trade with China

It's Okay To Lose Your Job Since You Can Always Buy "Stuff" From China.

Steven Capozzola — Wed, 24 Oct 2012 12:00:03 -0400

Here we go again. In the Washington Post's 'Wonkbook,' Dylan Matthews trumpets the tired old canard that American consumers benefit from the low price of Chinese imports.

Matthews cites a University of Chicago study that tried to estimate how Chinese exports have affected the cost of living for low-income Americans. They found that non-durable goods from China comprise a much bigger share of low-income Americans’ spending than that of wealthier U.S. consumers. Because of this, "from 1994 to 2005, inflation among poor U.S. households grew 6 percentage points slower than among rich households."

Basically, the study is saying that poor America shops at Wal-Mart and CVS. And this is great because those folks can buy low-cost goods there.

It's a great, simple theory. But it also overlooks the overall ramifications of an increased reliance on exports. The wider long-term national cost of our mushrooming trade deficit with China is closed factories, lost jobs, and stagnant wages. In fact, the Economic Policy Institute (EPI) found that the trade deficit with China has cost 2.7 million U.S. jobs, 2001-2011.

On a personal note, I was one of those low-income Americans. When I lost my job in the 2001 recession, I was unemployed for nine months. All I could find in that time was a job at a bookstore. I earned roughly $6.50/hour. After taxes, I was earning roughly $5.35/hour. A typical, non-durable good, like the ones Matthews celebrates, was a regular-sized Speed Stick deodorant. At CVS, it cost $4. So, it was taking me almost one hour to earn the money to buy one household good.

When we lose good-paying jobs, we can’t afford to buy much of any supposed low-cost imports. To me, Matthews blog piece is frustratingly elitist.

One more example: A paper mill worker in Wisconsin is earning $70,000/year, with benefits and healthcare for his family. Thanks to China's massive subsidization of its paper industry, plus its illegal currency manipulation, he loses his job. Now, he's earning hourly wages while working at Wal-Mart or CVS. How does he support his family, pay for healthcare, put his kids through college?

Sorry, Matthews, your viewpoint doesn't hold up in the real world.

In Other News China Trade Deficit Still Huge

Dave Johnson — Thu, 11 Oct 2012 14:18:28 -0400

The August trade figures are out and they are not good. The terrible trade deficit is where the jobs and the economy went but is ignored because it makes a few elites wealthy. Meanwhile our elites are whipping up fears about the budget deficit instead of the trade deficit, because they can use that fear to herd politicians toward a "grand bargain" that cuts taxes on the wealthy and corporations while cutting the things We, the People do for each other.

The Bad News

AP: US trade deficit rose to $44.2 billion in August,

The U.S. trade deficit widened in August from July because exports fell to the lowest level in six months. The wider deficit likely dragged on already-weak economic growth.

The deficit grew 4.1 percent to $44.2 billion in August, the biggest gap since May, the Commerce Department said Thursday.

Exports dropped 1 percent to $181.3 billion. Demand for American-made cars and farm goods declined.

Imports edged down a slight 0.1 percent to $225.5 billion. Purchases of foreign-made autos, aircraft and heavy machinery fell. The cost of oil imports rose sharply.

[. . .] For August, the deficit with China dipped 2.3 percent to $28.7 billion. U.S. exports edged up modestly, while imports from China fell. For the year, the U.S. deficit is on track to surpass last year's record, the highest ever recorded with a single country.

The widening trade gap with China has heightened trade tensions between the two countries. And it has become a flash point in the presidential race. GOP challenger Mitt Romney has promised a tougher approach than President Barack Obama with trade practices that he says are giving China unfair advantages.

Two key take-aways:

We had an international goods and services trade deficit of $44.2 billion.
The monthly goods deficit with China fell slightly to $28.7 billion from $29.4 billion in July. This is the second highest monthly trade deficit with China this year.

Here is the Census Bureau release.

Here is the Bureau's Trade in Goods with China.

