manufacturing

More Trade Actions - Wind Turbine Towers, Washing Machines

Dave Johnson — Tue, 31 Jul 2012 13:22:24 -0400

The game is to underprice your product until your competitors go out of business (like Solyndra & other solar companies). Then you own the market. This is about a lot more than just jobs. Our government is finally doing something about leveling the playing field!

This week, in separate actions, our Commerce Department imposed "anti-dumping" tariffs on wind turbine towers and washing machines. The wind turbine towers were coming in from China and Vietnam, the washing machines from Mexico and South Korea.

Why Sell Under Cost?

Dumping is when a product is sold for less than it costs to evenmake the product. The idea is that your competitors will go out of business and the manufacturing ecosystem of suppliers, knowledge and infrastructure moves to you, so you'll come out ahead in the long run.

It takes enormous investment to open up a manufacturing operation because you need the proper facilities, the right local utilities, the tools and machines, the skilled workforce, the suppliers, the local infrastructure, the channels to markets, and all the rest of the ecosystem that supports manufacturing. When that is lost to another country it is very, very difficult to get it back. Especially in a country with a Congress that refuses to understand the need for a national industrial policy.

This is the game that countries like China have been playing with their national industrial policies designed to capture strategic industries like solar and wind energy. By selling lower than cost for several years you gain market share and shed competitors. The suppliers, knowledge base, and jobs move their way. Eventually they build or strengthen an entire ecosystem and it is just too costly for others to try to compete.

At first it is attractive to take advantage of the lower prices, later the jobs, factories, companies and entire industries are gone along with the jobs and economic power they bring. Or, in other words, look around at what has happened to us.

Washing Machines

U.S. Sets Duties On Mexican, Korean Washing-Machine Imports

The U.S. set tariffs as high as 82 percent on large, residential washers from South Korea and 72 percent on the products from Mexico, concluding the items are sold below production costs to drive out American competitors.
The Commerce Department in a preliminary finding today responded to Whirlpool Corp. (WHR)’s complaint that LG Electronics Inc. (066570) and Daewoo Electronics Corp., both based in Seoul, and Samsung Electronics Co. (005930) of Suwon, South Korea, use unfair trade practices. Laundry appliances accounted for 30 percent of Whirlpool’s 2011 revenue of $18.7 billion, according to its annual report.

... Whirlpool has 3,500 employees in Clyde, Ohio, between Toledo and Cleveland, where washing machines are manufactured. The company has invested $175 million to make energy- and water- efficient appliances, according to a statement when the complaint was filed on Dec. 30.

... The duties may help reduce unbalanced trade with both nations. U.S. has deficits of $13 billion with Korea and $64 billion with Mexico, according to the U.S. Census Bureau.

Wind Turbine Towers

NY Times: U.S. Raises Tariffs on Chinese Wind-Turbine Makers

Chinese manufacturers have been illegally selling steel towers for wind turbines below the cost of production and will have to pay duties of 20.85 to 72.69 percent on imports, the United States Commerce Department said Friday in a preliminary ruling in an antidumping case brought by four American tower manufacturers.

The department said it found similar dumping on the part of Vietnamese manufacturers and set duties at 52.67 percent for CS Wind, a major supplier to the American market, and 59.91 percent for all other Vietnamese companies.

The finding is the fourth this year in favor of American wind and solar manufacturers and is likely to intensify tension with the Chinese, who have been rapidly expanding manufacturing capacity for alternative energy technologies and flooding global markets with inexpensive products, especially solar panels.

... “Commerce has taken an important step to address the significant dumping that is taking place,” said Alan H. Price, a lawyer at Wiley Rein, which is representing the American wind manufacturers that brought the complaint. The duties “will help to remedy the material injury already suffered by the U.S. industry and force the Chinese and Vietnamese producers to compete fairly,” he said.

Politico: Commerce OKs tariffs for wind towers,

Utility-scale wind towers from China will face anti-dumping duties from 20.85 percent to 72.69 percent, the Commerce Department said Friday.

Towers from Vietnam face anti-dumping duties between 52.67 percent and 59.91 percent.

The anti-dumping tariff, designed to counteract nations selling goods in the U.S. at below-market rates to snatch up more market share, adds to countervailing duties of between 13.74 percent and 26 percent, the department announced in May.

That means some wind towers from China could face tariffs as high as nearly 100 percent.

Problem: No US Industrial Strategy

A problem with tariffs on alternative-energy goods is that it raises prices. Meanwhile the oil companies are able to keep our government from acting to encourage alternatives with a badly-needed carbon tax and a national renewable energy standard. And existing tax incentives are expiring. This holds the price of oil and coal down relative to the alternatives, at a time when we desperately need to act on climate change

The NY Times story, U.S. Raises Tariffs on Chinese Wind-Turbine Makers, explains,

“On one hand, you say this is good for American manufacturing to have tariffs if they’re truly dumping towers below their cost into the U.S.,” said Michael Garland, chief executive of Pattern Energy, a wind developer. “On the other hand, it’s not going to solve the bigger problem we have, which is a dysfunctional Congress that can’t get anything passed. Because there’s this cliff that everybody’s facing at the end of the year, you’re not going to have any manufacturing in the U.S. anyway.”

The Factory Factor: Why Outsourcing and 'Made in America' Could Decide This Election

Scott Paul — Sun, 22 Jul 2012 21:03:30 -0400

American manufacturing is like apple pie to American voters: we love it and want more of it regardless of our politics, race, gender, income, or hometown. If you live in a swing state like Ohio, you already know that, because both presidential candidates have flooded the airwaves with ads labeling the other guy as the "outsourcer-in-chief."

Beneath the recent accusations and counter-accusations on outsourcing, there is a simple truth: citizens believe manufacturing is central to our nation's economic health, that America is in economic decline, that outsourcing to China is largely responsible for this condition, and they want their elected leaders to do something bold about it.

Voters of all political stripes are far ahead of the debate inside Washington, D.C. More importantly, perhaps, is that nearly all Americans -- not only working-class Ohioans -- share this view.

So don't be surprised if both campaigns escalate the rhetoric and attacks on shipping jobs overseas in the coming weeks, in part to mask their own shortcomings.

That's because no one is a knight in shining Made in America armor when it comes to this issue. Mitt Romney (rightly) criticizes President Obama for not labeling China as a currency manipulator, but glosses over the fact that Republican leaders in Congress are blocking a bipartisan currency bill that would pass overwhelmingly. Romney has also been on the wrong side of Administration decisions to defend American tire workers against China's cheating and successfully rescue Chrysler and General Motors.

