcohol. Faster evaporation meant workers could clean more screens each minute.

American companies forcing Asian suppliers to squeeze workers:

“You can set all the rules you want, but they’re meaningless if you don’t give suppliers enough profit to treat workers well,” said one former Apple executive with firsthand knowledge of the supplier responsibility group. “If you squeeze margins, you’re forcing them to cut safety.”

The Results For The 1%

A series of recent newspaper headlines tells the story of how China's working conditions benefit the 1% here.

NYT: Apple's Profit Soars‎

CBS Moneywatch: Apple shares close at record high

SF Chronicle: Apple CEO's Stock Awards Lift Compensation to $378 Million

ZDNet: Apple: made in China, untaxed profits kept offshore. We don't even get to tax the profits from moving our jobs to China, to use for schools, roads, police, etc.

The Results For The 99%

Headlines like these show how things are going better and better for the 1%. But what happened to our middle-class prosperity? We allowed companies to move jobs and factories across the borders of democracy to places where workers are exploited, calling that "trade." This enabled the breaking of unions and the weakening of our democracy.

The threat is in the air: "Shut up and take the wage cuts or we will move your job to China." How is that threat used on us? Here is an example: We have heard the stories of Mitt Romney's company Bain Capital, and how it "earned" its millions. According to the Christian Science Monitor, this is the story of what happened when a Bain-owned company "came to town":

The new owner, American Pad & Paper, owned in turn by Bain Capital, told all 258 union workers they were fired, in a cost-cutting move. Security guards hustled them out of the building. They would be able to reapply for their jobs, at lesser wages and benefits, but not all would be rehired.

Workers in countries like China where people have no say have low wages, terrible working conditions, long hours, and are told to shut up and take it or they won[t have any job at all. They are given no choice.

Increasingly workers here have their wages, hours, benefits, dignity cut and are told to shut up and take it or their jobs will be moved to China. Because we are pitted against exploited workers in countries where people have no say, we have no choice.

The unions are weakened, the government doesn't enforce or weakly enforces labor laws and regulations, age, gender or race discrimination laws, worker safety laws, so workers are placed in a terrible squeeze. Workers who try to organize unions are isolated, moved, smeared, fired, humiliated, whatever it takes.

This quote by Steve Jobs is from How the U.S. Lost Out on iPhone Work,

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

Democracy Brought Us Prosperity

We used to be a democracy, where everyone used to have a say in things. Because we had a say we built up a country with good schools, good infrastructure, good courts, and we made rules that said workers had to be safe, get a minimum wage, overtime, weekends… we protected the environment, we set up Social Security. We took care of each other. This made us prosperous. A share of the prosperity for the 99% was the fruit of democracy.

China, on the other hand, is not a democracy, and workers in China don't really have a say. So they don't make much money, they don't have good working conditions, the environment isn't protected, etc.

We Used To Protect Democracy

We used to protect our democracy. We used to put a tariff on goods coming in if they were made by people who didn’t have the ability to speak up and better their condition. We’d let the goods in but we would use a tariff to strengthen our country, our infrastructure, our schools – our democracy. This brought us prosperity.

For some reason, we started letting our companies move our factories over there, forcing our workers to compete with workers who have no say. We got tricked, by people who call that "trade," and said it would be good for us. (Like cutting taxes for the wealthy "job creators" is good for us.)

We opened the borders and let the big companies move the jobs, factories and industries over the border of our democracy, to places where workers don't have a say, so they are exploited. And the result was the big corporations were able to come back and cut our pay, and get rid of our pensions, and tell us, "take it, shut up, or we will move your job, too." We made the wages and working and conditions and environmental protections prosperity that democracy brings into a cost. We turned ourselves into a cost. We made democracy a competitive disadvantage.

Plutocrats Say Shed Benefits Of Democracy

Plutocrats say we need to shed the benefits of democracy and become more like China if we want to compete. They say get rid of regulations, employee protections, environmental protections, good wages, benefits like pensions and time off, etc... They say that We, the People (government) "get in the way of doing business." They say the taxes that pay for good infrastructure and schools and police and courts and services like Social Security and care for the disabled and health care for children "take money out of the economy" but they mean these take some of the money that they have been taking from the economy.