Trade Deficit Drains Jobs, Economy, Makes Workers Accept Lower Wages

The trade deficit, especially the trade deficit with China, costs jobs and jobs and jobs. From the post, Report On Job Cost Of Trade Deficit With China,

So just how many jobs are lost to trade deficits? A new report, The China Toll, takes a look at the effect of our trade deficit with China since that country joined the World Trade Organization (WTO) ten years ago, and comes up with some very specific numbers. In summary:

"Growing U.S. trade deficit with China cost more than 2.7 million jobs between 2001 and 2011, with job losses in every state"

The trade deficit also drains the economy, and sends essential pieces of the industrial ecosystems out of the country. Note that even if we double exports, as the President is working to do, we continue to drain our economy if this doesn't catch up to the level of imports. From Trade Deficit - One Root Of Many Problems,

You buy things till your wallet is empty. So you raid the savings account to buy more stuff. Then you get a loan, and buy more stuff. Another loan, another, you keep buying stuff... Finally you're selling off the tools you had used to make a living. That's where the country is now because of the huge imbalance in our trade relationships. We buy more from them than they buy from us and we have let this go on and on and on. This is the deficit we should be worried about.

The trade deficit makes workers afraid, so they work longer hours, skip vacations and accept cuts in wages and benefits, which also hurts the economy. From Job Fear From Trade Deficit Is What Happened To Jobs And The Middle Class,

The middle class is disappearing. Our economy is "hollowing out" because the money goes to the top and the people fall to the bottom. This is because we allow American companies to close factories here and open them there, shipping the same goods back here to sell in the same stores, costing jobs, companies, industries and our economy. This makes us afraid for our own jobs and afraid to make waves. By helping a few at the top get fabulously rich, China has essentially recruited our own businesses leaders to fight against our own government - and us.

The trade deficit is the problem we should be terrified by, not the budget deficit. If we fix the trade deficit and jobs that will fix the budget deficit!

The U.S. is China's market of first and last resort.

Steven Capozzola — Mon, 11 Jun 2012 13:38:01 -0400

The New York Times' Keith Bradsher reports that China's domestic economy has been stumbling of late due to a slowdown in construction and a sluggish retail market.

But that's not a major problem because China has an ace-in-the-hole. Whenever the economy of the People's Republic hits any headwinds, Beijing can always ramp up exports to support job growth.

According to Bradsher, China's exports surged 15.3% in May 2012 compared to May 2011. That's twice as fast as economists had expected. Apparently, May actually clocked in as the biggest month ever for Chinese exports, and the country's trade surplus has expanded in each of the last three months.

All of this massive exporting is more than enough to preserve millions of factory jobs throughout China's industrial sector.

What's most instructive, though, is that China is depending on the U.S. market, not the EU, as its biggest customer. Apparently, exports to the U.S. were up 23% in May from a year earlier, but only increased 3.2% to the European Union.

Helping to fuel this massive sales boom to the U.S. is China's deliberately undervalued currency. By pegging its currency to the dollar at an artificially low rate, Beijing is making sure that its exports are exceedingly cheap in the U.S. Conversely, U.S. exports become more expensive due to this preferential currency rate.

Despite continuing Congressional concern, the problem is actually getting worse. Bradsher reports that Beijing has actually depreciated its currency more of late. The Yuan fell nearly 1 percent against the dollar last month, and Bradsher says this is the "largest drop since Beijing officials unpegged the currency from the dollar in July 2005."

The fact that Beijing can adjust its currency so precisely is proof yet again that it deliberately manipulates the Yuan to gain an export advantage. But despite this blunt evidence, the Obama Administration has now refrained from designating China as a currency manipulator seven times.

Even though President Obama talked tough on China in the 2008 campaign, and promised action on the currency issue, his Administration has basically given China a "blank check" by not naming them a currency manipulator.

By contrast, GOP Republican hopeful Mitt Romney has taken a hard line in his campaign, promising to cite China for its currency peg on day one of his presidency.

National polling makes clear that the American people overwhelmingly support such action on China's brazen violations of world trade law, including its currency undervaluation. Thus, Romney's campaign rhetoric is well-timed and well-informed.

Amazingly, Speaker of the House John Boehner has continued to block movement on a House currency bill despite overwhelming, bipartisan, majority support for such legislation. The House is considering H.R.639, the Currency Reform for Fair Trade Act, which has 233 cosponsors, including 65 Republicans. (In 2010, the House passed a similar bill, H.R.2378, the Currency Reform for Fair Trade Act, by a strong, bipartisan vote of 348-79, including 99 Republicans.)

Similarly, the Senate passed S.1619, the Currency Exchange Rate Oversight Reform Act of 2011, last fall by a bipartisan vote of 63-35.

What's clear is that Speaker Boehner is single-handedly thwarting the majority will of both Congress and the American people. It's almost inexplicable that Boehner would stand in the way of such modest legislation to address China's mercantilism.