The GOP hypocritically accuses Obama of sending stimulus dollars overseas, while Republican Senators tried to block Buy America requirements for stimulus spending.

The fact is, accusing your political opponent of shipping jobs overseas is now an established American campaign tradition. What is missing is an honest debate about what could actually be done to promote American manufacturing jobs. Voters are ready for such a dialogue.

Public opinion research conducted for the Alliance for American Manufacturing (AAM) by the bipartisan team of the Mellman Group and North Star Opinion Research concluded that voters overwhelmingly embrace a bold, popular, and effective agenda for growing American manufacturing jobs. Now we just need Washington to listen.

A strikingly large percentage of Americans (56 percent) believe our nation is no longer the world's strongest economy. Americans believe that we should be number one, and understand that manufacturing is the most important part of our economy. But, less than a quarter of voters believe anyone in Washington is doing a great deal to defend American manufacturing against cheating on trade or to create new manufacturing jobs.

Voters want a national manufacturing strategy and they favor proposals to crack down on China's cheating, train a skilled workforce, and enforce Buy America policies by a margin of more than 8 to 1 -- perhaps even surpassing apple pie.

But what can get done in this time of partisan gridlock? More than you think. Exactly one substantive bill passed the Senate last year over a filibuster attempt led by Mitch McConnell: legislation to penalize China for manipulating its currency, which was supported by most Democrats and one-third of Republicans. That bill would sail through the House this year if Speaker Boehner allowed a vote.

The manufacturing majority is strong and diverse. It has never been effectively harnessed because of often competing agendas between global companies and labor unions; we are the exception to that rule.

Voters will be forced to endure an endless series of 30-second TV ads telling us how bad the other guy is on offshoring. The least they deserve is a good manufacturing policy after the election.

Conservatives Demand Surrender To China

Dave Johnson — Mon, 02 Jul 2012 13:38:31 -0400

The worldwide battle to get away from the coal and oil industries has been underway for some time. Countries are fighting to gain a share of the new green manufacturing industries with millions of jobs and trillions of dollars on the line. Country after country is executing plans to grab a share of this new industry. But not us. Oil-funded conservatives are trying to keep us from even fighting in that war.

Oil And Coal Are The Problem

Look around you, the climate is changing, the seas are rising, terrible storms are hitting, huge fires are burning, terrible droughts are causing crop failure, and plants, animals and insects are migrating to new areas. (In DC right now you might not be able to turn on a light because of that huge, freak storm you just had, so maybe wait and look around you after the sun comes up.) We have to stop burning oil and coal, and find a way to get that carbon back out of the air.

Aside from the terrible effects of climate change, our country has a trade deficit that is partly about buying oil, and those purchases send money to places that use that money against our country's interests.

Other countries get all of this. But our country is in the grip of an oil-and-coal-funded propaganda machine that tries to keep us from getting it.

Green Job Opportunities

We are in a worldwide economic competition to build the post-oil economy. This is a competition for millions of jobs and trillions of dollars. Every country wants a share of the design and manufacturing of wind turbines, solar panels, geothermal systems, biofuels, electric cars, high-speed rail, urban and suburban light rail, advanced batteries, smart-grid power transmission systems, and all of the rest. And there is also the fight for the construction, installation and maintenance contracts for all of these systems.

Many countries are fully engaged, and have national plans to capture a share of this new industry. They compete with us as countries, and see us as a country to compete with even if we do not. Because we refuse to act as a country, we send our companies out to compete with countries, and as big as our companies are they cannot compete with the resources of engaged countries.

Conservatives Demand Surrender

Our top competitor is China. Shots have been fired; China is helping their companies compete, and this has cut solar prices. So a few American companies are going under. In response, America's oil-backed conservatives are demanding immediate surrender. In fact, they don't just demand surrender, they are giving aid and comfort, even actively helping the other side, running down America's efforts to fight for a share of the new green economy.

This huge effort by conservatives to keep our country out of the world competition for a share of the new green economy kind of makes you wonder about the secrecy surrounding all of the money that funds the conservative movement, its think tanks, media outlets, and now even funds political campaigns. We don't even know where the hundreds of millions funding these horrible, negative ads comes from! Does any of it come from our economic competitors? Shouldn't we at least be able to find out who (or where) is funding the conservative propaganda and political machine that is running down our own government and demanding we surrender the new green economy to China?

Solyndra And Chevy Volt

Conservatives celebrated the fall of Solyndra, declaring that its demise meant that green energy in general is a "bad bet," or losing technology. They also have been trying to convince people not to purchase hybrids and new technologies like the Chevy Volt. The next time you hear someone of FOX running down our country's green energy efforts, knocking the Chevy Volt or denying climate change, think abougt this: Fox's second-largest shareholder is a billionaire Saudi oil prince. Fox might just have an agenda beyond backing conservatives here. Speaking of conservatives, though, keep in mind that the Koch brothers == oil.

Abound Solar Goes Under

Last week solar panel manufacturer Abound Solar filed for bankruptcy. NY Times reports in "A 2nd U.S.-Supported Maker of Solar Panels Will Close,"

Republicans, including Mitt Romney, the presumptive Republican presidential nominee, seized on Solyndra’s failure as evidence that the Obama administration was wasting taxpayer money by supporting clean energy companies.

... The company said it could have been profitable if it had had large-scale manufacturing under way, but “aggressive pricing actions from Chinese solar panel companies have made it very difficult for an early stage start-up company like Abound to scale in current market conditions.”

Abound Solar was unable to compete with low solar prices resulting from Chinese subsidies for their own solar manufacturers. (Add to that, China's currency manipulation which keeps the prices of everything made there up to 30% lower, even bore their subsidies, trade barriers, etc.) Federal officials froze their credit line last year, after the Solyndra failure, so Abound was unable to draw on credit to scale its manufacturing to a level that could compete with subsidized Chinese imports.

Conservatives immediately stepped up their drumbeat of demands that we surrender to China. Here are a few examples of conservatives blaming America first, calling America's efforts a failure, or generally running down efforts to fight for a share of the new green economy:

Hot Air: Yet another DOE-backed solar panel company bites the dust

Good grief. I feel like these ailing Department of Energy-backed loan guarantees are so laughably many that they’re barely even worth noting anymore, but you’re darn tootin’ I’ll continue to do so as long as President Obama keeps acting like it’s the federal government’s divine right to pick and choose winners in the energy market on the taxpayers’ dime.

