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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. (more…)

Around the middle of this month, after all the data is in and counted, the United States Census Bureau will announce our 2011 trade deficit with China, and it will be the largest trade deficit any country has ever had with another country in the history of the world. I guess it’s good to be number one in something! Based on current annualized data — we already have the numbers though November — it will total $297 billion. This is an amazing number, far larger than the gross domestic product of most U.S. states. By way of example, the gross domestic product of Indiana in 2010 was $245 billion, the gross domestic product of Connecticut was $211 billion, and the GDP of Nebraska was $80 billion. It’s as if we’ve taken the economic activity of a few of our states and turned it over to China.

Almost all of this trade deficit is in manufactured goods, and it is getting worse every year. It is not just commodity items like steel or paper (though these products are critical to our economy in themselves), or what might be considered low-end products like textiles and toys. It is also high technology products. In fact, the high-tech trade deficit with China for 2011 will be about $109 billion, another all-time record. This is for products like information and communications equipment, opto-electronics, weapons, and advanced materials.

The trade deficit is terrible and has a devastating effect throughout our economy, and the accompanying employment effects are even worse. The National Science Board reported last week that we have lost 28% of our high-tech manufacturing jobs during the last decade. Overall, manufacturing employment has dropped about 33% during the same period.

Along with the trade deficit comes striking symbolic losses such as the fact that the Martin Luther King statue on the Washington Mall was made in China, the glass in the rebuilt World Trade Center in New York will come from China and the steel will come from Germany, and the much exalted iPad — most desired Christmas gift of 2011 — is made in China.

Why is this happening? There are a large number of reasons that are coming together in a very bad mix for the U.S., but three are the most important: (1) Many other countries in the world have a sustained and pre-meditated plan to grab part of our manufacturing base and lure it to their countries. For example, they provide enormous subsidies to manufacturers to locate there, and many companies have had no choice but to accept the free cash; (2) The U.S. has no sustained response. We do not have a manufacturing policy or a manufacturing strategy. We hope the market and American innovation will solve all the problems, but they won’t, and that’s been evident for many years now; and (3) We enable China to pursue a mercantilist, protectionist policy of currency manipulation, which has the effect of making their goods very cheap in the United States and every third country market, and our goods so expensive they won’t sell. (more…)

As the Occupy Wall Street movement spread across the nation last week, politicians in D.C. flipped the bird at protesters – including those camping in Washington’s McPherson Square.

Here’s how: While occupiers sought political focus on the unemployment, impoverishment and foreclosures suffered by the nation’s non-rich 99 percent, politicians considered three major pieces of legislation and passed only the one that will help the wealthiest 1 percent and hurt the remaining 99 percent.

Senate Republicans murdered-by-filibuster the American Jobs Act, which would surtax the 1 percent to provide jobs for the 99 percent. The Senate did pass the currency manipulation bill, but House GOP leaders refused to schedule a vote on the measure that would protect jobs for the 99 percent by punishing countries that undervalue their currencies to artificially lower prices on their exports.

By contrast, both houses of Congress adopted the so-called Free Trade Agreements with Panama, Colombia and Korea, which will, just like their predecessor NAFTA, destroy jobs held by the 99 percent.

It’s incredible. Inexplicable. Inexcusable. In a country where joblessness is a painful 9.1 percent. Where one in five children lives in poverty. Where foreclosures rose again last month. Where a whole movement is growing to protest the appeasement of the rich at the cost of the middle class. In that place, Congress chose to walk backwards. It didn’t take two steps forward – which it could have by passing the currency bill and jobs act. No. It just took a giant step backward by embracing job-killing trade agreements.

It all forces the 99 percent to demand even more loudly: Where’s the jobs?

WHERE’S THE JOBS? (more…)

When GE’s CEO Jeffrey Immelt was appointed to head his administration’s competitiveness council, President Barack Obama said, “We think GE has something to teach businesses all across America.”