Democracy Is The Best Economics

Look at the primary target of the corporate/conservatives: unions. That should tell you something. This is a power confrontation. This is the power of the 1% overcoming the power of the 99%.

Democracy is the power of the 99% to make the decisions, and to build structures that protect us from exploitation by the wealthy and powerful. This confrontation is the story of the origin of our country -- how We, the People confronted the power and corruption of the British aristocracy, overcame that power, and built a country of, by and for the people.

Democracy and the taxes it enabled us to ask from the wealthiest is what enabled us to build the infrastructure and schools and everything that enabled our prosperity. The regulations of democracy are what enable our smaller businesses to compete with the giants. The shared prosperity -- redistribution of wealth -- is what enabled the middle class to grow, and turned us into the most prosperous country and largest market in the world.

Unions

Unions are about building up the power of groups of people, to confront and overcome the advantages of wealth and the power wealth brings to a few. When a union is strong enough to be able to confront the power of big corporations the result is that the 99% get a share of the pie. When unions are strong we all get better wages and better working conditions and a say in how we are treated, whether we are in unions or not. The benefits flow to the rest of the economy.

It would be nice if our system worked well enough that we didn't need to organize unions on top of the structure of laws and regulations, but it is just the fact of life that the wealthy and powerful and their corporations have throughout our history been able to exert tremendous influence over legislative bodies, again and again. So to fight that working people organize and build these organized unions of people, and leverage that power of the group to demand wages and benefits and weekends and a share of the prosperity. The story of the power confrontation between unions of working people (99%) and the large corporations (1%) is the story of how we built a middle class that brought us the prosperity we enjoyed.

It is not just a coincidence that the weakening of the unions coincides with the decline of the middle class. It is not just a coincidence that the current rise of the plutocrats brings in a swarm of anti-union legislation. It is not just a coincidence that the times when our democracy is strongest we all do so much better. And now, when our demcoracy has been weakened by the money and power of the 1% and their corporations, the rest of us are so much worse off.

Not US v. China

This is not about US workers and markets vs China. Working people in all countries are at risk when their countries trade with countries where workers are exploited. China's huge trade imbalance is threatening the world's economy. The loss of manufacturing to countries that exploit workers is threatening workers in many countries.

The US market is still large, and the US can still demand that imported goods be made according to better standards for workers. The rest of the world can also demand that China's workers be brought up to international standards. And we can certainly hold companies like Apple accountable, and demand that they only buy from suppliers that treat and pay workers according to international standards, because allowing companies to cheat, exploit workers and commit fraud drives the good companies out of business.

This is not about taking jobs back from Chinese workers! This is about demanding they be paid fairly and given a say in their workplaces! This is about not exploiting people there or here!

Trade can be an upward spiral, rather than a lever for exploitation of the 99% by the 1%. If Chinese workers are given a say and paid fairly then they can buy things we make and we can keep buying things they make.

Unions = Democracy = Middle Class = Shared Prosperity

Jon Stewart explains:

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Can We 'Insource' Jobs?

Dave Johnson — Tue, 10 Jan 2012 13:51:34 -0500

President Obama will host a forum on insourcing jobs Wednesday. The forum will feature leaders of several companies who have already shifted jobs back home and are encouraging others to do the same. According to the White House,

On Wednesday, January 11, 2012, President Obama and Vice President Biden will host an “Insourcing American Jobs” forum at the White House focused on the increasing trend of companies choosing to “insource” jobs and invest in growing in the United States.

As part of the “Insourcing American Jobs” forum, the President will meet with business leaders, as well as experts on the topic, to discuss why it’s competitive to locate in the United States and what more can be done to work with companies to take similar steps to insource American jobs. Following the meeting, the President will deliver remarks to a group that will include leaders from the government and the private sector that are taking steps to encourage companies to insource and invest in America. In the afternoon, Cabinet officials will host panel discussions with both small and large businesses and experts on insourcing and investing in America.

Leading up to this White House forum, the President said in his Weekly Address, "On Wednesday the White House will host a forum called “Insourcing American Jobs.” We’ll hear from business leaders who are bringing jobs back home and see how we can help other businesses follow their lead."

Headwinds

There are still headwinds pushing against efforts to bring jobs back. While China has allowed its currency to appreciate a bit, it is still undervalued by as much as 30% to 40%, which means goods made in China are priced 30% to 40% lower than goods made here. That's even before the effect of Chinese subsidies, trade violations, suppression of labor rights, cost savings from allowing environmental degradation and other advantages, including their massive investment in infrastructure, are taken into account.