The Alliance for American Manufacturing (AAM) has repeatedly called for Boehner to allow H.R.639 to come to a vote. Passage of such legislation would be an obvious step forward to provide a level playing field for America's manufacturers and their workers.

Can Apple Start Making Their Product in the U.S. Again? The Answer Is YES.

Steven Capozzola — Thu, 31 May 2012 10:17:29 -0400

Last fall, we pondered whether Apple could start building iPads and iPhones in the U.S. Our conclusion was, YES, Apple could indeed start assembling products in the U.S.

Some key points:

1. Labor costs are not the key factor. As Michele Nash-Hoff (President of ElectroFab) and Curtis Ellis (of the American Jobs Alliance) have explained, labor is a small part (probably less than 10 percent) of Apple’s cost of manufacturing, far less than capital equipment and components. With wages rising in China, and U.S. manufacturing workers actually being far more productive, the labor cost differential become very small.

2. Apple is the rare product that competes on quality, not price. While it may or may not cost more in total to assemble iPads in the U.S., Apple is not competing against dozens of similar products. And so, retail price is not the key criteria because consumers are already buying iPads due to their unique quality and attributes, not "low sticker price."

3. Thanks to high productivity and top quality, U.S. manufacturing offers its own cost-savings and benefits. U.S. manufacturers are recognized as being the most productive, efficient, and safe in the world. A state-of-the-art U.S. manufacturing facility would offer its own cost savings by virtue of its incredibly productive and streamlined assembly processes.

Okay, so why are we analyzing the Apple production process today? Because Apple CEO Tim Cook was quoted this week at an All Things Digital Conference as saying he'd like to see his company make more components, and possibly assemble them, in the U.S.

Specifically, Cook said:

"There are things that can be done in the U.S., not just for the U.S. market but that can be exported for the world...On the assembly piece, could that be done in the U.S.? I hope so, again, one day."

There are stumbling blocks to a possible reshoring of Apple products, though. Andrew Nusca at Between the Lines says that American companies can always "go overseas for greater flexibility, lower price and sheer speed." He also cites the potential shortage of skilled high-tech workers in the U.S. who can tackle the logistical and competitive needs of such competitive, state-of-the-art production.

But these are battles worth fighting. For starters, a high-tech facility COULD produce in the manner required by Apple for rapid market response. And as for worker skills needed in such a high-tech industry, the Alliance for American Maufacturing (AAM) has repeatedly urged that the U.S. needs to prioritize such training in order to compete successfully in the 21st Century.

All of this is a battle worth fighting, and a very necessary one if the U.S. is to maintain a solid middle class economy. Apple can do it, and so can the U.S. The question is who will take the big step first?

Members of Congress Stand Up To Subsidized Chinese Steel Pipe

Steven Capozzola — Tue, 01 Dec 2009 10:16:02 -0500

Recently, China has dumped a flood of subsidized OCTG (Oil Country Tubular Goods) steel pipe into the U.S. market. Known as OCTG pipe because it is used for the extraction of oil and gas, this pipe has flooded the U.S. market and, from 2006 to 2008 alone, the volume of these imports increased by 203 percent.

While OCTG pipe imports from China have surged into the U.S., natural gas drilling and overall demand for pipes has collapsed. As a result, there has been a massive inventory build-up that has essentially devastated domestic OCTG production, with large numbers of jobs lost and plants shut down.

On Tuesday morning, the U.S. International Trade Commission (ITC) is holding a final hearing on Oil Country Tubular Goods from China. Several petitioners, including U.S. Steel and the United Steelworkers, will allege that steel pipes imported from China is subsidized and sold in the United States at less than fair market value in order to gain a competitive advantage.

A number of U.S. congressmen and senators have signed a letter to ITC Chairman Shara Aranoff, urging support for the U.S. OCTG industry. These elected officials are taking a stand in favor of American manufacturers and their workers.

Beyond Obama's China Trip: Facing The Economic Dragon

OurFuture.org Staff — Thu, 19 Nov 2009 15:30:38 -0500

On the heels of President Obama's trip to China, Carolyn Bartholomew, the chair of the U.S.-China Economic and Security Review Commission, and Clyde Prestowitz, the president of the Economic Strategy Institute, discuss how the United States should respond to the Chinese economic juggernaut.

