Blog

As year-end 2011 nears, the massive flow of imports into the United States. continues unabated.  In the decade ended 12/31/2010, we lost 55,000 manufacturing facilities through closings or sale to foreign owners. The pace has continued this year at about 1,000 a month, and with it the loss of many thousand jobs.

The best long-term solution is for the United States to adopt  a strong policy of balanced trade with the rest of the world, especially including China, which sends by far the most imports here. Very simply, balanced trade would limit our annual total imports to no more than our total exports. The idea was first proposed by Warren Buffet  in Fortune Magazine in 2003. He said “Our trade deficits are selling America out from under us! Balanced trade is by far the best way to stop it !” Leaders in Washington yawned, and nothing was done while we wasted trillions of dollars on trade deficits and lost millions of good jobs.

This week, we made a bold proposal to top Presidential Economic Adviser Gene Sperling to start cutting the flow of imports to the U.S. as of January 1, 2012. A voluntary program would encourage major U.S. importers like Wal-Mart and Home Depot to cut their imports by 10% in 2012 while necessary permanent legislation is readied for our next president to adopt for 2013 and beyond.

This is a rare one-time opportunity for both government and business to learn how to best shift from importing to domestic production. It’s really a new variation on “Buy American,” and it will give voters a chance to express their support for the candidate who speaks out most strongly in favor of balanced trade and the implementation that’s already begun. It can save a whole year by acting now instead of waiting until after the November elections to get started!

***

Kenneth N, Davis, Jr. also is a former U.S. Assistant Secretary of Commerce/International and former IBM vice president and chief financial officer.

***

To submit a blog to Free Speech Zone, e-mail it to bstack@usw.org. Keep it to 250 words or fewer. You MUST include your full name, hometown, and state. You may attach a photograph of yourself. Please include a phone number. This WILL NOT be published. Posting any given blog is within the discretion of the USW.  No blog using foul language (this is a family site), false information (we don’t want to get sued), or unnecessary personal attacks (again, we don’t want to get sued) will be used. Wait a reasonable period of time, then blog again! This is a Free Speech Zone.

There’s a bold way to create jobs that’s being ignored by Washington!

What’s the plan? Pass a federal law to return to our pre-1970 status of maintaining a positive overall annual balance of  trade with other trading nations.

How would that work? We’d permit total imports each year to match our own ongoing exports. Import certificates  would be issued and traded by the U.S. government to implement the new arrangement. It’s not a protectionist tariff or added cost to U.S. consumers!

Give us the figures. Right now we import $2.3 trillion a year, and we export $1.5 trillion. $300 billion of the $800 billion deficit is from petroleum imports. The remaining $500 billion goods and services deficit would return to the U.S. for production and 5 plus million new jobs! The Obama jobs creation efforts have fallen far short, and there don’t seem to be any big ideas except ones needing heavy deficit spending.

Why hasn’t this balanced trade plan been adopted? Twice, first in late, 2009 and again this year, Obama held jobs summits. He said he’d consider all credible ideas, but both times his “free trade” advisors blocked all balanced trade proposals.

Result: There’s been no action on already-available legislation- “The Balanced Trade Restoration Act.” It wasn’t adopted by former President George W. Bush. It should be updated and passed. It would create millions of new jobs.

It’s time for bold action now!

Kenneth N. Davis Jr.
President, Economic Strategy Associates, Inc.
Stamford, Ct.
Former U.S. Assistant Secretary of Commerce
Former IBM Corp. vice president and chief financial officer
Former investment banker

***

To submit a blog to Free Speech Zone, e-mail it to bstack@usw.org. Keep it to 250 words or fewer. You MUST include your full name, hometown, and state. You may attach a photograph of yourself. Please include a phone number. This WILL NOT be published. Posting any given blog is within the discretion of the USW.  No blog using foul language (this is a family site), false information (we don’t want to get sued), or unnecessary personal attacks (again, we don’t want to get sued) will be used. Wait a reasonable period of time, then blog again! This is a Free Speech Zone.

By Ian Fletcher
Adjunct fellow, U.S. Business & Industry Council

The price of living in the fantasy world of free-trade economics continues to rise for America.