The Wall Street Journal highlighted another problem for manufacturing: In spite of conservative complaints about debt, in truth the safety of U.S. currency makes it attractive and therefore "stronger," especially now, with the worries over the euro. This "flight to safety" has the reverse effect of China's currency manipulation. Where China manipulates its currency to make it "weaker," the strength of the U.S. dollar increases the price in international markets of goods made in the U.S. The WSJ explains, in U.S. Factories Could Suffer From Dollar’s Appeal,

Being a safe haven can be a drag. The euro zone remains the albatross around the global economy’s neck. Any hint about default, a euro-zone break up or banking collapse sends skittish investors into the secure embrace of the U.S. dollar.

... A strong dollar may enhance the U.S.’s sense of pride. But it will be a headwind for U.S. manufacturing.

That isn’t because a weak euro will cut U.S. exports to Europe. The euro zone is in recession and won’t be buying much from any nation.

The challenge will come in emerging markets that have the money and pent-up demand for foreign-made goods.

... A weak euro will give European producers a price advantage in emerging markets. This is especially true for commodity materials, such as chemicals and paper, that compete on price more than brand-name preference.

Can insourcing brings jobs back? Michael Mandel asks at the Wall Street Pit, Can Insourcing Be A Major Source of Job Creation?

Can insourcing be a major source of job creation for the U.S.? The answer is yes, with a caveat. Widespread insourcing–or import recapture, as I like to call it–won’t happen without some help from government policy. In particular, the main role of the government is to provide better data about the relative cost of insourcing vs outsourcing.

Why would better statistics help create new jobs in the U.S. and accelerate insourcing? The reason is hysteresis. Hysteresis is defined as a “lag in response” when the forces acting on a situation have changed. Originally hysteresis worked in favor of keeping jobs in this country, because businesses didn’t want to switch their production to a country thousands of miles away, even if it might be cheaper.But now, with production firmly established in China, India, Mexico, and other low-cost countries, hysteresis is working against the U.S.

Mandel says that the loss of manufacturing ecosystem will make it difficult to bring these jobs back. We have lost suppliers, we have lost some of the "ecosystem" as we "hollowed out" our own manufacturing and our smaller manufacturers will find it very expensive to find the suppliers, etc. if they wish to return manufacturing here. Government can help this by providing better information:

Assuming that production costs really are converging, better information would make it easier for companies to justify the decision to bring jobs back to this country. Right now the safe decision for executives is to continue sourcing from China and India, since they are generally accepted to be ‘low-cost’ countries. It’s like they used to say, you can’t get fired for buying from IBM. It’s the same today–execs can’t get fired for buying from China and India, because everyone assumes that prices are lower there.

In For 2012 Let's Restore Our "Industrial Commons", I explained this phenomenon,

We have been dismantling our "industrial commons." By sending manufacturing out of the country we have been taking apart the supply chains and abandoning the expertise and skills and culture that go with it.

Other Warnings

Last year former Intel CEO Andy Grove sounded a warning about this problem. In How to Make an American Job Before It's Too Late. Grove wrote that we are not just losing jobs to China, we are losing the "chain of experience" that enables new companies and industries to form and to create new jobs and argues for a national economic strategy to preserve our manufacturing and technology base. He lays out a plan: "rebuild our industrial commons,"

The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.

We have to start now rebuilding the manufacturing ecosystem - the "industrial commons" that helps us make things here.

China Commission Report - A Bit Scary

Dave Johnson — Wed, 16 Nov 2011 14:19:51 -0500

Bear with me here, this gets interesting ... and a bit scary. The 2011 REPORT TO CONGRESS of the U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION has been released. From the press release:

The report covers the U.S.-China economic relationship, including the impact of China’s growing State-Owned Enterprises, intellectual property rights violations, and forced technology transfers to China. The report also details China’s military modernization, including recent developments over the past year, the People’s Liberation Army’s “area control” military strategy, and China’s growing space capabilities.

Here are some hilights partly quoting from the release:

Piracy: China has yet to create a system that effectively protects intellectual property; something that is required of all WTO members. But U.S. business software companies still report that China is the world’s largest source of pirated software. About 8 of 10 computers in China still run counterfeit operating system software.