... This article tries to spin the situation to suggest that the company’s failure is the result of too much unfair competition and global oversupply, and we should therefore direct our ire at China. No — just no. This is the fault of the Obama administration. Maybe if we had just left the decision to develop solar (or not!) up to the private sector, we would’ve quickly figured out that investing in solar energy was a bad idea.

Weekly Standard: Video: Obama Touted $400 Million Loan to Another Solar Company Now Declaring Bankruptcy

Washington Moon Times: Yet another government-backed solar company turns out the lights

News of the company’s demise prompted early criticism from Rep. Jim Jordan, Ohio Republican and chairman of the House subcommittee on regulatory affairs, stimulus oversight and government spending.

In a statement, Mr. Jordan, among other Republicans, said Abound’s collapse shows that “our government is not good at picking winners and losers in the marketplace but has certainly proved it is good at wasting taxpayer dollars.”

National Legal and Policy Center: Yet Another DOE Green Failure as Abound Solar Goes Bankrupt

And now with failures like Solyndra and Abound Solar, in addition to several others, these crony redistributors leave the political fallout to others and just move on to their next “green” scheme. Unfortunately we won’t find out if the ultimate political price is paid until November, but in the meantime DOE continues with its renewable energy “investments,” which will undoubtedly lead to more pain for taxpayers.

Human Events: Your Obama “green energy” bankruptcy of the day: Abound Solar,

Abound had borrowed about $70 million against these loan guarantees. That would have bought a lot of health care for poor people, but the Obama Administration blew it on solar panel junk instead.

Heritage Foundation: Another Stimulus Backed 'Green Energy' Company Goes Bankrupt

Another stimulus-backed green energy company has filed for bankruptcy, further fueling criticism of Energy Department programs that backed highly-risky investments on the taxpayer dime.

Like Solyndra and a number of other green energy investments made under this administration, Abound Solar had a very poor credit rating, but enjoyed a wealth of political connections.

So ... should we respond as a country to this economic attack on us by other countries who see us as a country and compete with us as a country? Or should we surrender the new green economy to others?

The National Manufacturing Strategy Debate

Dave Johnson — Fri, 13 Apr 2012 14:32:20 -0400

President Obama has been pushing policies to boost American manufacturing. Democrats in Congress are pushing a package of bills under the label "Make It In America." The Obama administration's Gene Sperling gave a big speech recently describing the vital importance of a healthy manufacturing sector to our economy. But others say promoting manufacturing is "the wrong target" and reviving manufacturing won't help revive our economy. So what's the story?

Gene Sperling, Director of the Obama administration's National Economic Council gave a big speech at the recent Conference on the Renaissance of American Manufacturing. Sperling talked about how a manufacturing "commons" works, and why it is a good thing if government promotes this commons.

A manufacturing commons is an ecosystem, in which manufacturers, suppliers, designers, innovators and all the other manufacturers, suppliers, designers and innovators all complement each other, creating a "cluster" effect. When all of these components are working together it creates a "virtuous cycle" but when they don't it creates a "vicious cycle." So because the sum of these parts is greater than the whole, each component's interests do not align with the interests of the whole -- and "our" (We, the People's) manufacturing capacity is degraded, which degrades our standard of living. So government (We, the People) must play a role in promoting the whole effort. From Spreling's speech:

The ecosystems that grow up around these intersections of innovation and production tend to be complex. They are the result of evolutions that occur over periods of years and decades. Once the virtuous, reinforcing cycles are broken they are difficult to recreate, and they can turn to a vicious cycle. That’s why losing pieces of our manufacturing base should be such a serious concern.

... For any single firm, the decision to move production elsewhere may make economic sense. But that decision impacts suppliers and the local talent pool. This makes the decision even easier for the next firm to leave and even harder for the next firm considering coming there to say yes.

Job Loss Not Just Competition And Productivity

Sperling traces the history of our manufacturing and shows that we didn't lose jobs when competing with Japan, and didn't lose jobs during periods of high productivity growth. He shows that what happened between 2000 and 2009 (the Bush years, and China in the WTO) with the loss of 50,000 factories and millions of manufacturing jobs was different, saying "the dramatic loss of manufacturing employment in the past decade was a break from the past and cannot be explained by the conventional view of productivity and technology gains."

Since 2000, the manufacturing sector lost nearly one-third of its workforce, a total of nearly 6 million jobs. Unlike the preceding decades, according to the Federal Reserve, manufacturing production, the measure of the physical amount of goods that we make, actually declined from 2000 to 2010 by five percent. This drop was not just a result of the recession. From 2000 to 2007, manufacturing production grew at only 1.3 percent per year, the worst peak-to-peak performance since World War II.

Sperling explains why this loss is so significant to our economy: manufacturing is special in that so many other jobs depend on manufacturing, extending "from the web of suppliers that support manufacturers to the communities where manufacturing plants often serve as an anchor employer."

For those of you here from towns across the U.S. that rely on a major manufacturer, or states like Michigan where I come from, you understand the impact of manufacturing. In addition to the web of suppliers, the expansion of an auto plant brings other types of businesses to town including new restaurants, retailers, and service providers feeding off of this economic activity. If an auto plant opens up, a Wal-Mart can be expected to follow. But the converse does not necessarily hold - that a Wal-Mart opening definitely does not bring an auto plant with it.

So it is clear that this is not just about the back-and-forth of companies competing, we have a national interest in bolstering the manufacturing sector.

Finally, Sperling described some of the administrations manufacturing initiatives. He did not come out and advocate for a coordinated national industrial strategy -- which every major competitor has and we don't have. But his speech did advocate "policy to support manufacturing." This is at least a start.

Criticisms And Agreements

Matthew Yglesias at Slate, in Forget the Factories writes that it is "foolish" and worries about the, "troubling possibility that these ideas will actually guide policy in a second term rather than simply serve as props in a re-election campaign." Yglesias writes that.

it should be obvious that the path forward for America is to focus on our strengths in information technology and media, and not compete with the Chinese for manufacturing supremacy.

Yglesias writes that manufacturing areas are "poor" while high-tech areas are "richer" and "more prosperous" and we should "learn from the most prosperous parts of the country, not to imitate Chinese clusters that are even poorer than America’s industrial hubs." Also, "creating new billion-dollar software startups has a lot more to do with the future of American prosperity."

Yglasias concludes that we should "instead build and expand new industries that push living standards up and keep factory owners searching abroad for cheap labor."