Failure to recognize the pitfalls will probably mean a continuing struggle to emerge from recession, as much U.S. domestic demand leaks abroad due to the trade deficit, rather than being recycled at home. And America will continue to lose key industries: not just the primitive ones a developed nation should shed, but the high-tech jobs of the future.

Any serious discussion of free trade must confront David Ricardo’s celebrated 1817 theory of comparative advantage, whose tale of English cloth and Portuguese wine is familiar to generations of economics students. According to a myth accepted by both laypeople and far too many professional economists, this theory proves that free trade is best, always and everywhere, regardless of whether a nation’s trading partners reciprocate.

Unfortunately for free traders, it is riddled with holes, some of which even Ricardo acknowledged. If they held true, the hypothesis would hold water. But because they often don’t, it is largely inapplicable in the real world. Here’s why:

– The first dubious assumption is that trade is sustainable. But when a nation imports so much that it runs a trade deficit, this means it is either selling assets to foreign nations or going into debt to them. These processes, while elastic, aren’t infinitely so. This is precisely the situation the U.S. is in today: Not only does it risk an eventual crash, but in the meantime, every dollar of assets it sells and every dollar of debt it assumes reduces the nation’s net worth. (more…)

By Lori Wallach
Director of Public Citizen’s Global Trade Watch

The growth rate of U.S. exports to the countries with whom we do NOT have Free Trade Agreements (FTAs) has been over double that to U.S. FTA partners. That stunning finding should put an end to recent Obama administration talk about reviving three NAFTA-style FTAs leftover from the Bush era. And, it should provide impetus to finally implement President Obama’s campaign commitments to renegotiate aspects of the past FTAs, and create a new American trade pact model going forward.

The core justification for FTAs like NAFTA and CAFTA is that they boost exports. Yet Public Citizen’s recent study “Lies, Damn Lies and Export Statistics,” analyzes the actual government trade flow data. It showed that, if exports to the 17 U.S. FTA partners had only grown as much as exports to the rest of the world, the U.S. would have had an extra $72 billion in exports over the past decade. Check out this stunning graph:

Yup, U.S. FTAs resulted in a relative export penalty! Not only did U.S. manufacturing exports grow faster with non-FTA countries, but so did service sector exports. And, we have a substantial agricultural trade deficit with our FTA partners, contrary to the sales pitch about the supposed gains for our heartland farmers. (more…)

By Leo W. Gerard
USW International President

Long-suffering victim is hardly the American image.  Paul Revere, Mother Jones, John Glenn, Martin Luther King Jr. — those are American icons. Bold, wry, justice-seeking.

So how is it that America finds herself in the position of schoolyard patsy, woe-is-me casualty of China’s illegal trade practices that are destroying U.S. renewable energy manufacturing and foreclosing an energy-independent future?

Come on, America. Show some of that confident pioneer spirit. Stand up for yourself. Tell China that America isn’t going to hand over its lunch money anymore; international trade law will be enforced now.

That’s the demand the United Steelworkers (USW) union made this week when it filed a 5,800-page suit detailing how China violates a wide variety of World Trade Organization (WTO) obligations.

The case, now in the hands of the U.S. Trade Representative, shows how China uses illegal land grants, prohibited low-interest loans and other outlawed measures to pump up its renewable energy industries and facilitate export of those products at artificially low prices to places like the United States and Europe.

The U.S. aids renewable energy industries, like solar cell and wind turbine manufacturers, but no where near the extent that China does. And the American aid lawfully goes to renewable manufacturers that produce for domestic consumption. China, by contrast, illegally subsidizes industries that export, a strategy that kills off competition.

The USW recognizes and appreciates that trade with China has lifted millions there out of poverty. But truly fair trade would benefit workers in both China and the United States. And that is what the USW is demanding.

The USW is far from alone in accusing China of violations. New York Times reporter Keith Bradsher described them in a story Sept. 8, titled “On Clean Energy, China Skirts Rules.” It ends with this quote from Zhao Feng, general manger of Hunan Sunzone Optoelectronics, a two-year-old solar panel manufacturer that exports nearly 95 percent of its products to Europe and is opening offices in three U.S. cities to push into the American market:

“Who wins this clean energy race really depends on how much support the government gives.”