Bartholomew and Prestowitz agree that the United States needs to respond to the Chinese government's efforts to boost their economy with our own "innovation strategy" that supports the strengthening of industries key to our energy and technology future. That strategy would include national incentives to businesses that would supplement, if not replace, the piecemeal efforts by states to woo foreign companies or keep domestic companies from leaving. They suggest that, contrary to the insistence of some doctrinaire free-marketeers, there are some steps that China is taking to build up its economy that we should emulate, and our bilateral negotiations should reflect that truth.

They also explain the importance of Chinese currency policy in constraining our own ability to grow our economy.

Obama’s Home And The Report Is Out: China Takes Us To School

Eric Lotke — Thu, 19 Nov 2009 11:04:38 -0500

President Obama is home from China and the U.S.-China Economic and Security Review Commission today releases its 2009 report to Congress. What have we learned? That we need to pay attention because we’re getting schooled.

While Obama posed for photos on the Great Wall and talked about a relationship “at an all-time high," China continues to take our lunch money. Hopefully, there were serious back-room negotiations over currency manipulation and illegal subsidies … because if not, we’re in trouble.

Don’t take my word for it. The official, bipartisan China commission held hearings, traveled to China and received closed briefings on classified information. They reported back about expansion of the Chinese navy, China’s stepped-up espionage and cyber-warfare capabilities, and the world’s most sophisticated web filtering and Internet control systems.

But the economy is behind it all. China is quite literally eating our lunch. Since 1980, the U.S. has accumulated a trade deficit with China of nearly $2 trillion. The biggest piece of this trade deficit is in manufactured goods, once the wellspring of American prosperity. And a big piece of that comes from China subsidizing industries and manipulating currency in a way that gives their exports a competitive edge. China then takes our money and lends it back to us, creating both national indebtedness and a destabilizing excess of liquidity that helped fuel our asset bubbles.

This year's report reflects the commission's concern that despite its accomplishments and growing sense of confidence, China may be moving in the wrong direction and that this affects the U.S.-China relationship. China has yet to embrace the challenge first issued in 2005 by the United States that it become a "responsible stakeholder" in world affairs (p. 15).

The report reads like an indictment of Chinese behavior and American compliance. The most glaring problem is the subsidies.

China continues to employ a wide range of subsidies to favored companies and industries within China and to control the value of its currency and provide massive loans from state-owned banks to industries producing over capacity. This approach gives Chinese exporters a substantial price advantage in international markets and disadvantages U.S. companies hoping to export to China.(p. 15).

The report itemizes subsidies in the form of land grants, discounted electricity, and loans from state banks at below market interest rates or “without expectation of repayment” (p. 59). As a whole, the commission concludes that the subsidies and special treatment of Chinese-owned companies “violate China’s obligations as a member of the World Trade Organization” (p. 59).

The report goes on to describe export restrictions (p. 62), currency manipulation (p. 68), double-standards on domestic content (p. 52, 64) and China’s failure to enforce its laws on forced labor, child labor and environmental standards (p. 67) that were key to gaining international investment and foreign government support. The findings go far to explain why products made in China are so much cheaper than products made in America, and the incentives behind our gargantuan and growing imbalance in trade.

The report also explains how the imbalance goes beyond the trade in goods, and helped bring the whole system down. The commission places responsibility for the global economic meltdown “partially on the United States as the world's biggest spender and borrower and partially on China as the world's biggest saver and lender.” But it’s not because Chinese are inherently parsimonious or frugal. “China pursues policies that have the effect of increasing Chinese savings, restraining consumption, and keeping the RMB (renminbi) undervalued” (p. 3). The saving was as out of balance as the spending.

The imbalance extends all the way to the banks. China had hundreds of billions of American dollars, and needed something to do with them all, so they lent them back to us. “The policies that China adopted generated a huge flow of liquidity —or money that can be easily lent to borrowers — into U.S. markets. This excess liquidity created perverse incentives in the United States that encouraged banks to make risky loans to U.S. households, which in turn grew ever more indebted. High U.S. demand for imports allowed China to save even more, creating a vicious cycle and laying the foundation for the current crisis” (p. 4).

So it collapsed. The unstable structure tumbled down.