Ezra Klein, writing Is industrial policy back? at the Washington Post, writes that "cozy consensus against industrial policy is, at least when it comes to manufacturing, flawed." Describing what Sperling's argument, Kleinwrites,

There is, in other words, a building argument that the market is failing to appropriately price the benefits of manufacturing firms. They're worth more to the economy than they are to individual firms. And that's the key to this new argument: Sperling isn't saying America should support the manufacturing sector because it delivers good jobs, or it's been important to America's middle class, or even because China is competing unfairly. He's saying there's a market failure. And even the most orthodox economists will tell you that it's appropriate for the government to intervene to correct market failures.

Even so, he says the Obama administration isn't really doing all that much,

For all this, the Obama administration's strategy to promote high-tech manufacturing is modest: A couple of tax cuts, mostly. Some money for research into basic technologies and new techniques. And a sustained effort to talk up the industry's importance and thus signal to investors that America intends to fight for its manufacturing base. None of these are gamechangers.

At least the consensus against doing anything is changing.

Economist Mark Thoma writes in Is Manufacturing the Answer?, "At one time I would have been opposed to industrial policy, but I have been reevaluating my position lately (I can't say I've been convinced as of yet, but I want to stay open-minded on the question)." He links to EPI's Lawrence Mischel, who writes in Robert Lawrence misleads the New York Times on manufacturing, saying that,

... closing the trade deficit would provide millions of jobs and boost the economy. For instance, my colleague Robert Scott has shown that growing trade deficits with China eliminated 2.8 million U.S. jobs between 2001 and 2010 alone, including 1.9 million jobs displaced from manufacturing. Similarly, correcting the currency imbalances with China, Hong Kong, Taiwan, Singapore, and Malaysia could add up to $285.7 billion (1.9 percent) to U.S. GDP, create up to 2.25 million jobs over the next 18 to 24 months (most in manufacturing), and reduce U.S. budget deficits by up to $71.4 billion per year.

... manufacturing employment will not return to 25 percent of employment. Nevertheless, we can gain a lot of manufacturing jobs by strengthening the recovery and through appropriate trade and currency policy. This would provide millions of good jobs, aid many communities, and be good for the nation.

At Financial Times, Edward Luce writes in America reassembles industrial policy that we do have an industrial policy, that favors oil and Wall Street,

Whether it is the schooner-rigging of tax incentives for Wall Street – and the federal tax system’s subsidies for debt over equity – or the panoply of write-offs for Big Oil, Washington never stopped promoting favoured sectors. Manufacturing was simply not among them.

Most are of long pedigree. Some might say it would be easier to pass through the eye of a needle than to separate the fossil fuel sector from its Washington subsidies, which date from the second world war. No presidential hopeful would dare to suggest scrapping Depression-era farm subsidies because they skew so heavily towards key states such as Iowa.

Luce points out that Facebook and Twitter might be glamorous, but making actual things is where innovation comes from,

Facebook and Twitter may bring disruptive social change. But the most valuable innovation still comes from making products such as semiconductors, batteries and robotics.

Just Look Around

I think a problem with economists (and a lot of big-city columnists and journalists) is that they somehow are unable to just look around them. All one has to do is drive around the midwest for a few days, Michigan, Ohio, etc. and you will see for yourself how important - and different - manufacturing is to the country, and what happens when factories close. It affects the entire community and those jobs are not replaced - and the ripple effect from the loss of a community's jobs base is terrible. All the other jobs that manufacturing supports go away, too, when manufacturing goes away.

I live in Silicon Valley. Facebook, Google and Twitter employ relatively few people relative to manufacturing. Apple sends its manufacturing to China, because in China working people don't have any say, so they can treat workers there worse than workers here in our democracy will allow. In fact Silicon Valley has high unemployment, in some areas here as much as 25% or more of the office and light industrial buildings are for lease, and our downtowns and commercial streets have plenty of empty stores. They're just newer, so they don't look as bad as the downtowns across the midwest. But it is as bad.

In February economist Christina Romer wrote in a NY Times op-ed, Do Manufacturers Need Special Treatment? that our government should not promote manufacturing. She wrote,

American consumers value health care and haircuts as much as washing machines and hair dryers. And our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada.

I responded, in Manufacturing On Planet Economus, and think it very much applies in response to this ongoing discussion:

Here is the difference: We can't just keep servicing each other. This "service economy" thing hasn't worked out so well here on Earth, and now we have a huge trade deficit. It is "better to produce real things" because that is what you sell to others to get the money to pay each other for haircuts (and scissors).

Manufacturing brings so much along with it that entire economies have been, are and will be supported. China isn't making its living by cutting each others' hair. Neither is Germany, or other countries that have realized the importance of manufacturing and manufacturing policy to an economy.

Manufacturing brings with it all the businesses in a supply chain, it brings the research and innovation that manufacturing requires, and it brings a lasting real infrastructure that requires enormous investment to duplicate elsewhere before competition is enabled. Today we have a tremendous current account imbalance that resulted from the terrible trade deficits suffered since we were invaded by this crowd from planet Economus, who told us we don't need manufacturing - that we should transform ourselves into a "service economy." And it will require enormous investment to restore the ecosystem that we allowed to escape to other countries in that period.
Once you've got it, it's hard to lose it, and once you lose it, it's hard to get it back. Not so much with services.

Once you've got it, it's hard to lose it, and once you lose it, it's hard to get it back. Not so much with services.

Mother America Always Loved Manufacturing Most

Leo Gerard — Tue, 28 Feb 2012 09:28:56 -0500

There’s just something about manufacturing. Ask Rosie the Riveter. Ask the computer geeks and artists across America who create “Hacker Space” workshops to help each other invent and fabricate to their imaginations’ content.

Yeah, it’s cool to make stuff. The “maker,” whether an inventor or engineer or welder gets a thrill out of performing work that results in visible, viable products. Manufacturing also gives the “makers” the feeling of empowerment that can be seen all over Rosie the Riveter’s face.

Manufacturing is powerful. And power is coveted. That’s why mother America always loved manufacturing most. Since the early days of this country, visionary political leaders like Alexander Hamilton and Abraham Lincoln nurtured manufacturing. They knew manufacturing builds a country’s economic strength. And the capacity to manufacture secures a nation’s military might. So President Obama’s focus on reviving American manufacturing, including his proposal last week to give American manufacturers a small tax break, is wise, even if the banking brother and service sector sister feel aggrieved as a result.