Trade: China has stepped backward from its original promise to lower trade barriers and to treat foreign products and services fairly. ... [They] force the transfer of technology to Chinese firms. These policies ... strike at the heart of America’s greatest economic strength – its ability to innovate.

State ownership: ... the Chinese government in the past several years has returned to relying on a system of state ownership and control of major sectors of its economy. The government directs a vast array of subsidies to favored industries and seeks to nurture particular technologies behind protective barriers. This is contrary to the spirit, and in many cases the letter, of China’s WTO commitments.

Military: This year also marked several milestones for China’s decades-long military modernization efforts, ... a defense budget that has averaged 12 percent growth over the past decade. China has recently achieved several military “firsts”: it flight tested its first stealth fighter, conducted a sea trial of its first aircraft carrier, and made progress towards deploying the world’s first anti-ship ballistic missile.

... the Commission continues to be concerned with the opacity of China’s military development and intentions... And, in particular, our report notes China’s development of its cyber capabilities, focusing on the growing evidence that Beijing sponsors or condones computer network intrusions against foreign commercial and government targets. When combined with the military’s excessive focus on other disruptive military capabilities, such as counterspace operations, it presents an image of Chinese intentions that diverges significantly from Beijing’s official policy of peaceful development.

61 House Republicans Co-Sponsored China Currency Bill, Now Side With China

Dave Johnson — Wed, 19 Oct 2011 10:40:56 -0400

Last week, in These Are The House Republicans Blocking The Crackdown On China Currency Manipulation. Call Them. I named 61 House Republicans who had co-sponsored the China currency bill, but who now side with China by refusing to help force a vote on the bill. The bill has passed the Senate and Republican leaders are refusing to allow a vote in the House. This bill means jobs. This bill means confronting China over their trade cheating. Call these members of Congress and demand that they side with American workers instead of China.

From last week's post,

We buy a lot from China, and they don't buy much from us. Some call that "trade." The result is that our jobs, factories, companies, industries and wealth are moving to China. One very big thing we can do about this right now is to confront China over their currency manipulation and the Senate passed a bill to do just that. The House leadership, under the control of lobbyists siding with China, refuses to allow the bill to come up for a vote. You can contact co-sponsors of the bill and ask them to sign a "discharge petition" that will make that vote happen.

Why Is This Important?

From Trade Deals Pass Congress -- China Currency Bill More Important Than Ever,

Congress just passed three more NAFTA-like trade deals, so our country's trade deficit is going to get even worse. And pressure on working people to accept pay and benefit cuts and longer and harder working hours is going to get even worse. And the rewards to the top 1%, at the expense of the rest of us, are going to get even greater. But we can still win the fight over China's manipulation of its currency. If we win this it lessens the difference between prices of goods made there and goods made here and can bring some jobs, factories, countries, industries and wealth back to the 99% of our country that doesn't benefit from these trade deals.

... China manipulates its currency to keep it "weak" (low) compared to the "strong" dollar. This means that goods made in China cost much less - up to 40% less - than goods made here, even before any wage differentials, exploitation of the environment, trade cheating, special subsidies and other trade violations are taken into account. China does this in order to capture the jobs, factories, companies and industries that make a country strong. We have let them do this for many years, leading to the economic situation we find ourselves in today.

One reason this continues is that big companies can threaten workers here with moving a job or factory there if they don't go along with big cuts in wages and benefits and working standards -- or just move the factory or company to take advantage of the differential. This benefits a wealthy few in the short term, and China in the long term after those wealthy few have sold the rest of out and cashed out for themselves.

This trade situation with China, while greatly enriching the top 1% here (and there), has hurt the rest of us so much, and drained so much wealth from the country, that even some Republicans are willing to support doing something about it. There are 61 Republican cosponsors of the bill to confront China over their currency manipulation!

The Club For Growth, a Wall Street front-group that backs China's positions on these issues, has demanded that Republicans side with China on this, and has called it a "litmus test." One Republican who actually did sign the discharge petition to force the House to vote, Harold Rogers, was forced by House leadership to remove his name!

