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I work for a labor union in the aerospace industry. We are 100% in favor of trade. We make products the rest of the world wants to buy.

With increased trade we expect more prosperity. Instead, we see the American economy de-industrializing and job security at historic lows. So, what’s going wrong?

Figure 1. US Trade in goods since 1992.Figure 1 tells the story. Since NAFTA and WTO took effect around 1995, our trade deficit has widened steadily, except for the 2008 crash, which cut imports more than exports.

The language for trade is deceptive. We speak of “free trade agreements,” which sounds like freedom, and evokes the image of prosperity. Maybe we should call them “trade deficit agreements,” since that’s what they do.

We have alternatives. Today, many countries take a different approach to trade, and they run trade surpluses. Japan, Korea, Singapore, and Germany run trade surpluses and they have high living standards. China’s very effective industrial policies are the opposite of free trade. Their growth is phenomenal. It could be even more impressive if workers and communities in China had more say in how their gains were allocated. (Please finish this post, then get a cup of coffee, sit down and listen to this sensational radio piece.)

When America industrialized, we rejected free trade (trade deficit agreements), and our living standard rose dramatically.

Since NAFTA and WTO took effect, factories in America closed, entire industries declined, and millions of good jobs moved offshore. China’s industrial policies are a credible threat to our aerospace industry – one of the last bright spots in our trade profile. Technology and capital for new industrial capacity goes to China, India, and Russia, rather than Michigan, California or Pennsylvania. (more…)

Those of us ensconced in debates in support of U.S. manufacturing often hear opponents claiming that the over-regulated U.S. labor market and unionized heavy industry render us uncompetitive in global markets.

That may sound convincing given competition from emerging markets, but there are lots of advanced economies with long records of positive net exports, while we continue to run large deficits in manufactured goods, year after year.

If you’re thinking the difference must be prices, you’re thinking like an economist… and you’re pretty much wrong.

This new BLS report (including a link to their rockin’ new dashboard — go BLS!) provides the data in the form of manufacturing compensation costs across countries, with conversions to dollars using market exchange rates.

First, as shown in the first figure, in the most recent year for which they have complete data, we’re toward the low end of the advanced economies in terms of compensation costs. Second, in dollar terms, manufacturing compensation costs have increased much faster elsewhere over the past decade (figure two; these summary measures use trade-weighted currencies, based on each countries relative share of U.S. trade; you can use the dashboard link above (open the Excel file) to view individual countries).

*OECD, Eastern Europe, East Asia

Source: BLS (more…)

“America’s trade policies often force domestic industries to compete on an unfair playing field with foreign competitors, and it’s costing us jobs. To help address this problem, we have introduced H.R. 1749, The Reciprocal Market Access Act.”

Congresswoman Louise M. Slaughter (D-NY)
Congressman Walter B. Jones (R-NC)

Right now, three fundamental premises underpin America’s overall global economic and trade policy. Each is deeply flawed, especially as it relates to our single most important trade relationship, which is that with China.

1) The first premise is that advancing the interests of America’s multinational corporations always benefits American workers and in turn the American economy.

The reality, however, is that the disconnect between the interests of America’s multinational corporations and the best interests of employees and the country has never been greater. Significant consequences have been the consequences-be-damned offshoring of millions of American manufacturing jobs and a failure to tie the fruits of domestic R&D and innovation into corresponding production in the U.S.

2) The second premise is that the rules-based, free trading system favored by U.S. multinationals, combined with the overall rule of “Country Comparative Advantage”, will result in balanced globalization for all trading partners, to the advantage of American workers and the American economy.

This premise works well when all nations play by the same rules. However, we know that China especially continues to pursue mercantilist policies that are at best anti-competitive and often illegal.

Many of us have written often about how China has gained unfair trade advantages through its abysmally low direct labor costs, its lack of meaningful environmental and labor standards, and its currency manipulation. Less appreciated, however, are the other measures China uses to game the system, the two most extreme of which are China’s “Indigenous Innovation Production Accreditation Program” and its related unceasing demands that U.S. companies seeking to do business in China make massive transfers to it of their intellectual property that took decades to develop with internal investment and often with support from U.S. government-funded research laboratories. Because of their perpetual ripple effects throughout our economy, these IP transfers will ultimately be an even bigger drain on our economy than the direct offshoring of millions of American jobs over the last 15 years.