Even in the summer heat, that’s a bone-chilling thought to an anxious cross-section of employees from engineers all the way down to the janitorial staffs who still take pride in being part of GE’s X-ray business division in Waukesha, Wis.

GE announced on Aug. 22 that it would close its X-ray division headquarters in Waukesha, Wis. and move to China. Reports are that GE has hired 100 engineers to staff the China office. This is an ironic development since deputy White House press secretary Josh Earnest reported from Martha’s Vinyard that President Obama and Immelt were discussing how to increase the number of engineers who graduate from U.S. colleges and universities.

Anne LeGrand, vice president and general manager of GE Healthcare Global X-ray division, told the Wall Street Journal that the company expects to develop 20 to 25 percent of the division’s products in China during the next three to five years. (more…)

With free trade agreements between the United States and Panama, South Korea and Colombia set to hit the congressional floor as soon as this month, lawmakers should check out recent polling which shows American voters are overwhelmingly opposed to trade deals that end up sending jobs overseas.

Polls have consistently shown that Americans believe the nation’s trade policy plays a major role in putting our workers behind, but the numbers are growing as the job crisis deepens and more Americans are out of work longer. A recent report from Global Trade Watch brings together in one place results of years of polling on trade and the global economy.

Here’s what people are saying about trade deals.

(more…)

By Ian Fletcher
Senior Economist, Coalition for a Prosperous America

It’s only fair to answer some of the objections to the idea of an import tariff that I and others, like possible presidential candidate Donald Trump, have recently proposed.

One common objection is simply that our trading partners would just shrug it off by increasing subsidies to their exporters.

They are constantly alert to threats against their trading position: China, for example, was recently reported in China Daily as increasing export rebates on 3,800 items “to maintain growth.”

This would, obviously, force us into an endless game of matching these moves on a country-by-country, industry-by-industry, and even product-by-product basis.

However, such subsidies by our trading partners would be restrained by the fact that they would be very expensive in the face of an American tariff. Right now, these subsidies are relatively affordable only because they don’t have to climb an American tariff wall. But if they did, their cost would increase dramatically. (more…)

By Leo W. Gerard
USW International President

Tragically, the government of Colombia exhibits the behavior of an addict. And, just as regrettably, the United States is co-dependent, so addicted to so called free trade that it plans to award Colombia an agreement based solely on promises.

Addicts always promise. They’ll stop, they pledge. Their co-dependents desperately want to believe, so they cooperate with the addicts’ demands.

Colombia, the most dangerous country in the world for trade unionists, has pledged to try to stop the murders to persuade Congress to approve a Free Trade Agreement (FTA). Promises, promises.

And the United States has agreed to accept those promises rather than demand performance before signing an FTA. American’s Wall Street banks and multi-national corporations crave another FTA so badly they will believe anything.

When the Colombia FTA was first proposed, Congress refused to approve it because so many trade unionists are assassinated each year by the Colombian military and paramilitary forces that the murders exceed the number of unionists killed in all other countries of the world combined. In 2007, the year that former President George W. Bush completed the agreement, 39 Colombian unionists were slain.

The Colombian government knew why Congress denied approval. It could have responded four years ago by protecting trade unionists and preserving their lives. It did not.

Instead, the murders increased. In 2008, 52 Colombian trade unionists were assassinated, one a week. In 2009, the number declined by 5 to 47, but it was back up to 52 last year. Six have been slain so far this year, including Hector Orozco and Gilardo Garcia, members of the agricultural union known as Association of Peasant Workers of Tolima, who were threatened by the Colombian military just before they were assassinated. Promises, promises.

In response to the concerns expressed by Congress about the murders, the newly-proposed FTA requires Bogota to improve safeguards for workers by April 22, and to develop a plan by May 20 to enhance the capacity of regional judicial offices because the murders of trade unionists go unpunished by the Colombian government – giving the killers an impunity rate of approximately 95 percent. And by mid-June, the Colombian government promises to increase penalties for threatening workers.

