Fact Sheets & Briefs

Making Sense on China, Trade and Jobs

Isaiah J. Poole — Tue, 23 Oct 2012 23:27:22 -0400

How to win the argument about the big economic challenges facing the American people

Number 5 | October 24, 2012

Making Sense On China, Trade and Jobs

The Challenge	American companies continue to ship good jobs to China. They seek to profit from underpaid, overworked labor with few rights. They profit from Chinese subsidies and lax environmental policies. They want access to China’s market, even at the price of forced partnerships, stolen technologies and tilted playing fields. Our $295 billion trade deficit in goods with China in 2011 was the largest-ever such imbalance between two nations. It is a staggering three-fourth of the U.S. non-oil trade deficit. And it is as much a jobs deficit as it is a trade deficit. International Monetary Fund economists have declared that severe trade imbalances contributed directly to the economic collapse. And now the China deficit weakens our recovery. In the years since China’s entry into the World Trade Organization in 2001 we lost more than 50,000 factories and 5 million manufacturing jobs without filing a single trade complaint. Even worse, we have lost entire industries and vital industrial ecosystems, taking down entire regions of our country. And the threat of companies leaving has put downward pressure on wages here, as workers are frightened that they will lose their jobs if they assert their rights. The reason for the imbalance is that China pursues mercantilist policies. The Chinese government controls access to its internal markets; steals technology; manipulates its currency to keep the prices of its exports artificially low; holds down the cost of fuel and electricity; provides free land and utilities to companies in key economic sectors; limits competition by regulating distribution of products; subsidizes Chinese-owned companies and industries, and utilizes many other methods of promoting its export industries at the expense of those who play by the rules. But China isn’t simply taking jobs from us. U.S. corporations are shipping our jobs to them, seeking out low-wage workers, subsidies, and minimal workplace and environmental regulation. And worse, they can write off the expenses of doing so from their taxes as a cost of doing business. And while China’s government has a national trade and industrial strategy, U.S. trade strategy is written by multinationals, serving their interests and not the interests of the American people.
Make the Case	It’s time to see “Made in America” once more. We’re running a trade deficit of well over $1 billion a day. We can’t continue to let countries like China rig their currency, target our industries and drive us into a race to the bottom. We do need more trade, but it must be balanced trade. We have to put companies on notice: If you want to sell in America, you need to produce in America. And we need to put countries like China on notice: We will treat your exports to this country in the same way you treat our exports to your country. It's time to enforce the rules – and to change the rules that rig the game. Let’s stop negotiating more treaties modeled after NAFTA (North American Free Trade Agreement), which opened the U.S. floodgates to cheap imports and encouraged corporations to export jobs to low-wage countries, and start balancing our trade. And let’s create a manufacturing strategy for this country to rebuild manufacturing right here at home.
Case in Point	Don’t buy the myth that more trade treaties create more jobs. NAFTA-style trade treaties aren’t free trade accords. They are complicated agreements negotiated with corporations, designed to protect their investments abroad as much as exports abroad. Our trade policies are dominated by American multinationals that profit from shipping jobs abroad to low-wage markets. The old-style trade accords have cost us jobs and run up our foreign debts. “Made in America” needs to be more than a slogan or a fading wish. We need a national manufacturing strategy, as every other country has, that targets strategic industries, invests in research and development, builds world-class competitive infrastructure, and enforces balanced trading relations. "China cheats" resonates with voters because it is true. They sell much more to us than we sell to them. That is not “trade”; that is a one-way relationship that is draining our economy. China is guilty of repeated trade violations and they regularly lose trade cases brought not only by the United States but also by other nations and the European Union. When we fix the trade problems with China (and other countries) our economy will be better off, we will have more and better-paying jobs, and key industries will again prosper. And if China begins to seek greater growth at home, millions of Chinese will be better off as well! To fix this we need to act against currency manipulation and trade violations like government subsidies and blocking our products from sale over there. But the problem isn’t just China. The problem is that U.S. trade policy is dominated by multinationals that have a different interest from the American people and American workers. They can profit from moving good jobs abroad, even as Americans pay the price in lost jobs and declining wages. We won’t have a trade policy that makes sense for America until we clean out Washington and curb the influence of big money and entrenched corporate lobbies.