What You Can Do

There are 61 Republican members of the House of Representatives who co-sponsored legislation to confront China over their currency manipulation: Currency Reform for Fair Trade Act (HR639). Contact them and ask them to sign the "discharge petition." They are:

Tim Murphy (PA)
Todd Aiken (MO)
Steve Austria (OH)
Lou Barletta (PA)
Brian Bilbray (CA)
Rob Bishop (UT)
Mo Brooks (AL)
Dan Burton (IN)
Shelley Moore Capito (WV)
Howard Coble (NC)
Chip Cravaack (MN)
Rick Crawford (AR)
Charles Dent (PA)
Jo Ann Emerson (MO)
Michael Fitzpatrick (PA)
Randy Forbes (VA)
Jeff Fortenberry (NE)
Jim Gerlach (PA)
Chris Gibson (NY)
Sam Graves (MO)
Morgan Griffith (VA)
Gregg Harper (MS)
Duncan Hunter (CA)
Bill Johnson (OH)
Tim Johnson (IL)
Walter Jones (NC)
Mike Kelly (PA)
Blaine Luetkemeyer (MO)
Steven LaTourette (OH)
Frank LoBiondo (NJ)
Donald Manzullo (IL)
Tom Marino (PA)
Thaddeus McCotter (MI)
Patrick McHenry (NC)
David McKinley (WV)
Patrick Meehan (PA)
Candice Miller (MI)
Sue Myrick (NC)
Tom Petri (WI)
Joe Pitts (PA)
Todd Platts (PA)
Jim Renacci (OH)
Scott Rigell (VA)
Dana Rohrabacher (CA)
Harold Rogers (KY)
Mike Rogers (AL)
Mike Rogers (MI)
Dennis Ross (FL)
John Runyan (NJ)
James Sensenbrenner (WI)
John Shimkus (IL)
Bill Shuster (PA)
Marlin Stutzman (IN)
Glenn Thompson (PA)
Michael Turner (OH)
Lynn Westmoreland (GA)
Ed Whitfield (KY)
Joe Wilson (SC)
Rob Wittman (VA)
Frank Wolf (VA)

These Are The House Republicans Blocking The Crackdown On China Currency Manipulation. Call Them.

Dave Johnson — Wed, 12 Oct 2011 15:08:26 -0400

We buy a lot from China, and they don't buy much from us. Some call that "trade." The result is that our jobs, factories, companies, industries and wealth are moving to China. One very big thing we can do about this right now is to confront China over their currency manipulation and the Senate passed a bill to do just that. The House leadership, under the control of lobbyists siding with China, refuses to allow the bill to come up for a vote. You can contact co-sponsors of the bill and ask them to sign a "discharge petition" that will make that vote happen.

As Steven Capozzola explained yesterday in Why Should Congress Pass China Currency Legislation?,

What few seem to understand is that we are already in a trade war with China. It’s not one that we launched, nor one that we wanted. But China’s undervaluation of its currency, which violates world trade rules, is part of a deliberate, well-coordinated strategy to undercut U.S. manufacturers.

Currency manipulation has helped fuel China’s massive rise as a manufacturing powerhouse. And it’s also helped drive our massive trade deficit with Beijing, which reached a record $273 billion in 2010. This huge trade gap has cost 2.8 million U.S. jobs over the past decade—jobs in every state and congressional district, jobs in manufacturing, jobs in high-tech sectors… It’s a terribly one-sided trade relationship.

How did this happen? China intervenes in the currency market to buy dollars and set its own currency at an artificially low exchange rate. This makes Chinese goods 40% cheaper when entering the U.S. market while making our goods significantly more costly when exported to China.

... This is a bipartisan issue, one that marks a clear chance for Congress to stand up to a very protectionist, predatory campaign. China can purchase dollars, which are freely traded, in order to set its currency peg. But conversely, it is illegal to buy China’s closely held currency.

I wrote yesterday, in Will The U.S. House Side With China On Currency?

If we want to bring jobs and wealth back to the United States for the 99% of us who have been under extreme pressure we're going to have to do something about trade. The huge trade imbalances -- especially with China -- are sucking our jobs and factories and companies and industries and money out of the country. The biggest thing that can be done right now is to take action on China's currency manipulation.

...Speaker of the House Boehner is siding with China and is refusing to allow it to come before the House for a vote. (Reminder to self: do some research into the Citizens United Supreme Court decision enabling foreign money to influence our elections.)