The U.S. isn’t providing support that violates WTO regulations. China is. And it’s  hundreds of billions — $216 billion from China’s stimulus package, another $184 billion to be spent through 2020, $172 million in research and development over the past four years.

Bradsher’s story details illegal aid given Sunzone and says that it’s common, not exceptional. It includes China turning over land to Sunzone for a third of the market price and government-controlled banks granting Sunzone low-interest loans that the provincial government helps Sunzone repay.

In addition, the USW suit notes that China, which accounts for 93 percent of the world’s production of so-called rare earth materials like dysprosium and terbium essential for green energy technology, has severely restricted their export. That practice, illegal under WTO rules, forces some foreign companies to move manufacturing to China to get access.

And when corporations move, China routinely – and illegally — mandates they transfer technology to Chinese partners, which often means U.S.-tax-dollar-supported research and development benefits China.

That is one reason China rose to first in the world in clean energy so quickly.  China now leads globally in producing solar panels. It doubled its wind power capacity in one year – 2009. Worldwide, Chinese manufacturers supply at least half of all hydropower projects and fabricate 75 percent of all compact fluorescent light bulbs.

Meanwhile, here in the United States, BP shut down its solar panel manufacturing plant in Maryland this year and Evergreen Solar of Marlboro, Mass., plans to close its American plant, eliminating 300 U.S. jobs. Both are moving manufacturing to China.

Germany’s Solar World still manufactures in Europe and the United States, and its chief executive, Frank A. Asbeck, told Bradsher the German solar industry association is investigating whether to file a suit of its own to try to stop China’s illegal practices:

“China is cordoning off its own solar market to fend off international competition while arming its industry with a bottomless pile of subsidies and boundless lines of credit.”

The Times story also says China’s “aggressive government policies” are designed to ensure “Chinese energy security.”

China’s illegal aggression to secure its energy independence and dominate world production of green technology threatens the energy security of the United States.

America turned to renewables not just to diminish climate change but also to reduce dependence on foreign oil, an addiction that has entangled the U.S. in costly and bloody wars.

If the United States can’t build its own renewable energy products, it will forfeit the next generation high technology industry and good manufacturing jobs, and it will remain dangerously beholden to foreign nations for energy.

China agreed to follow international regulations when it joined the World Trade Organization. This pledge was crucial because China’s economy is government-controlled, very different from the free market economies of the United States and most Western nations.

Faced with blatant rule-flouting that has cost USW members their jobs and threatens to cost their children high-technology manufacturing of the future, the USW is demanding the American government put a stop to it.

That is how a true American acts. Americans have a sense of justice. They follow the rules and expect trading partners to do the same. When they don’t, Americans do something about it.

We all know that the nation’s annual trade deficit is figured by deducting our total exports to the rest of the world from our imports from the many exporting nations.  Our current exports are about $1.6 trillion, with imports of about $2.4 trillion, for a U.S. trade deficit of $800 billion annually.

Those deficits are so great that the U.S. government must borrow about $2 billion abroad every day to cover them.  Most U.S. economist are “free traders” who ignore this problem or discard the idea of introducing critically-needed balanced trade legislation. Instead they foolishly want to go on repeating failed efforts like jaw-boning China to raise the value of its currency.

For the decade that ended on 12/31/09 our total trade deficit and related borrowing was a shocking $6 trillion! It’s a ticking time bomb. When it explodes and America’s world financial position crumbles, the ensuing chaos will make the recent financial crisis seem like child’s play. Beyond even more massive unemployment and a shattered economy, we’d undoubtedly lose our status as a reserve currency, and with it lose the freedom for the U.S. to print money to cover our national debt the way we can now.

What’s the best and only effective way to recover a fair share of our own domestic market and create millions of jobs?  Answer:  Enact balanced trade legislation based on “The Balanced Trade Restoration Act of 2006” drafted by  Senators Byron L. Dorgan and Russ Feingold, but not passed under President Bush. Under this legislation, $800 billion of annual production would come back to U.S. companies while creating 5 million jobs.