The government of Colombia could have completed all of those steps four years ago. It didn’t bother.

To this point, Congress has taken the moral high ground by refusing to approve the trade deal. It said, basically, as long as Colombia continued to countenance the slaughter of its community and labor leaders, Afro-Colombians and indigenous people, America would not give it special treatment for trade purposes.

In addition, Congress recognized the FTA’s potential to devastate Colombian farmers. The FTA would speed forced displacement of Afro-Colombians and indigenous people by encouraging increased exploitation of their land by business interests, such as palm oil companies, half of which are owned by paramilitary groups. Expelling these farmers from their land would further swell Colombia’s internally-displaced population – the largest in the world at 4.3 million.

Making matters worse for Colombian farmers, the main U.S. beneficiaries of the FTA would be big agricultural companies which would be permitted to dump cheap, subsidized food stuffs into Colombia duty-free. This would result in farmers’ impoverishment and land loss because small growers would not be able to compete with the low-cost American produce.  In Haiti and Mexico, domestic food production was wiped out by similar free trade agreements. It’s likely that Colombia would follow the path of Mexico, where, as the ability to grow legitimate crops became economically impossible, farmers turned more and more to producing illicit drugs. Colombia already produces as much as 80 percent of the world’s cocaine.

Business groups, like the U.S. Chamber of Commerce, protested the refusal by Congress to approve the FTA, contending that increasing American exports and jobs was more important than protecting Colombian lives and human rights.

The Chamber’s position is not only depraved, it’s based on flawed calculations of exports and jobs. Just like the North American Free Trade Agreement (NAFTA) and granting China entrance to the World Trade Organization (WTO), the Colombia FTA will cost America jobs and exacerbate the U.S. trade deficit.

Previous projections by the Chamber and the U.S. International Trade Commission (ITC) that NAFTA and China’s WTO membership would improve the U.S. economy proved catastrophically off base.

When the U.S. signed NAFTA in 1993, it had a $1.7 billion trade surplus with Mexico. After the agreement, that surplus quickly morphed into a deficit, which ballooned to $64.7 billion in 2008. These annual deficits cost the U.S. 560,000 jobs between 1993 and 2004.

Similarly, the ITC predicted that the tariff reductions China offered when it entered the WTO would result in a trade deficit of $1 billion a year. Instead, between the years of 2001 and 2008, the actual result was deficits of $185 billion, and the loss or displacement of 2.3 million American jobs.

The U.S. already runs a trade deficit with Colombia. It was $1.86 billion in 2009. The Economic Policy Institute calculates that the proposed FTA with Colombia would nearly double that trade deficit by 2015, which would cost the United States another 55,000 jobs.

Frankly, the EPI calculation, which factors in effects on trade like currency manipulation, is far more credible than the ITC and Chamber reports, which ignore these issues.

Bogota wants the FTA because it believes the deal will be good for Colombian business interests. One immediate bonus, for example, is that the FTA would eliminate tariffs on 80 percent of Colombia’s exports to the U.S.

To get what it wants, the Colombian government is willing to say anything. Just like an addict. Promises, promises. The Colombian government’s past performance shows its pledges to protect workers from assassination are empty.

America must reject the role of co-dependent. It must demand the proof of performance before rewarding the government of Colombia with an FTA.

Without proof of performance, the government of Colombia will get away with murder.  It will export more of its goods – crude oil, coffee, fruit and flowers — to the U.S.  And unwitting Americans will buy more blood red Colombian roses.

***

Leo W. Gerard also is a member of the AFL-CIO Executive Committee and chairs the labor federation’s Public Policy Committee. President Barack Obama recently appointed him to the President’s Advisory Committee on Trade Policy and Negotiations. He serves as co-chairman of the BlueGreen Alliance and on the boards of the Apollo Alliance, Campaign for America’s Future and the Economic Policy Institute.  He is a member of the IMF and ICEM global labor federations and was instrumental in creating Workers Uniting, the first global union.