President Obama said in his State of the Union address that his goal was to forge an economy built to last. That, he said, would be based on American manufacturing and American know-how, American-made energy and skilled American workers.

Since then, he has talked up his plans to reinvigorate manufacturing during several factory tours. At Master Lock in Milwaukee, Wis., he applauded the company for bringing 100 jobs back to America from overseas. The tax code should reflect that, the President said. He proposed the government give tax breaks to companies that on-shore jobs, instead of granting them to those that offshore.

It’s illogical, even unpatriotic to use tax dollars to subsidize companies that send jobs overseas, transferring America’s manufacturing power to foreign countries like China.

Later, in Everett, Wash., President Obama lauded The Boeing Co. for manufacturing planes in America. Orders for Boeing’s commercial aircraft rose by more than 50 percent last year, and it hired 13,000 Americans.

During a tour of the plant where Boeing manufactures its 787 Dreamliner, the President said:

“We can’t go back to an economy that was weakened by outsourcing and bad debt and phony financial profits.”

While Wall Street’s financial gambling took down the nation’s economy, the solid, steady, circumspect practices of manufacturers are facilitating recovery. No wonder manufacturing is the favored child.

Manufacturing, Obama pointed out, supports jobs throughout the economy, from mines to machines shops to malls. At the Boeing plant, he said:

“Every Dreamliner that rolls off the assembly line here in Everett supports thousands of jobs in different industries all across the country. Parts of the fuselage are manufactured in South Carolina and Kansas. Wing edges, they come from Oklahoma. Engines are assembled in Ohio. The tail fin comes from right down the road in Frederickson.”

In addition, those supply chain factory workers, whose jobs pay about eight percent more than comparable ones outside manufacturing, support service sector jobs in their communities.

All of that explains the government loans to car manufacturers GM and Chrysler. It would have been devastating for the country to lose the industrial might and capacity of GM and Chrysler. In addition, at risk were 150,000 jobs at the two carmakers and untold hundreds of thousands of other manufacturing jobs at car part factories across the country and at real estate offices and restaurants and retailers.

Four years later, GM and Chrysler are profitable, repaying the loans with interest, and hiring workers. Still, the number of jobs at the Big Three auto companies is down by about 150,000 over the past five years, reflecting the overall job losses in manufacturing in America. Over the past 40 years, manufacturing employment declined from 25 percent to 9 percent, as manufacturing output fell from 25 percent of GDP to 12 percent.

Some of that loss is unavoidable as robots replace humans, but economist Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, says, “a lot of it has to do with bad policy.” The government picks winners and losers all the time with tax policy and subsidies and other measures. “It’s just not very smart about it,” Bernstein says. For example, it provides billions in subsidies to corporations to move jobs offshore.

A report called “Why Does Manufacturing Matter” by the Brookings Institution says government traditionally fostered manufacturing:

“History also reveals. . .there is no transformative investment that reshaped our economy, from railroads to the Internet, where the federal government did not partner with the private sector to overcome . . . barriers. . .To ignore this reality in the name of “not picking winners” . . .or whatever misguided ideology you want to plug in, is to concede global competition to those unburdened by such dangerously wrongheaded thinking.”

President Obama believes that. His mantra over the past two months has been:

“I want us to make stuff.”

And he openly admits the nation has a favored child, saying:

“Manufacturing has a special place in America.”

Working People Not Sharing Economy's Gains - How Do We Fix This?

Dave Johnson — Wed, 22 Feb 2012 13:37:41 -0500

Robert Reich says the economy's problem is that regular working people are not sharing in the gains that the economy makes. He says the idea that bringing back manufacturing will fix this is an illusion. I agree and disagree.

In Manufacturing Illusions, Reich writes that our challenge is not so much to bring back manufacturing jobs,

The real issue isn’t how to get manufacturing back. It’s how to get good jobs and good wages back. They aren’t at all the same thing.

... But American manufacturing won’t be coming back. Although 404,000 manufacturing jobs have been added since January 2010, that still leaves us with 5.5 million fewer factory jobs today than in July 2000 – and 12 million fewer than in 1990. ...

Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs because the old assembly line has been replaced by numerically-controlled machine tools and robotics. Manufacturing is going high-tech.

Bringing back American manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kind of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

Reich says that while corporations are making record profits, American workers aren’t sharing the bounty. In fact wages are dropping even as jobs are (maybe) starting to return, concluding,

The fact is, American corporations – both manufacturing and services – are doing wonderfully well. Their third quarter profits (the latest data available) totaled $2 trillion. That’s 19 percent higher than the pre-recession peak five years ago.

... The fundamental problem isn’t the decline of American manufacturing, and reviving manufacturing won’t solve it. The problem is the declining power of American workers to share in the gains of the American economy.

Disagree

I disagree that "manufacturing isn't coming back." In many ways this echoes the now-infamous Steve Jobs line, "Those jobs aren't coming back." Reich writes that these jobs "compete with lower-wage workers overseas" but also that there are just going to be fewer of them because technology is replacing jobs.

OK, first, the competitive advantage of China and others isn't really lower wages, it is the overall working conditions forced on people who don't have a say. We can and must do something about that, or there will be a natural migration of our own working conditions downward to match the worst around the world. As I wrote yesterday, We, The People Have To Say, "No You Can't Do That". The choice for us really is just that stark. We must use democracy's power or lose it.

Next, jobs or not, we have to regain our manufacturing clout in order to tackle the trade deficit, which is draining our economy. This is a fundamental structural problem.

Finally, manufacturing jobs are different from other jobs, because of all the jobs that support those manufacturing jobs. They are a canary in the coal mine, or a spotted owl in an ecosystem -- it isn't about the manufacturing jobs themselves but the overall ecosystem of manufacturing. This is why manufacturing is so important, not just the jobs directly in the factories themselves on the day the widget is assembled.

It is also the lasting infrastructure and ecosystem that comes with manufacturing -- and stays. It requires enormous investment to create a manufacturing ecosystem. But once you've got it, it's hard to lose it, and once you lose it, it's hard to get it back. Not so much with services.

This is why China is targeting supply chains and not just manufacturing. They want that ecosystem. Manufacturing means suppliers and all the jobs involved there, and researchers and designers and other innovators (and their patents) follow the manufacturing. And so does the balance of trade, and the overall position on the world's economic ladder.

Agree

And this moves us directly to Reich's other point, which I absolutely agree with. We, the People have not been and are not sharing in the gains that "our" economy makes. This is the key problem of our economy today. This is the Reagan Revolution coming home to roost. (See this simple explanation, in charts.)