3) The third premise is that the U.S. can make up for the millions of manufacturing jobs being lost overseas with exports of “software, movies, medicine, university degrees, management consulting and legal work” plus new employment by the high technology companies of Silicon Valley.

This first conclusion is simply absurd on its face. And as for the high-tech companies and their plans and capabilities, Silicon Valley is mostly a jobs-exporting juggernaut and not a jobs-creating one. Our own Bureau of Labor Statistics has concluded that U.S. employment in “information technology” will actually be lower in 2018 than it was as far back as 1998.

In the face of these three very flawed premises and actions by certain of our major trading partners which are particularly counterproductive to American interests, we can pursue one of two strategies:

I. We can continue to try to resolve our problems through lengthy bilateral and international discussions over the next several years, which our recent history in this arena ought to discourage; or

II. We can adopt a realistic, hard-headed approach to leveling the playing field, in order to straighten out our trade deficit and help U.S. companies be more competitive.
Both strategies, of course, would be intended to create American jobs, especially manufacturing jobs. The first strategy, however, smacks of timidity and belies the urgency of the problems and the lack of past success in patiently trying to resolve these problems through lengthy bilateral and international discussions. By contrast, the second strategy is all about quickly restoring U.S. self-determination and adopting a more urgent, hard-headed approach.

We need to do three things to successfully put into place the second strategy.

First, we need to enact the Reciprocal Market Access Act, the bipartisan legislation sponsored by Representatives Slaughter and Jones. This Act was first introduced in 2007, and reintroduced in this Congress. Its companion bill, S. 1766, has been introduced by Senators Sherrod Brown (D-OH) and Kay R. Hagan (D-NC). Here is why this legislation is critical.

Right now, U.S. industry faces significant non-tariff barriers (“NTBs”) in key markets, preventing fair market access. These NTBs deny U.S. manufacturers current and future export opportunities. As the Members of Congress have noted, “eliminating the U.S. tariffs without securing elimination of NTBs is equivalent to unilateral disarmament – giving full advantage to our competitors, while allowing them to protect their home markets.”

The Reciprocal Market Access Act would immediately break down the ‘barrier’ (i.e., the Chinese Wall) which, under the current Doha negotiation process, exists between tariff and non-tariff barriers. Currently, so-called “tradeoffs” are almost strictly tariff-for-tariff and non-tariff-for-non-tariff.

This Act, according to its legislative write-up, would, in addition:

• Tie the authority to reduce or eliminate tariffs in trade agreements to achieving meaningful market access for U.S. domestic producers that have identified and worked with the U.S. government to address those barriers.

• Require that the President provide a certification to the Congress, in advance of agreeing to a modification of any existing duty on any product, that sectoral reciprocal market access has been obtained. This will also greatly enhance the vital trade ‘partnership’ with Congress.

• Give our government – triggered by either a private sector or a Congressional request – the automatic negotiated right (or “snap back authority”) to revoke concessions to cut tariffs if our trading partners don’t implement the commitments they made in order to open up their markets.
Second, for economic, employment, competitiveness and national security reasons, the administration and Congress should continuously test their views of our international trading environment against the following realities:

1. The now-desperate need for a Manufacturing & Industrial Policy for the U.S. that balances the mercantilist policies of our major trading partners, especially China’s, whose overall trade surplus in manufactured goods matches almost dollar for dollar America’s trade deficit in such goods. Nineteen members of the G-20 have defined Manufacturing Policies. America alone does not, even though there is not a responsible economist who believes that an economy as large and complex as ours can prosper with less than 20-25% of its workers being in manufacturing and without the sector contributing a like percentage of GDP. As it is, however, only 8 to 9% of Americans now work in manufacturing, and as a percent of our GDP, the sector provides just 11.2% of the total.

2. The obvious challenge to America’s interests from China’s non-WTO-compliant “Indigenous Innovation Production Accreditation Program” and from China’s illegal subsidies and currency manipulation. Many of China’s practices provide its companies with a clear-cut “counter-available subsidy” and they need to be treated as such, including China’s abysmal environmental practices.

3. The outright theft every day of America’s hard-gained, valuable intellectual property, especially by China, which enervates our economy as much as any other trade tactic employed by China or any other country. The U.S. International Trade Commission estimated in May that “up to 2.1 million new direct private-sector jobs would be created in the U.S. in total if China [alone] raised its IP protection to U.S. levels.”
Third, we need to stop international intellectual property theft.