Counterpoint	When they say: Aren’t you risking a trade war if you take on China’s cheating? You can say: We are already in a trade war and China is winning. We can fix trade with China and both sides will be better off. When they say: What happens if China retaliates and won't buy our bonds? You can say: We are China’s largest customer. If China stopped buying our bonds it would bring down their economy. Also, that would force the value of the dollar down, which would help make U.S. exports more competitive. When they say: We benefit from cheaper goods made in China. You can say: The cost of those cheaper goods is closed American factories, lost jobs and stagnant wages for most of us who still have jobs. It also means sacrificing our ability to make a living in the future. If we keep going down this path, the U.S. will no longer be the leading source of innovation and new technology. When they say: Aren’t you just advocating “protectionism?” You can say: We need a trade policy that works for working people. We can’t let global corporations drive a race to the bottom that undermines working families here and abroad. We need a strategy that defends core labor standards at home and abroad. We need a national strategy to counter the strategies of mercantilist nations and unaccountable multinationals. When they say: Isn’t a national strategy just picking winners and losers? You can say: No, this isn’t about picking individual companies to win and lose. It is about creating a strategy to insure that the U.S. captures a lead in the markets of the future – from clean energy to biotechnology.
The Public Pulse	Americans know our trade deficit with China is important. In a September Pew Research Center poll comparing public concerns with those of “experts”: 78 percent of the public considers the amount of debt held by China to be serious vs. 20 percent of government experts, 42 percent of business/trade experts and 53 percent of news media experts. 71 percent of the public sees loss of jobs to China as a serious concern vs. 22 percent of government experts, 15 percent of business/trade experts and 22 percent of news media experts. And 61 percent of the public sees the trade deficit with China as a serious concern vs. 33 percent of government experts, 36 percent of business/trade experts and 31 percent of news media experts. The public wants policies that stand up for America. A July poll conducted for the Alliance for American Manufacturing found that: Overwhelming majorities of Republican (87 percent), Democratic (91 percent), and independent (87 percent) voters were in favor of strong Buy American provisions for public works projects. More than two-thirds said that China’s trade violations were costing the U.S. jobs, and 62 percent wants Washington to get tougher on China’s cheating. 83 percent had an unfavorable view of companies that outsource jobs to China while voters maintain extremely favorable views of goods manufactured in the U.S. (97 percent favorable). 62 percent of voters favor a “get tough” approach with China, as opposed to only 29 percent who say we should be careful not to “start a trade war.” When asked if China’s cheating on trade agreements had cost American jobs, helped create U.S. jobs, or had no effect: 68 percent said it cost jobs, 10 percent said no effect, 2 percent said had created jobs. When asked about enforcing trade laws to support a level playing field, 91 percent of voters were in favor.
Hot Facts	The trade deficit with China cost more than 2.7 million American jobs between 2001 and 2011. Our $295 billion deficit in goods trade with China in 2011 was the largest-ever such imbalance between two nations in the history of the world, and it is on pace to exceed $300 billion this year. It is as much a jobs deficit as it is a trade deficit. From January 2000 to December 2011, the U.S. lost almost 5.5 million manufacturing jobs (from 17,292,000 to 11,808,000), according to the Bureau of Labor Statistics. China has accumulated almost $1.5 trillion from the trade imbalance.
How To Say It	America has been falling behind, while countries like China have a vision to succeed. We need our own vision for American success. We need a clear strategy to make things in America, make our economy competitive and revive America's middle class. It's time to challenge countries like China that are taking our jobs, end subsidies to corporations that send jobs abroad, stop passing NAFTA-like trade deals until we have a national strategy for making things in America and exporting goods, not jobs.
Avoid	Being against China just because they are “foreign.” This is not the source of the problem with trade with China. Sounding like you are against trade itself. If set up correctly, a good trading relationship with China will benefit us as much as it benefits them, and we want that.
Tweet This	Tell Congress to vote on Currency Manipulation Bill to bring back jobs. Boehner holding it up. #smarttalk via @OurFuture Renegotiate bad NAFTA-style trade agreements that kill jobs and industries! #smarttalk via @OurFuture Stop China cheating! Enforcing trade agreements will bring jobs home. #smarttalk via @OurFuture
Learn More	On OurFuture.org: "Make It In America" issue page U.S.-China trade page Other trade-related posts Alliance for American Manufacturing: Trade with China Currency manipulation China’s business subsidies Public Citizen's Global Trade Watch Coalition for a Prosperous America Trade Reform