But this again comes back to having to do something about getting back the manufacturing jobs. The unions were broken by the trade deals, which enabled the 1% to say to the 99% "shut up and take it or we'll move your job, too." When the unions were broken the only real mechanism available to us to challenge the power and wealth of the 1% was broken. And so we stopped being able to demand a share of the gains of the economy.

Up to that point yes, the 1% were able to buy enough of the government, but we were able to organize around our jobs and say "no we will not let you ..." to the worst of the ravages of 1% capitalism. This was how we were able to force a certain amount of democracy on them. But after the trade deals broke the unions and the power to organize we were no longer able to do that. This has played itself out in the years since Reagan, but now the result of these changes are pretty clear in front of our faces. The stark choices are upon us.

The solution lies with us. We need to recognize this is a fight about democracy. This really is about the 99% vs the 1%. We, The People Have To Say, "No You Can't Do That" We have to understand what has been happening to us, how the 1% were able to use China as a wedge to break the unions and break democracy, and demand these "trade" deals be rewritten to actually help us -- and help the Chinese workers. We must not continue to let exploitation and lack of democracy reward the 1%ers. Democracy really is the best economics.

This means tariffs on imports made by people who do not have a say and are therefore exploited. This way those goods do not undercut the wages and working conditions of people here. Use those tariffs to subsidize our own exports so the exploitation does not undercut our own goods in world markets. The start is understanding the equation that exploitation is undercutting democracy, which is undercutting our whole economy.

We, The People Have To Say, "No You Can't Do That"

Dave Johnson — Tue, 21 Feb 2012 14:06:23 -0500

In Will We Choose A Chinese Future, David Sirota asks the core question: "Do we accept an economic competition that asks us to emulate China?" THIS is the choice that the "job creators" are demanding that we make when they say we need to be more "business friendly." THIS is what they are asking us to do to ourselves when they say that less government, less regulation, lower taxes, anti-union "right-to-work" laws, and the rest of the corporate-conservative litany is what will restore the economy and "create jobs."

We, the People have to say, "No, you can't do that."

It's Not Low Wages, It's Low Democracy

The reason so many factories have moved to China is not just price, it is because they do things a democracy cannot allow. Steve Jobs famously said, "Those jobs aren't coming back," because over there they make people live in dormatories at the factory and can roust them at midnight and make them work 12-14 hour days, seven days a week, using toxic chemicals. Richard Eslow lays it out in, Hell Is Cheaper: China, Apple, And The Economics Of Horror,

Companies like Apple don't outsource to China because the workforce is better-educated or more highly motivated. They don't even outsource just because the labor is cheaper there. They outsource because employers who defraud their workers can make products more cheaply, and those who ignore their safety can produce them more quickly. [...] It's possible that Steve Jobs and other outsourcing executives really think that "those jobs aren't coming back" because they expect it will always be impossible to underbid the Chinese - because they don't believe Chinese workers will ever be protected by law.

That's the inexorable logic of the unrestrained and unregulated market. If things don't change, there will be no stopping the outflow of employment from the safe and the stable to the cheated, the endangered, and the abused. Bad ethics drives out good ethics.

Jobs is saying that those jobs and companies and factories are not coming back because over there the workers can be forced to do those things, because they don't have a say. They don't have We, the People democracy like we do, so they can't do anything about it. And our trade agreements allow our companies to close our factories here and force our workers to compete with that.

We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People -- the 99% -- are in a real fight here to keep our democracy, or we will lose what is left of it.

We, the People have to say, "No, you can't do that." We have to say it to the companies that move jobs to China, where people have no say and are exploited. And we have to say that goods made by people with no say cannot be brought into our country without a strong tariff. We should use the funds brought in by that tariff to subsidize goods made here so they can compete in world markets. Otherwise we are making democracy into a competitive disadvantage. And if countries like China don't like it, they can give their people a say, pay them decent wages, and protect their environment. That would be a race to the top instead of the current race to the bottom.

The Climate Change Denial Industry

Oil and coal companies are funding a "denial industry" to keep us from doing what needs to be done to rescue the planet's climate. They make billions upon billions from pumping carbon into the air, and block efforts to cut back their polluting. Modeled after the tobacco denial industry and its "doubt is our product" strategy, they fight efforts to move us to green energy sources. They even direct their propaganda to attack electric cars and high-speed rail.

We, the People have to say, "No, you can't do that."

The Too-Big Banks

It's the same story with the biggest banks. They pushed debt on us. They used their power to gut regulations and then took huge risks that crashed the economy. They demanded taxpayer money to rescue them without even cutting back the huge salaries and bonuses. And then they funded propaganda that blamed us, the poor, the government, public employees, unions -- anyone but themselves. And they used their vast power and wealth to block investigations and accountability, forcing "settlements" that make their shareholders and their employees and their customers pay.

We, the People have to say, "No, you can't do that."

Other Examples

There are many, many other examples of wealthy, powerful interests - "the 1%" - using their wealth and power to make us do things that benefit themselves at the expense of the rest of us. And as this continues life for "the 99%" gets harder and bleaker and we fall further and further behind.

In all of these example We, the People have to say, "No, you can't do that."

That's What Government Is

Government is We, the People banding together to watch out for and take care of each other. Government is We, the People saying to the wealthy and powerful, "No, you can't do that."

When the1%ers demand "less government" they are using their power and propaganda to force us into a position where we are less able to say to them, "No, you can't do that."

We, the People have to say, "No, you can't do that." Until we do, they will do that, and that, and that.

China Is Very "Business-Friendly"

Dave Johnson — Wed, 15 Feb 2012 14:52:02 -0500

China is very, very "business-friendly." Corporate conservatives lecture us that we should be more "business-friendly," in order to "compete" with China. They say we need to cut wages and benefits, work longer hours, get rid of overtime and sick pay -- even lunch breaks. They say we should shed unions, get rid of environmental and safety regulations, gut government services, and especially, especially, especially we should cut taxes. But America can never be "business-friendly" enough to compete with China, and here is why.

Workers In Dormatories, 12 To A Room, Rousted At Midnight

China is very, very "business friendly." Recent stories about Apple's manufacturing contractors have started to reveal just how "business-friendly" China is. Recently the NY Times' Charles Duhigg and Keith Bradsher exposed the conditions of workers at Apple's Chinese suppliers, in How the U.S. Lost Out on iPhone Work. They describe how China's massive government subsidies and exploitation of workers mean, as Steve Jobs told President Obama, “Those jobs aren’t coming back.”