That’s far more than any new stimulus program can do, especially with the current limits on deficit spending. No deficit spending at all is needed here, and the plan is fully in accord with all WTO Rules. Best of all, our ruinous trade deficits and borrowing will be eliminated!

Kenneth N. Davis, Jr.
President, Economic Strategy Associates, Inc.
Stamford, Conn.
Former U.S. Assistant Secretary of Commerce

***

To submit a blog to Free Speech Zone, e-mail it to bstack@usw.org. Keep it to 250 words or fewer. You MUST include your full name, hometown, and state. You may attach a photograph of yourself. Please include a phone number. This WILL NOT be published. Posting any given blog is within the discretion of the USW.  No blog using foul language (this is a family site), false information (we don’t want to get sued), or unnecessary personal attacks (again, we don’t want to get sued) will be used. Wait a reasonable period of time, then blog again! This is a Free Speech Zone.

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Fred Hochberg, president of the Export-Import Bank of the U.S., thinks I’m wrong to worry about a trade war, and that the president’s goal for doubling U.S. exports over the next five years is on track. Writing here on HuffPost, Hochberg says:

Reich’s argument contradicts the message I’ve heard from leaders of the world’s emerging economies who know that American innovation will help sustain their rapid infrastructure growth.
According to data released yesterday by the Department of Commerce, U.S. exports of goods and services increased by 17.7 percent during the first five months of 2010, compared to the same period last year. If this trend continues, the President will meet his goal of doubling exports in five years. The key: targeting export markets strategically.

At the Export-Import Bank, we’re focused on countries that have weathered the global recession and want to grow in areas where U.S. companies have a comparative advantage…. Commerce’s May data illustrate the potential of an export strategy tailored to countries and sectors that suit our strengths.
With due respect, Mr. Hochberg is being misleading. The same Commerce Department report shows that America’s trade deficit with the rest of the world has continued to widen. American businesses sold $152.3 billion of goods and services overseas in May (an increase of just over 2 percent from April) but the U.S. imported $194.5 billion (a jump of 2.9 percent). (more…)

For 110 years America has reigned as the world’s number one manufacturing nation. Next year, China is expected to wrest that title from the United States.

Last year, the U.S. manufactured $1.7 trillion worth of goods; China fell second at $1.6 trillion. Next year, China is expected to edge out America with production worth $1.87 trillion.

America will be Number 2. And unlike the Dutch at the world cup, America is losing the crown it held for a century, not seeking a first-time anointment.

It doesn’t have to be this way. China’s manufacturing sector is using the equivalent of steroids to attain the title. It deliberately devalues its currency, an outlawed practice on international markets. Devaluation means China’s exports are artificially cheap in the U.S. and American exports to China are falsely expensive. It’s no puny sum either. The discount for Chinese products sold in America is as much as 40 percent. – 40 cents on the dollar.  

Allowing China to devalue its currency devalues American workers and businesses. Chinese currency manipulation is driving American manufacturers out of business and America workers into unemployment. For 110 years, American factories and workers have proved they can compete and win against all comers in the world. They can continue to do that if Congress places tariffs on Chinese exports to the U.S. or taxes them to compensate for the 40 percent price break the Chinese government arranges for its manufacturers.

Inaction means the U.S. government disrespects American workers and manufacturing in a way that the Chinese government does not. China deliberately manipulated its currency value to protect and preserve Chinese manufacturing jobs as the worldwide recession deepened in 2008.

Beginning in 2005, China had begun to allow the value of its currency to float up against the dollar on international currency markets. It rose about 7 percent a year, for a total of about 20 percent until 2008. Then, as the effects of the worst recession since the Great Depression hit China and tens of thousands of Chinese factory workers lost their jobs, China froze its currency’s value at 6.83 Yuan per dollar. At the same time, China continued to print Yuan for the sole purpose of buying dollars. In 2009, China bought about $450 billion-worth of dollars. This practice artificially raises the value of dollars and suppresses the value of Yuan.