What Members Of Congress Say About Unemployment Benefits

Darrell Robinson — Thu, 15 Jul 2010 15:00:10 -0400

What Members of Congress Who Support Unemployment Benefits Say

"When the economy turns down, there's a compact that we have, that there's unemployment insurance for people who, through no fault of their own, lose their jobs."
— House Speaker Nancy Pelosi (D-Calif.), Associated Press, July 1, 2010

“Economists say one of the most effective ways to put money into our economy is unemployment benefits,”
— Rep. Carolyn Maloney (D-N.Y.), The Hill, July 2, 2010

“"It's a class warfare issue. ... Wall Street is saying to them, 'These deficits, they're making problems, we need to get this deficit down. So the very people who took the money and were stabilized because we created deficits are now turning around and biting the hand that feeds them, that is, the taxpayers. It's unconscionable."
— Rep. Jim McDermott (D-Wash.),The Huffington Post, July 1, 2010

"It is past time for congressional Republicans to stop standing in the way of relief for our families and start standing up for our middle class."
— House Speaker Nancy Pelosi (D-Calif.), The Hill, July 1, 2010

“Somehow the politically correct position on the deficit has become cut, cut, cut, irrespective of the economic consequences,”
— Rep. Carolyn B. Maloney (D-N.Y.), The New York Times, July 4, 2010

What Conservatives Who Voted Against Unemployment Benefits Say

“[jobless insurance] doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”
— Sen. Jon Kyl (R-Arizona), All Voices, July 8, 2010

“[extended benefits] basically keep an economy that encourages people to, rather than go out and look for work, to stay on unemployment.”
— Sen. Judd Gregg (R-New Hampshire), All Voices, July 8, 2010

“Even when businesses are willing to hire, nearly two years of unemployment benefits are too much of an allure for some ... the evidence is mounting that so-called stimulus policies rammed through Congress are doing more harm than good.”
— Rep. John Linder (R-Georgia), All Voices, July 8, 2010

“A lot of people are saying ‘Hey, it’s about time. Why do we keep giving money to people who are going to go use it on drugs instead of their families?’”
— Sen Orrin Hatch (R-Utah), All Voices, July 8, 2010

Myths And Facts About China Trade and Currency Manipulation

Mike Elk — Tue, 06 Apr 2010 11:00:00 -0400

So you want the U.S. to declare China a currency manipulator, which could lead to tariffs on goods imported from China. Won’t that spark a trade war?

The reality is that we are already in a trade war, but we aren't fighting back. Between 2000 and 2008, 2.4 million jobs have been lost to China's unfair trade practices, including its decision to peg its currency to the dollar, which helps make Chinese goods artificially cheap and U.S. exports to China artificially more expensive for Chinese consumers. During this period, the U.S. has tried to play nice, but that has resulted in nothing but lost jobs.

But what you're calling for is protectionism.

China is practicing its own form of protectionism by refusing to abide by the rules it agreed to when it joined the World Trade Organization in 2001. A February 2010 survey of foreign businesses in China shows that 38 percent of them feel unwelcome doing business in China. China repeatedly refuses to play by the rules of international trade in case after case, and the United States has filed a variety of WTO cases against China’s barriers to trade as a result. However, China has filed more charges before the WTO against unfair trade practices than any other country in the world last year. What we're asking for is for China to play by the rules and be held accountable when it doesn't.