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. ... New screens began arriving at the plant near midnight.

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

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Right. No American plant can roust workers out of nearby dorms at midnight to force them onto a 12-hour shift. And the corporate conservatives criticize America for this, not China, saying we are not "business-friendly" enough to compete. This is because we are a place where We, the People still have at least some say in how things are done. (Don't we?) Later in the story,

The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones.

“Business-friendly” = living 12 to a room in dorms, rousted out of bed at midnight for 12-hour shifts, working in a plant paid for by the government, using a neurotoxin cleaner that harms people but enables more production for companies like Apple.

Forced Labor Is The Real "Business-Friendly"

Arun Gupta at AlterNet, in iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think, writes,

Researchers with the Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) say that legions of vocational and university students, some as young as 16, are forced to take months'-long “internships” in Foxconn’s mainland China factories assembling Apple products. The details of the internship program paint a far more disturbing picture than the Times does of how Foxconn, “the Chinese hell factory,” treats its workers, relying on public humiliation, military discipline, forced labor and physical abuse as management tools to hold down costs and extract maximum profits for Apple.

... Foxconn and Apple depend on tax breaks, repression of labor, subsidies and Chinese government aid, including housing, infrastructure, transportation and recruitment, to fatten their corporate treasuries. As the students function as seasonal employees to meet increased demand for new product rollouts, Apple is directly dependent on forced labor.

... The use of hundreds of thousands of students is one way in which China’s state regulates labor in the interests of Foxconn and Apple. Other measures include banning independent unions and enforcing a household registration system that denies migrants social services and many political rights once they leave their home region, ensuring they can be easily exploited. In Shenzhen about 85 percent of the 14 million residents are migrants. Migrants work on average 286 hours a month and earn less than 60 percent of what urban workers make. Half of migrants are owed back wages and only one in 10 has health insurance. They are socially marginalized, live in extremely crowded and unsanitary conditions, perform the most dangerous and deadly jobs, and are more vulnerable to crime.

Please read the entire AlterNet piece, iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think. These things are not “costs” that we can compete with by lowering our wages, these things are something else.

Not JUST Low Taxes -- Massive Government Subsidies

These stories also describe how the Chinese government massively subsidizes these operations, assists their low-wage labor-recruitment schemes, and looks the other way at violations of labor and trade policies. The Chinese government is very "business-friendly." They hand money to businesses so they are much more able to "compete." They are so friendly to business that they even own many businesses.

Trade Secret Theft

Another area where China has very "business-friendly" policies is when their own businesses steal from non-Chinese businesses. This NY Times story, U.S. to Share Cautionary Tale of Trade Secret Theft With Chinese Official details just one case of the "unbelievably endemic" problem of Chinese theft of "intellectual property" -- the trade secrets that keep businesses competitive. In this case China's Sinovel sole the software that ran an American company's products, and immediately cancelled their orders for those products because they could now make them in China:

Last March, China’s Sinovel, the world’s second largest wind turbine manufacturer, abruptly refused shipments of American Superconductor’s wind turbine electrical systems and control software. The blow was devastating; Sinovel provided more than 70 percent of the firm’s revenues.

... Last summer, evidence emerged that Sinovel had promised $1.5 million to Dejan Karabasevic, a Serbian employee of American Superconductor in Austria.

If you steal the ideas, processes, techniques, expertise, plans, designs, software and the other things that give companies a competitive edge, then you don't have to pay them and you can just make the things yourself. When you get in bed with a very "business-friendly" country, you might find that they are more friendly to their own businesses. Because they consider themselves to be a country with a national strategy, not a self-balancing, self-regulating "market."

Trade Deficit Drains Our Economy

As a result of our ideological blindness, refusing to understand China's game, we have a massive trade deficit with them. This means hundreds of billions of dollars are drained from our economy, year after year. And to make up for this we borrow from them in order to keep buying from them. But this does not cause their currency to strengthen in the "markets" because China loves this game the way it is going, and intervenes against the markets to keep their currency low. And so it continues, year after year. We believe in "markets" they believe in rigging markets so they come out ahead...

Markets Can't "Compete" With This

Corporate conservatives tell us we need to be more "business-friendly" to "compete" with China. But at the same time Steve Jobs was being a realist when he said "the jobs are never coming back" because he understood that the current political climate, controlled by a wealthy few who benefit from China's "business-friendly" policies will not let us fight this. Why should these companies bring jobs back here, when over there they can roust thousands from dorms at midnight and make them use toxic chemicals for 12 hours a day for very low pay to make iPhone screens that he can sell at fantastically high prices? Why should they, unless We, the People tell them they can't do that to people, and that we won't let them profit from it?

As long as we continue to think that this is about "markets" competing, we will lose. China sees itself as a nation, and they have a national strategy to continue to be so "business-friendly" that our businesses can't compete. Our leaders and corporations may have "moved on" past this quaint nation thing but China has not.

We, The People Need To Act To Fix This

As long as we continue to send our companies out there alone against national economic strategies that engage entire national systems utilizing the resources of nations, our companies will lose. But the executives at those companies are currently getting very rich now from these schemes, so what happens in the future is not their problem. Maybe the companies they manage won't be around later, but that is not their problem. Others are concerned, but are forced to play the game because no one can compete with national systems like China's.

When everyone is in a position where something isn't their problem, or where they can't do anything about it on their own, it means this is a larger problem, and this is where government -- We, the People -- needs to get involved. It is our problem but we have been convinced that we -- government -- shouldn't interfere, or "protect" our industries, because "the markets" don't like "government" -- We, the People -- butting in. This is a very convenient viewpoint for few who are geting very, very wealthy at the expense of the rest of us.

We Need A Plan

In U.S. must end China's rulers' free pass at Politico, AAM's Scott Paul writes, Read it, read it, read it!)

We shouldn’t fear China’s citizens. But we should be worried about the actions of its authoritarian — and, yes, still communist — regime that tightly controls the People’s Republic. And we should be downright terrified by some of our own leaders’ attitudes toward China.

... China is not merely the key U.S. supplier of cheap toys, clothing and electronics: Its government is also one of our foreign financiers. China achieved this status by defying the free market and its international obligations toward more open trade and investment.

[. . .] History didn’t do in the Soviet Union. A sustained and aggressive strategy did. China engaged our business and political elites — and seduced them into believing these policies were no longer necessary.