The bill can be forced onto the House floor using a "discharge petition." You can take action to help get Republicans to sign the discharge petition so it comes to the floor. Click here to contact members of Congress and ask them to sign this discharge petition and end Chinese currency manipulation now.

What You Can Do

There are 61 Republican members of the House of Representatives who co-sponsored legislation to confront China over their currency manipulation: Currency Reform for Fair Trade Act (HR639). Contact them and ask them to sign the "discharge petition." They are:

Will The U.S. House Side With China On Currency?

Dave Johnson — Tue, 11 Oct 2011 07:14:24 -0400

If we want to bring jobs and wealth back to the United States for the 99% of us who have been under extreme pressure we're going to have to do something about trade. The huge trade imbalances -- especially with China -- are sucking our jobs and factories and companies and industries and money out of the country. The biggest thing that can be done right now is to take action on China's currency manipulation. Here are two things you can do today.

The Senate votes today on a bill to push back against China's (and a few other countries') currency manipulation, and the bill is expected to pass. The bill also has to pass the House and be signed by the President before it can take effect. CNN explains, in Senate targets China's currency,

For years, U.S. officials have been pressuring China to allow its renminbi -- or yuan -- to appreciate more rapidly. Between 2008 and 2010, China had pegged the yuan to the dollar, keeping its value artificially low and Chinese exports comparatively cheap.

Besides hiking tariffs on Chinese goods, the bill also takes aim at the administration, which already has some ability to point out nations that purposefully manipulate their currency but has avoided doing so.

The bill would:
-- Force the administration to officially red-flag nations whose currencies are undervalued for long periods with the term "fundamentally misaligned currency."
-- Make it tougher for the Commerce Department to ignore calls to investigate accusations of undervalued currencies.
-- Force the administration to give Congress a list of nations with "misaligned" currencies.
And if a nation is accused of having an undervalued currency and makes no effort to rebalance the currency for three months or more, that's when the tariffs kick in.

Jobs And Wealth

It's complicated, but by manipulating its currency instead of letting it "float" to world market value, China can sell goods to other countries at a much lower price than they would cost without the manipulation. In effect China puts its own money into the currency markets, which works out the same as subsidizing the products directly so they have a lower price, in order to get the orders. While this might seem like a dumb thing to do the long-term result is that China is buying themselves a very big chunk of the world's manufacturing business. In the long term this pays off for them in jobs, industries, wealth and power.

And as we now know, the result for us is a big loss of jobs and wealth and factories and companies and industries -- in other words, our ability to make a living in the world.

The House

Even as the bill likely passes the Senate today, Speaker of the House Boehner is siding with China and is refusing to allow it to come before the House for a vote. (Reminder to self: do some research into the Citizens United Supreme Court decision enabling foreign money to influence our elections.)

The bill can be forced onto the House floor using a "discharge petition." You can take action to help get Republicans to sign the discharge petition so it comes to the floor. Click here to contact members of Congress and ask them to sign this discharge petition and end Chinese currency manipulation now.

Tell Congress to stop China's cheating on currency manipulation, which stands in the way of free and fair trade, job creation, and a higher standard of living for millions of Americans.

Click here to see the actual discharge petition.

The President

In his news conference last week President Obama said that China is manipulating their currency but that he doesn't want a law that is just "symbolic." He was not clear about whether he would sign this bill or not, should it pass. He said,

"...China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States. And I have said that publicly, but I've also said it privately to Chinese leaders. And currency manipulation is one example of it. [. . .] My main concern -- and I've expressed this to Senator Schumer -- is whatever tools we put in place, let's make sure that these are tools that can actually work, that they're consistent with our international treaties and obligations. I don't want a situation where we're just passing laws that are symbolic knowing that they're probably not going to be upheld by the World Trade Organization, for example, and then suddenly U.S. companies are subject to a whole bunch of sanctions. We've got a -- I think we've got a strong case to make, but we've just got to make sure that we do it in a way that's going to be effective."

So it is not clear if he intends to sign this legislation. You can sign a petition encouraging him to sign it, should it pass, and take other steps to push China to stop their trade violations. Click the following: WE PETITION THE OBAMA ADMINISTRATION TO: Take Action to Stop China’s Job-Killing Currency Manipulation.

Please take the time to urge members of Congress to sign the discharge petition, and to urge President Obama to sign the bill if&when it passes.