Plus, it's not wrong for the United States to protect its own economic interests, and the jobs of its workers, in a way that respects the rules of global trade and the responsibilities that come with being a global economic power.

But if calling China a currency manipulator leads to a tariff on Chinese imports, that will raise the prices working families pay for thousands of basic household goods.

Actually, consumers won't see much of a price increase at all, if any. Think back to 2005: The Senate voted to impose tariffs against China, and China responded by allowing the value of the yuan to rise by 20 percent. Back then there were warnings that consumers would be paying a lot more for Chinese imports, but in reality there wasn't a noticeable impact on consumer goods prices. A 20 percent valuation similar to what China did in 2005 is being called for now and that would not likely have a major effect on the cost of consumer goods; to the extent that wholesale prices do rise, past history suggests retailers would absorb some of the blow themselves by accepting a lower profit margin. Plus, China setting its currency to market levels, or tariffs that would have a similar impact on import prices, would mean somewhat lower profits for Chinese companies.

Won't a currency revaluation hurt Chinese workers?

Whatever effect this has on Chinese workers could be offset by increases in Chinese worker's purchasing power. That's the view of people such as Lenovo CEO Yang Yuanging, who was recently quoted in Business Week making that very point. Also, it would help reduce inflation in China caused by the price of the yuan being held artificially low.

What if China retaliates by refusing to buy our debt or selling off all of our debt?

This is a good thing. As economist Dean Baker argues "The United States has absolutely nothing to fear from China's decision to reduce its investments in the United States and allow the dollar to fall and the yuan to rise. This decision would mean that the United States could finally get its trade deficit down to a manageable level. The trade deficit has been the leading imbalance in the U.S. economy over the last decade." Clearly, NOT doing anything would only make the problem worse.

Wouldn't China selling off our debt destroy our economy and ability to borrow as a nation?

China selling off its debt would hurt China's economy even worse since they have invested so heavily in the U.S. China has $1.5 trillion in U.S. assets and there is simply no one that would to buy them. China would be forced to take a huge loss on these assets. So it’s unlikely they would do anything that would negatively affect their own economy.

Won't pushing China on currency make it more difficult to address our own budget deficit?

The opposite is true. Producing more products in the United States would mean more Americans working and paying taxes instead of collecting unemployment, thus helping us to reduce our budget deficit. It would mean we are earning money instead of borrowing to buy things, leading to a more stable economy.

Why China's Currency Matters To American Jobs

Isaiah J. Poole — Wed, 24 Mar 2010 10:45:34 -0400

Here are some basic facts you should know about the China currency dispute and how progressive experts say the United States should respond.

What’s the impact of unfair Chinese trade and currency policies on American jobs?

The U.S. has lost 2.4 million jobs between 2001 and 2008 as a result of China's trade and currency policies. According to a March 2010 study by the Economic Policy Institute, jobs have been lost in every single congressional district in the country. And these aren't just obsolete manufacturing jobs: Since 2001, we have lost more high-tech jobs than manufacturing jobs Economist Rob Scott of EPI believes that if China were not engaging in currency manipulation, the net impact would be an additional 3 million jobs in America in the next few years.

What do you mean when you say "currency manipulation"?

Most major countries, including the United States, allow the value of their currency to "float," continuously rising upward or downward based on global demand for the currency and the strength of their economies. But a few countries, China being the largest, "fix" the value of their currency so it does not fluctuate with conditions in the market. China pegs its exchange rate to the dollar. Since 2008, the rate has been 6.83 yuan to the dollar. Before 2008, the last time China adjusted the exchange rate for the yuan was in 1994, when the rate was 8.28 yuan to the dollar.

The Chinese central bank maintains this fixed exchange rate by buying (or selling) as many dollars as possible, instead of allowing the value of good produced and sold to determine the yuan's value. Meanwhile, as the value of the U.S. dollar has gone up and down against the value of every currency in the world, as the accompanying chart shows, it has remained constant against the yuan. That's kept the value of the yuan artificially low—by as much as 40 percent, say many economic experts. (Include Chart)

How does that affect jobs here in the U.S.?