When it comes to finding solutions to the daily theft of America’s invaluable IP, a single anecdote brings this imperative home. Microsoft, one of the real gems of American ingenuity and also one of the most patriotic major companies headquartered in the U.S., recently sold to a large commercial customer in China one (1) unit of its advanced business software, for several hundred dollars. However, when it sent out an upgrade to the software, the upgrade was downloaded thirty million (30,000,000!!) times. This egregious theft of Microsoft’s IP – and the millions of other thefts in China of the company’s intellectual property – is why Microsoft’s profits from sales in China, with its 1.3 billion population, are no greater than its profits from sales in The Netherlands, with its population of only 16.7 million.

The best immediate solution to the theft of American intellectual property would be to adopt former U.S. Senator Slade Gorton’s (R-WA) recent recommendation to the U.S. China Economic and Security Review Commission that the U.S. impose tariffs which would generate revenues equivalent to 150% of the estimated annual IP losses suffered by American companies.

The best solution into the long-term would be for the administration and Congress to make IP theft a trade agreement priority, which is a priority sadly lacking today in an urgent, encompassing way.

Following the US-China Strategic and Economic Dialogue meetings held in mid-May 2011, Commerce Deputy Assistant Secretary Craig Allen declared: “In all of these cases – indigenous innovation, intellectual property enforcement, transparency – we would have preferred much more explicit detail in terms of timeline, in terms of coverage, and in terms of implementation. But we are pleased at the same time that the Chinese did commit those previously verbal assurances in writing. That is progress.”

This may be deemed “progress” by some, but I, for one, am not satisfied that this is the kind of progress that we should ever accept. We need to take a much more pro-active stance in trade in order to better balance the nationalistic economic policies and mercantilist practices of our trading partners with our own trading rights as a nation.

Within the last week, the recently confirmed new Secretary of Commerce, John Bryson, declared in a speech that we must reshape our trade policies toward China. One important way to meaningfully do that would be for him to get the administration to support the important trade legislation being sponsored by Senators Brown and Hagan in the Senate and Representatives Slaughter and Jones in the House. As they have implored us: “We must ensure that our trade negotiators do not give away our domestic markets in future trade agreements without gaining meaningful market access for American manufacturers in exchange. Unless other governments play by the rules and remove barriers to our exports, the U.S. should not acquiesce to their demands by further opening our market – already the most open market in the global economy.”

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Leo Hindery Jr. is chair of the US Economy/Smart Globalization Initiative at the New America Foundation, co-chair (with USW President Leo Gerard) of The Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media, and is currently an investor in media companies.

Follow Leo Hindery, Jr. on Twitter: www.twitter.com/leohindery

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This is republished from The Huffington Post.

Excellent debate on CNBC featuring the Alliance for American Manufacturing’s Scott Paul about the currency manipulation bill.

A bill to hold China accountable for its job-killing practice of currency manipulation passed its final procedural hurdle in the Senate this morning 62-38 and is expected to pass in final vote later today.

The Republican-controlled House is holding up its version of the legislation, even though it passed the House with overwhelming bipartisan support in 2010, with 99 Republicans supporting it.

For more on the bill, click here.

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The news that our trade with China has been bad for the American middle class has finally reached the U.S. Senate. On Monday, the Senate will take up legislation that would impose tariffs on Chinese goods so long as China depresses the value of its currency. Despite the partisan polarization that grinds lawmaking to a halt these days, the bill’s support is thoroughly bipartisan, with sponsors ranging from such conservative Republicans as South Carolina’s Lindsey Graham to liberal Ohio Democrat Sherrod Brown. The legislation is expected to clear the Senate’s 60-vote hurdle for a floor vote and move on to the House.

But the consequences can no longer be denied. Between 2001 and 2010, the U.S. trade deficit with China cost Americans 2.8 million jobs, according to a report by economist Robert Scott, issued last week by the liberal Economic Policy Institute. Most of those jobs — 1.9 million — were in manufacturing, and of those, almost half were in computers and electronics.

This wasn’t simply the consequence of China’s cheaper labor or more generous corporate subsidies. As China’s productivity soared during the past decade, the value of its currency should have risen correspondingly. Instead, China purchased dollars, which had the effect of depressing the yuan and making Chinese exports about 28 percent cheaper than they would be if the yuan had been allowed to appreciate, William Cline and John Williamson found in a study for the centrist Peterson Institute for International Economics.