... There has been no strategy, no effort to prevail economically.

... No one is suggesting that China is an enemy and we should just update our Cold War strategies. No one can accurately define what China’s intentions are in terms of foreign policy or defense. But on the economic front, the lessons of the past are instructive: We need a plan.

We need a plan. We need to understand that China is not competing with us in "markets' they are competing with us as a nation. We need a national economic/industrial strategy that understands the urgent need to fight as a country to win the industries of the future.

It’s not just price, it is things a democracy cannot allow. We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People -- the 99% -- are in a real fight here to keep our democracy, or we will lose what is left of it.

Democracy Is The Best Economics

When people have a say they demand good wages, benefits, reasonable working conditions, a clean environment, workplace safety and dignity on the job. We need more of that, not less of that. We must demand that goods made in places where people who do not have a say do not have a competitive advantage over goods made in places where people do have a say. And we must demand that those places give their people a say.

As long as we let democracy be a competitive disadvantage, We, the People will lose.

Infrastructure And Manufacturing In The President's Budget

Dave Johnson — Mon, 13 Feb 2012 23:51:55 -0500

Saying the country can't "cut our way to growth," the President has some serious infrastructure money in his budget, along with serious help for America's manufacturers. This will create jobs and make our economy more competitive. Republicans are already blasting it as "more government spending."

This budget proposal has significant increases to maintain and modernize the nation's crumbling infrastructure, includeing

$476 billion over six years in a surface transportation reauthorization package, including an immediate investment of $50 billion for roads, rails, and runways.
$47 billion over six years, plus $6 billion in 2012, to fund the development of high-speed rail and other passenger rail programs as part of an integrated national strategy.
Creation of an independent, non-partisan National Infrastructure Bank (NIB) to help fund large-scale ($100 million minimum) transportation, water, and energy infrastructure projects. The NIB would issue loans and loan guarantees to eligible projects. To maximize leverage from Federal investments, the NIB would finance no more than 50 percent of the total costs of any project.
Builds a next-generation, wireless broadband network and establish an interoperable network for public safety.
$30 billion to modernize at least 35,000 schools

The President's budget also offers a number of pro-manufacturing proposals, including:

$2.2 billion for Federal advanced manufacturing R&D, a 19 percent increase over 2012. This includes a doubling of the budget for the National Science Foundation (NSF), the Department of Energy’s (DOE’s) Office of Science, and the National Institute of Standards and Technology (NIST) labs.
Make permanent the R&D tax credit.
$149 million for research at the National Science Foundation (NSF) targeted at developing new manufacturing technologies in partnership with the private sector.
Revisions to the tax system to encourage domestic job creation, including corporate tax reform that will “close loopholes, lower the overall rate, encourage investment here at home, and not add a dime to the deficit.”
$290 million—more than double the amount in 2012 —for the Advanced Manufacturing Office at the DOE Office of Energy Efficiency and Renewable Energy.
$430 million, an increase of $19 million over 2012 levels, for the Export-Import Bank, the U.S. Trade and Development Agency, the Office of the U.S. Trade Representative, the U.S. International Trade Commission, and the Overseas Private Investment Corporation (OPIC).
$517 million for the Department of Commerce’s International Trade Administration (ITA), an increase of $61 million over 2012 levels, to strengthen its efforts to promote exports from small businesses; help enforce domestic and international trade rules; fight to eliminate barriers on sales of U.S. goods and services; and improve the competitiveness of U.S. firms. This includes $26 million for the creation of a new Interagency Trade Enforcement Center (ITEC) intended to challenge unfair practices by America’s trading partners.
$1.1 billion for reauthorization and reform of the Career and Technical Education (CTE) program, currently set to expire in 2013.

China's Next Leader Xi Jinping Visits US

Dave Johnson — Mon, 13 Feb 2012 12:02:58 -0500

Get to know the name Xi Jinping. He is currently Vice President of China, and in 2013 is expected to become general secretary of the Chinese Communist Party, the next leader of the country. Xi is traveling in the US this week, meeting with President Obama and them stopping in Iowa and California to discuss local trade possibilities.

Last August US Vice President Biden did a tour of China; this trip is considered a reciprocation and a chance for Xi to discuss economic and trade issues and develop bilateral cooperation.

Currency Rates And Trade Cheating

A key topic of discussion with President Obama will be currency exchange rates. China manipulates its currency, holding its value very low, making Chinese-manufactured goods cost much less on world markets than it would if it was allowed to float at market rates. This manipulation enables them to seize jobs, factories, companies and industries from the rest of the world. It is the cause of the massive trade imbalances that many countries have with China. In addition China uses government subsidies, government-owned enterprises, intellectual property theft, forced technology transfer and various other barriers to allowing US-made goods to compete within China and hindering the competitiveness of our exports to world markets.

While China has been gradually increasing the relative value of their currency, it is still as much as 30% undervalued with little sign of China's willingness to bring the value all the way up to market rates at any speed. In 2011 our annual goods deficit with China was $295.5 billion. (Our overall U.S. trade deficit in goods and services with the entire world was $558 billion in 2011.)

President Obama has asked Congress for $26 million to set up a new Interagency Trade Enforcement Center to investigate unfair trade practices that hurt US manufacturers. He is also requesting a 3.4 percent increase in the Commerce Department’s 2013 budget, to assist with export efforts. This is part of his effort to double US exports, to increase jobs and help fight trade deficits.

See also: Washington Post, Views from China’s vice president, a Q&A with Xi.

Americans Think China Dominates

As Xi arrives in the United States, a new Gallup poll shows that Americans see China as the world's leading economic power. The release, Americans Still View China as World's Leading Economic Power, explains,

Americans believe China is the leading economic power in the world today, by a significant margin over the United States. This is the second consecutive year the majority of Americans have viewed China as economically dominant; previously, China held a smaller lead. By contrast, in 2000, Americans overwhelmingly believed the U.S. was the leading economic power.

In fact, the US is still the dominant economic power. But China is growing relative to the US, and their economy continues to show rapid growth while our own remains mired in the after-effects of the recession. China's growth is the result of their trade policies and massive internal infrastructure investment. American ideologues prevent us from maintaining and modernizing our own infrastructure, calling it "government spending." This means that the economic soil in which our companies are enabled to thrive is malnourished. The ideologues also prevent us from countering China's trade policies, calling it "government interference." The result is that we send our companies out to compete against national systems, and even our largest companies are not large enough to compete with that.