It makes goods China sells to the U.S. cheaper than they would otherwise be and goods that the U.S. wants to sell in the Chinese market more expensive, thus making it tougher for America industries that employ American workers to compete. Most economists say that China's fixed currency policy amounts to a 25 percent to 40 percent illegal subsidy of its exports. Economist Paul Krugman was recently quoted as calling it "the most distortionary exchange-rate policy any major nation has ever followed. And it's a policy that seriously damages the rest of the world."

Aren’t there rules against what China is doing?

Yes. The World Trade Organization and the International Monetary Fund prohibit currency manipulation and illegal subsidies as a barrier to free trade. And the United States has several times in the past identified countries, including China, as currency manipulators.

So what should we do about it?

On April 15, the Treasury Department is expected to release its biannual report on global currency exchange rates. In that report, Treasury Secretary Timothy Geithner can declare China a currency manipulator, and that would set the stage for the U.S. to impose tariffs on imports from China to offset the impact of that manipulation. Meanwhile, Sen. Charles Schumer, D-N.Y., has introduced a bill that would allow the U.S. to impose tariffs on imports from countries with "fundamentally misaligned currencies." He and 14 other senators also signed a letter calling on the Commerce Department to investigate currency manipulation. Calls for tough actions such as these are supported across the political spectrum.

But the U.S. must also address its larger problem, it's lack of an economic strategy for manufacturing in a 21st-century global economy. Other major economic powers take steps to support domestic manufacturing while also being fully engaged in free and fair trade that does not depend on unfair, heavy-handed currency manipulation; the U.S. should do the same.

Why We Need To Revive American Manufacturing

Isaiah J. Poole — Wed, 24 Feb 2010 16:04:30 -0500

Manufacturing jobs are the foundation of our economy. Manufacturing creates the goods that bring in the income that supports the service economy. We can’t just cut each other’s hair and sell each other hamburgers; the income to pay for those haircuts and burgers has to come from somewhere.

For more than three decades, we have been shedding factories and manufacturing jobs—as well as the suppliers, contractors, shippers, trainers, managers and other jobs that go along with them. Between 1970 and 2009, according to the Bureau of Labor Statistics, goods-producing jobs in America shrank from 39 percent of the private-sector workforce to 17 percent (a decline of more than 54 percent). Since 2000, we've lost one in three manufacturing jobs.

This has coincided with an increase in the share of Wall Street's portion of the economy, as we've sold off our manufacturing infrastructure and converted our goods economy into a paper (and debt) economy. In 2007, 40 percent of America’s corporate profits came from the financial sector. Meanwhile, we've had to sharply increase our borrowing to pay for things made elsewhere.

Middle-class workers have been the big losers. The service-sector jobs that replaced the manufacturing jobs that disappeared have an average weekly wage of $610, compared with $810 in the goods-producing sector, even when you include high-end professionals such as doctors, lawyers, and investment brokers. The disappearance of solid manufacturing jobs is a major reason why between 2000 and 2009 median household incomes dropped 4 percent.

At the same time, we've shortchanged our investment in our infrastructure and public facilities—from roads and bridges to water mains—as well as our people. According to the American Society of Civil Engineers, we need to spend $2.2 trillion during the next five years to restore our infrastructure—such as the one in four bridges that are today “structurally deficient or functionally obsolete—to just to minimal standards.

The result is that we are falling behind in the global economic race as other nations pass us in building the education systems, transportation networks and energy grids of a 21st-century economy.

The Progressive Solution

The next economy must be built on a solid platform. We need to rebuild our infrastructure, renew our manufacturing base and educate our people. America needs an economic strategy to help fit these pieces together. From workforce development to component manufacture, we need a strategic collaboration between the private sector and the government to reach our shared national goals. We need an opportunity for stakeholders to come together to remove obstacles, allocate resources, and create rules that work for everyone involved. And we need an economy in which everyone shares the benefits of the work that gets done, instead of the current paradigm in which all the incentives work toward eliminating jobs rather then sharing productivity gains with workers.