Now China’s economy is booming again. Its exports in May increased by nearly 50 percent over a year earlier. Meantime, the American economy is stalled. The U.S. manufacturing sector has lost 2.1 million jobs – 16 percent of its total, since the recession began in December of 2007. Earlier this year, President Obama set a goal of doubling U.S. exports in five years, a feat that would pump up U.S. manufacturing and U.S. manufacturing jobs. But that goal will be impossible to reach if Congress doesn’t intervene to offset Chinese currency manipulation with tariffs.

In June, China announced that it would begin to permit the value of its currency to rise again. But since then, the value has floated up less than one percent — a trifling amount when it’s undervalued by 40 percent.

China injures its own workers with its currency manipulation as well. Undervaluing the Yuan suppresses their purchasing power. And it contributes to inflation in China, which further reduces workers’ buying power.

But it sustains Chinese manufacturing. It’s a predatory economic practice. China is feeding its economy by killing and devouring American manufacturing jobs.

Last week, in a long awaited report, the U.S. Treasury Department labeled China’s currency as undervalued. That’s fine, but it won’t save the U.S. from losing its title as world’s greatest manufacturer.

Diplomacy has failed to preserve American manufacturing and American jobs. China did what it felt was necessary to shelter its factories. Congress must flex some muscle to defend American manufacturers.

Legislation has been introduced in Congress that would impose tariffs on Chinese imports to offset the effect of the currency manipulation. It wouldn’t give American industry an unfair advantage; it would just take the steroids away from Chinese manufacturers.

The bills in both the House and Senate have bi-partisan support. This isn’t a liberal or conservative issue. This is a jobs bill that won’t raise the deficit.

Reps. Tim Ryan, D-Ohio, and Tim Murphy, R-Pa, co-sponsored the Currency Reform for Fair Trade Act, and Sens. Charles E. Schumer, D-NY, Debbie Stabenow, D-Mich., and Lindsey Graham, R-SC, sponsored the Currency Exchange Rate Oversight Reform Act.

Today is National Currency Manipulation Call-In Day. Tell your Senators and Congressman to stop the devaluation of U.S. manufacturing and U.S. workers. Tell them to pass these bills immediately or attach them to other legislation that will pass immediately. Sign this petition.

Tell them America is no Number 2.

By Robert L. Borosage
Co-Director of the Campaign for America’s Future

President Obama touted his National Export Initiative this week, boasting that in the first quarter of this year, exports were up 17% from a year ago. Increased exports abroad generate jobs at home. Given the failure of the Senate to pass badly needed jobs bills, the collapse of consumer confidence, plunging home sales, declining factory orders, continuing layoffs at the state and local level, and the weak June jobs numbers, a little good news comes as welcome relief. At a time when jobs are in short supply,” Obama said Wednesday, “building exports is an imperative.” And give the president some credit for beginning to focus government on the question of exports.

But don’t break out the spirits. Exports are a delectable appetizer, but the full meal is less digestible. Imports count too. Buying stuff abroad that could be made here displaces jobs. What matters is the balance of trade, not simply the rise or fall of exports. With consumers tightening their belts, businesses sitting on over a trillion in retained profits, and government slated to cut back its spending, we would need record trade surpluses to generate jobs

And there is the rub. Exports are up from early last year when the economy was still in freefall and, not surprisingly, so too are imports. The problem is that the latter are much greater than the former, and our trade deficits are on the way back up. (more…)

By Dave Johnson
Fellow with Campaign for America’s Future

In his State of the Union speech President Obama announced the National Export Initiative, a campaign to double US exports within 5 years. Today he gave a progress report and announced the members of his Export Council, with a number of CEOs (and one labor leader) including Alan Mulally of the Ford Motor Company, Scott Davis of U.P.S., Glenn Tilton, United Airlines Chairman and CEO and Robert A. Iger of the Walt Disney Company.

The White House says that with a 17% increase in exports in the first 4 months of the year we are on track to double exports within 5 years.

Announcing the Export Council, Obama said, “We’ve got to compete for those customers. We mean to compete for those jobs and compete to win.” For example, they are setting up “business assistance centers” abroad to help American companies get business, and increasing credit through the Export/Import bank.. They are fighting barriers that other countries have set up to keep out American products, so far increasing our export of things like pork by $1 billion. “When we give other countries the privilege of free and fair access we expect it in return.” (more…)