By Gilbert B. Kaplan
Former Deputy Assistant and Acting Assistant Secretary of the U. S. Department of Commerce

We have one trade problem in this country that so far surpasses every other one that it is almost not worth talking about any of the others. The problem is Chinese subsidy practices, and our resulting $260 billion sustained trade deficit with China. The problem has recently taken on a new, more dangerous bent. First, China has made it increasingly clear they are not going to do anything about their undervalued currency. One aspect of the currency problem has been much talked about — how it makes Chinese exports to the United States very cheap and our exports to China uncompetitive.

But it is now clear that the Chinese undervaluation has an even more nefarious and dangerous and long-term effect. It is a big driver forcing U.S. companies to leave the United States and relocate to China. This is because of the simple reason that a relatively “overvalued” dollar goes much further in China building plants and buying inputs and paying workers, than it does in the United States. This is not just a question of very low wages in China, it is about the additional accelerant of low cost renminbi making already low wages and cheap inputs even cheaper. So U. S. companies cannot afford to stay in the U. S. And once they leave it is very unlikely they will ever come back.

The other development is a Chinese government pronouncement late last year that they are pumping subsidies of $1.5 trillion into seven strategic industries. The money will be going to the same emerging industries that President Obama and substantially every governor in the United States touts as the “industries of the future” that will rescue the United States from its high unemployment and anemic growth. The industries include information technology, environmental protection, new forms of energy (read wind and solar), biology, and new materials. (more…)

By Travis McArthur
Public Citizen Trade and Finance Researcher

In Rep. Brady’s announcement of last week’s hearing on the Colombia Free Trade Agreement (FTA), he said, “According to the President’s own statements, [the pending trade agreements with Colombia, Panama, and South Korea] have the ability to create over 250,000 American jobs.” Speaker Boehner’s blog has also been claiming this 250,000 jobs gain figure.

But did the President ever say that the three FTAs will create 250,000 jobs? No. Rep. Brady here makes at least three errors. If you correct for one, the “jobs created” number goes down to 78,000. If you correct for two, the jobs number goes down to 39,333. If you correct for three, the job gain turns into a job loss of 3,200 jobs.

Back in November 2009, Obama gave an interview to Reuters on the eve of his trip to Asia in which he stated, “And right now we have about 9 percent of — a 9 percent share of Asia’s — not just China, but Asia’s trade overall, and it’s estimated that for every 1 percent of increased share that we get, that could mean 250,000, 300,000 jobs.” (more…)

By Scott Paul
Executive Director of Alliance for American Manufacturing (AAM)

When IHS Global Insight revealed this week that China has passed the United States to lead the world in manufacturing output, the response from some in government and manufacturing was to quibble with the data. The correct response is to develop a national manufacturing strategy, so that we can once again lead the world in manufacturing, which is a position we’ve held for 110 years.

Why a strategy? Well, Germany has one. China has one. South Korea has one. In fact, every other industrialized nation has a network of currency, trade, tax, investment, innovation and skills policies that promote domestic manufacturing. We stand alone in allowing our jobs to be freely outsourced overseas. Our economic and training policies spur on a service and financial sector economy at the expense of investments in manufacturing.

First, let’s consider the data on the size of manufacturing. Manufacturing accounts for one-third of China’s economic output. For most of our industrial competitors, the number is somewhere between 15 and 20 percent. In America, manufacturing accounts for less than 13 percent of our GDP, and that figure is falling every year.

The rate of growth in manufacturing in China has averaged over 20 percent per annum over the past three years. In the U.S., despite a recent rebound, that figure is only 1.8 percent. We’ve shed 50,000 factories and 5.5 million manufacturing jobs over the past decade. Meanwhile, one company in China — Foxconn — created more manufacturing jobs last year than the entire U.S. economy. (more…)