Seeking a Trade Rule Enforcer

Leo Gerard — Mon, 26 Sep 2011 12:09:58 -0400

Leo Gerard will be addressing the Oct. 3-5 Take Back the American Dream conference about the "Contract for the American Dream" and how we can "Stop Outsourcing the American Dream." Click here to register.

America is being played.

The U.S. allowed China to join the club of trading partners in the World Trade Organization (WTO) in 2001 under the condition that China observe club rules.

Over the past decade, however, China has profited immeasurably by ignoring, flouting and circumventing the rules barring market-distorting practices. Among the most destructive of these violations is China’s deliberate undervaluing of its currency, which makes Chinese exports to the United States artificially cheap and U.S. exports to China artificially expensive.

This nurtures Chinese industry and poisons American manufacturing.

In the trade contest with China, the referees have been absent or silent or completely craven on the issue of currency undervaluation, even as it kills U.S. factories and jobs. American workers need a trade rule enforcer. With unemployment above 9 percent, the situation is desperate. American workers can’t be played anymore.

Just last week, the Economic Policy Institute (EPI), a non-partisan think tank, issued a report showing that the trade deficit with China cost the United States 2.8 million jobs since the WTO allowed China into the trading club. Every congressional district in the U.S. lost jobs as Chinese exports to the United States overwhelmed U.S. exports to China.

The trade deficit is the difference between the value of Chinese exports to the United States and U.S. exports to China. It was $84 billion the year China entered the WTO. Last year it grew to $278 billion – a 230 percent increase.

EPI also determined that China’s currency manipulation is a major cause of the trade deficit. The report explains that China has aggressively bought U.S. dollars and other foreign exchange reserves to depress the value of the yuan. Smart move, but prohibited under WTO rules.

Without this deliberate market interference, the yuan would have risen in value over the years as China’s productivity soared. But a stronger yuan would have increased the cost of Chinese products in the U.S. and decreased the cost of U.S. exports to China. That would have quashed Chinese exports and invigorated American exports, lowering the trade deficit.

The currency manipulation is not surprising considering China’s other routine trade-distorting and rule-violating practices. These include giving government subsidies to factories that export. WTO rules permit governments to subsidize manufacturers that sell only within their own countries. But subsidized products can’t be exported because the government aid artificially lowers prices, which wrongly propels them ahead of unsubsidized products on the international market.

Developing countries often violate the rule anyway. They game the system. Everyone wants a leg up. It has served the Chinese economy and the Chinese people well. Progress for third world workers is to be celebrated. But it’s unjust when a country accomplishes it by defying rules it pledged to follow.

The United States has repeatedly imposed tariffs on China for exporting improperly-subsidized products. For example, my union, the United Steelworkers, filed a case seeking relief from subsidized Chinese passenger and light truck tires sold in the United States. Both the U.S. International Trade Commission and the U.S. Department of Commerce determined China breached the trade rules, and President Obama imposed tariffs on imported Chinese tires for three years. When China appealed the tariffs, the WTO concluded that Obama was right.

That’s enforcement.

And the result is that tire companies now are spending hundreds of millions to expand U.S. operations and hiring hundreds of U.S. workers.

But when it comes to currency manipulation, the U.S. government is all threats and no enforcement.

The U.S. Treasury Department has considered officially designating China a currency manipulator, a finding necessary before commencing sanctions. But it never did. The U.S. house and senate considered legislation but failed to pass it. And Obama asked China to allow the value of its currency to float up naturally. In June of 2010, China said it would.

But it hasn’t.

It’s more than a year later, and maybe another hundred thousand U.S. jobs lost. Washington seems to be listening only to greedy reactionaries who contend sanctions will spark a trade war.

They’re wrong. Every time the USW wins a trade case – including the tire case -- the reactionaries have wailed that the tariffs will prompt a trade war.

China won’t do it because the value of Chinese exports to the United States is four times that of American exports to China. China faces four times the risk in a trade war. The greedy reactionaries consist mainly of multi-national corporations that have outsourced production and jobs to China and are concerned only with profits and totally unconcerned about the U.S. economy and unemployment.