Data like these have been floating around for years, of course. Until now, however, the Senate has remained largely impervious to the evidence of Chinese cheating and American decay. But elite opinion, which the Senate does heed, is finally catching up with mass opinion on whether losing our manufacturing base is a bad thing. An influential July 2009 article in the Harvard Business Review by economists Gary Pisano and Willy Shih argued that losing manufacturing meant losing our edge in innovation, that the relationship between research and production was reciprocal. This would not have come as news to Thomas Edison, but few on Wall Street or in corporate boardrooms the past two decades believed that America’s prosperity and dynamism required the retention and renewal of manufacturing.

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Senator Sherrod Brown (D-Ohio) was on MSNBC’s Morning Joe where he talked about a bill he is introducing next week to deal with China currency. Brown states, “We continue to lose ground to China because they don’t play fair.” He also mentions the right thing for America to do is to preserve American manufacturing.

During the session, Joe Scarborough asked the Senator what was on his lapel. Brown indicated that it was a canary in a bird cage which signified the mine workers of hundreds of years ago when they had no strong union.

Brown said, a baby born in this country 100 years ago lived about 45 years old but because of Medicare, Social Security, safe drinking water, civil rights and women’s rights, people in this society have a much better shot at the middle class. That’s what that signifies.

President Obama’s address to Congress tonight was really two speeches in one. The first laid out his jobs plan—substantively, an attempt to forestall a double-dip recession. The second laid out a longer-term economic vision that promised, however vaguely, to restore American manufacturing.

Politically, both plans are aimed at shoring up the president’s support within the Democratic base: the jobs plan by its relative expansiveness (compared to the low-ball estimates the White House was putting out earlier this week so that Democrats would be pleasantly surprised at the plan’s actual scope), the manufacturing plan by its promise to use state power, in some unspecified way, to help restore middle-class jobs.

Both plans are also aimed beyond the Democrats’ core constituencies, however. Parts of the jobs plan—certainly, the payroll tax cuts to both employers and employees—will be hard for the Republicans to oppose if Obama and the Democrats simply hammer home these proposals day after day. Similarly, the theme of restoring America’s manufacturing capacities (and not, as the president asserted, by competing in “a race to the bottom,” but rather “a race to the top”) should play well in places like the industrial Midwest—if, and only if, the president changes our trade policies that were key to our deindustrialization in the first place. (more…)

WASHINGTON (PAI) — Government repression, in aid of large companies and Mexican millionaires, and abetted by longtime “company unions,” oppresses the overwhelming majority of Mexican workers, three leaders of independent Mexican unions are telling U.S. lawmakers. And that repression harms U.S. workers, too.

In a Sept. 13 Capitol Hill briefing led by the Steelworkers and the AFL-CIO International Affairs Department, speakers added the state of Mexican workers is important both there and here, as repression of Mexican workers drags down U.S. workers. Mexican wage and worker repression lets firms decamp there and threaten U.S. workers that they will do so unless U.S. workers lower their own living standards.

The briefing, in a packed congressional hearing room, comes as Congress prepares to consider two more trade pacts – without enforceable worker rights written into their texts – with two more Latin American nations, Colombia and Panama. Both pacts are modeled on the 1990s-era U.S.-Canada-Mexico “free trade” treaty, NAFTA. (more…)

Of all the lies that the American people have been told the past four decades, the biggest one may be this: We’ll all come out ahead in the shift from an industrial to a post-industrial society. Yes, we were counseled, there will be major dislocations, as there were during the transition from an agrarian to an industrial economy, but the America that will emerge from this transformation, like the America that emerged 100 years ago, will be one whose citizens are ultimately more prosperous and secure than their industrial-era forebears.

What a crock.

On Labor Day 2011, the America that’s replaced the vibrant industrial giant of the mid-20th century is a basket case. We’ve lost the jobs that created the broadly shared prosperity that made us the envy of the world. In their place, when we’ve created jobs at all, they’ve generated neither prosperity nor security.

The most prescient writer on post-industrial America offered a sobering perspective. In his 1972 book “The Coming of Post-Industrial Society,” sociologist Daniel Bell predicted a future of service jobs, rising consumption, compensatory entitlements and wars over taxes.

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