Manufacturing...

A commitment to revitalizing our infrastructure can jump-start our efforts to get Americans working again as well as prepare us for the challenges of the future. For example, $30 billion in school infrastructure development would create 240,000 jobs. And 35,000 jobs would be created for every billion dollars invested in our roads, rails and public transportation systems.

The transformation to new energy and the building of a 21st century infrastructure can provide the basis for reviving manufacturing—but only with a clear strategy to ensure that the jobs are created here.

Our nation needs to reexamine our global economic strategy, with a clear commitment to end the destabilizing global imbalances in exchange rates and trade. We need to reconsider tax breaks that create incentives to move production offshore and to provide fertile ground on which manufacturing can thrive. Our federal government can return to the role it played in years past: investing in a modern infrastructure and providing seed money for research and development in key sectors whose commercial application will come later—as it did with the Internet 30 years ago and is beginning to do with clean energy today.

For more, read our report, "Building The New Economy: Where We're Going. How We'll Get There."

Jobs Now: The Urgency Of The Need

Isaiah J. Poole — Thu, 04 Feb 2010 08:41:25 -0500

Source: Economic Policy Institute. Click here for more information; click again to close.

The official unemployment rate stood at 10 percent in December 2009. But that only tells part of the story. To understand the real magnitude of the recession, add those forced to work part-time or who have given up searching for a job altogether. That means a combined unemployment/underemployment rate of 17.3 percent. That's 27 million Americans who need a full-time job. That's double the number of people needing work in 2008.

We're making progress, but not nearly enough. We still lost more than 7 million jobs since the recession began. According to the Economic Policy Institute, to fill the gap in employment and keep up with population growth, we need to create about 402,000 jobs a month over the next three years. That's ambitious, but we've come close before: In 1994, the economy created an average of 320,000 jobs a month. But we never came close to that performance between 2001 and the start of the economic meltdown, and we're certainly nowhere close to that right now.

The best jobs are disappearing most quickly. In December 2009, we lost a total of 85,000 jobs—but a third of those jobs were in the manufacturing sector. Overall, service-producing sectors have fared much better, and in some instances gained jobs, in the recession compared to the goods-producing sector. This indicates that workers may be settling for lower-paying jobs in order to find work.

America’s manufacturing sector has been on the decline as a result of offshoring, global competition and absence of a national industrial policy. In 1980, manufacturing jobs made up 20 percent of the workforce; today manufacturing represents just 9 percent of jobs. Since 2000, one in three manufacturing jobs has been lost—1.2 million of those in 2009.

We know what works. We just need the political will. We can jump-start the economy by putting people to work doing the work that needs to be done. Here are the facts:

Every dollar spent on infrastructure projects generates $1.59 worth of economic benefits: people hired, goods and services purchased, taxes paid. Every dollar spent on corporate tax cuts or on making the Bush tax cuts for the wealthy permanent only generates about 30 cents of economic benefit. (EPI/Moody's Economy.com)
Every billion in federal transportation investment supports 35,000 jobs (SharedProsperity.org); every billion spent on school construction supports 8,000 jobs (Congressional Research Service).
Each billion spent on the Apollo Alliance green-energy investment program would create 200,000 jobs; the full $60 billion program would create 1.2 million short-tern and long-term jobs, plus yield billions of dollars worth of economic and environmental benefits. (Apollo Alliance)
A transaction tax on Wall Street trading of just 0.5 percent—less than one-tenth of the percentage tax many people pay in sales tax on clothes or a restaurant meal—would in 10 years cover the full cost of a robust jobs and economic recovery plan. It would have a negligible impact on routine stock trades but it could curb the kind of high-velocity, speculative trading that helped inflate the Wall Street bubble and set up the financial crash. (EPI)

With 27 million Americans out of work or underemployed, now is not the time to cut deficits and freeze spending. The Obama budget projects unemployment to be at 9.8 percent when the domestic discretionary spending freeze kicks in, and the biggest danger is that spending restraints will stall recovery—and increase deficits as mass unemployment continues.