Another EPI study released earlier this year showed that if China and other Asian countries properly valued their currencies, as many as 2.25 million jobs would be created in the United States and the U.S. budget deficit would decline by up to $71.4 billion per year.
More jobs; lower debt – that’s why a bipartisan group of U.S. senators and congressmen introduced legislation last week to enable the U.S. Treasury Department to more easily declare a country deliberately undervalues its currency and to punish manipulators.

There can’t be any more dawdling or cowering or negotiating on this. American workers need enforcement now.

When Trade Is Out Of Balance Tariffs And Trade Enforcement Equals Jobs

Dave Johnson — Tue, 20 Sep 2011 17:30:13 -0400

A new report shows just how many jobs have been lost to "China’s currency manipulation, state-owned enterprises, heavy industrial subsidies, intellectual property theft and piracy, indigenous innovation policies, rare earth mineral export restrictions and other trade-distorting practices," and lets you look at the numbers in each Congressional district.

We have a huge trade imbalance with China, and trade imbalances that aren't as huge with several other countries. What this means is that we are buying from them and they are not buying from us. And that isn't really "trade," is it? The result of this kind of "free trade" has been a terrible bleeding of jobs from our country to countries that don't pay good wages, so they can't buy from us if they wanted to. How can any of this be good for the world economy?

Before "free trade" America had been a nice, big, prosperous market that the world wanted to sell things to. This prosperity was the fruit of our democracy. We, the People have a say here and we demanded good wages, benefits, workplace safety protections, environmental protections and all of this built a prosperous middle class. Everyone in the world wanted to sell into this market, and we were able to get concessions before letting their goods in. If countries exploited their workers we put a tariff on their goods to keep that exploitation from brings them a price advantage. It didn't make sense to make our democracy a competitive advantage on our own store shelves!

But we were talked into "trade" agreements that let companies move factories outside of the borders of our democracy, to places where people do not have a say and so are paid very little and have few protections, and then let them bring the same goods that used to be made here back here to sell at a lower price. This made democracy a competitive disadvantage and now our wages are falling and our protections are under pressure.

The China Job Loss Report

A trade deficit means jobs deficit, and a new report shows just how many jobs we're talking about.

According to a briefing paper describing the report, "since 2000 2.8 million jobs, largely in manufacturing, have been lost as a result of the growing U.S. trade deficit with China since that country’s entry into the World Trade Organization (WTO) in 2001."

The Alliance for American Manufacturing held a conference call with reporters yesterday describing the new report. From their summary:

The growing U.S. trade deficit with China has cost jobs in every one of the nation’s congressional districts, the study reported, including the District of Columbia and Puerto Rico. Between 2001 and 2010, the computer and electronic parts industry was hit the hardest, as more than 909,400 jobs were displaced. The rapidly growing number of imports of computer and electronic parts, including semiconductors and audio-video equipment, accounted for more than 44 percent of the $194 billion increase in the U.S. trade deficit with China during that time.

The report, written by EPI’s Director of Trade and Manufacturing Policy Research Robert E. Scott, cites illegal currency manipulation as a major cause of the rapidly growing U.S. trade deficit with China. Unlike other currencies, the Chinese yuan does not fluctuate freely against the dollar, but is artificially pegged in order to boost China’s exports.

China’s currency manipulation, state-owned enterprises, heavy industrial subsidies, intellectual property theft and piracy, indigenous innovation policies, rare earth mineral export restrictions and other trade-distorting practices have caused China’s share of the total U.S. non-oil goods trade deficit to soar from 69.6 percent in 2008 to 78.3 percent in 2010.

“Unless China raises the real value of the yuan by at least 28.5 percent and eliminates other trade distortions,” the report concludes, “the U.S. trade deficit and job losses will continue to grow rapidly.”

Click to see the map: Interactive map of jobs lost throughout the U.S.

The growth of the U.S. trade deficit with China since that country entered the World Trade Organization in 2001 has had a devastating effect on U.S. workers and the domestic economy. Between 2001 and 2010, 2.8 million U.S. jobs were lost or displaced. Using a new model, the study by the Economic Policy Institute reveals a first look at how the growing trade deficits cost jobs in every congressional district, including the District of Columbia and Puerto Rico. You can see data for all 437 districts by clicking on the states in the interactive map here.

Click to read the entire study: GROWING U.S. TRADE DEFICIT WITH CHINA COST 2.8 MILLION JOBS BETWEEN 2001 AND 2010