In the aftermath, the U.S. passed its own Recovery Act and led efforts for international collaboration. But what did China do? More of the same. The commission reports that China stimulated its economy by raising rebates to exporters and offering other advantages to see manufacturers through the downturn (p. 40). In the words of the Commission:

The fact that the government in Beijing is still pursuing an export-led strategy based on a wide variety of subsidies to export industries, including an RMB that remains substantially undervalued, is a cause for concern. If China continues to pursue huge trade and investment surpluses and to accumulate vast financial claims, it will hinder the necessary global economic adjustment, create excess manufacturing capacity, and lay the groundwork for the next crisis.” (p. 2)

We don’t need to watch it fall apart all over again. Cheap Chinese exports to distressed U.S. consumers are not the answer. The report advances 42 specific recommendations, from responding to currency manipulation to increasing our defenses against cyber-espionage. A crucial minimum is aggressive use of World Trade Organization trade remedies. We’ve started moving in that direction with cases on tires and steel pipes. The Commission recommends that the U.S. government preserve and use existing remedy laws “to respond to China's unfair or predatory trade activities” (p. 12).

Obviously, nobody wants to start a trade war and nobody thinks we can unwind the global economy. This isn't about protectionism or going backwards. It’s about building a global economy with agreed-upon rules of free trade that every country follows. From rugby to poker, rules make systems work. Following rules is what China agreed to when it entered the G-20 and was granted permanent normal trade relations with the U.S.

♦ ♦ ♦

There’s a purely domestic angle, too. Between the lines of criticism is a hidden story, implicit advice about fixing our own economy. Parts were illegal and parts were unfair, but China’s success shows how deliberate industrial policy helped it accomplish strategic goals. Indeed, a summary of China’s misdeeds reads almost like a “how-to” list for industrial policy: Subsidize strategic industries, especially energy (p. 57, 65). Enhance innovation by creating “industrial commons,” clusters of producers, suppliers and researchers in close proximity who support each other in uncovering problems and discovering solutions (p. 87). Build an infrastructure, especially on transportation, with domestically produced parts (p. 64).

Now the U.S. can’t be like China in every regard, and we wouldn’t want to be. But we might as well learn some lessons while we’re in school. As the Commission observes, “A widely shared goal in China is to make the country rich and powerful and to regain the nation’s former status as a great power that controls its own fate” (p. 56).

That’s their goal and they made a plan to achieve it. What’s our goal? How are we going to get there?

Tripping in China: Barack Obama's Challenge

Robert Borosage — Thu, 12 Nov 2009 11:23:53 -0500

This week, Barack Obama trips to China as part of an eight-day trip to Asia. The White House paints a full agenda: Afghanistan, human rights, North Korean nukes, climate change, trade relations, and the economy. But it's really just the economy, stupid.

For decades during the Cold War, the U.S. gave security concerns priority over economic issues. Now the economy is our central security concern. It will simply be another measure of the administration's gathering calamity in Afghanistan if that is allowed to distract from the essential discussions about the economy.

On economic issues, Asian leaders, particularly the Chinese, are in the mood to deliver lectures, not receive them. It was the excesses of Wall Street that brought the world to its knees. And Asian nations, not burdened zombie banks or purblind conservative politicians, are enjoying a rapid recovery, after boosting demand with large-scale government spending.

But the president has a vital message to deliver. We can't go back to the old bubble-bust economy. That requires more than just financial reform. Central to that old economy was our relationship to the mercantilist nations of Asia, particularly China. For years, the U.S. consumed more than it made, running up record trade deficits. The Asian nations, particularly China, financed our consumption to increase their exports and market share. The Chinese kept their currency undervalued, hoarded dollars and bought up treasury bills, enabling the U.S. to borrow more and more without suffering rising interest rates. That helped inflate the housing bubble that finally blew up in our faces.

Correcting this imbalance—even as we move to meet the challenge of catastrophic climate change—is essential. Thus far, President Obama has forwarded this discussion carefully. He got the G-20 nations (including China) to establish a mandate for more balanced growth as part of the global economic reconstruction. The IMF has been tasked with monitoring— and pressuring—surplus as well as deficit nations to change their ways.

And the president has shown some teeth. He signed off on slapping temporary tariffs on cheap tires flooding in from China. Punitive tariffs have just been imposed on steel pipe dumped on the market by the Chinese. Serendipitously, the World Trade Organization ruled in August that Chinese restrictions on foreign publications, film and music imports are illegal.

The Chinese haven't gotten the message yet. They did a far better job than the administration in boosting their economy with a bold stimulus package, but much of the spending went to new infrastructure designed to boost exports. They continue to manipulate their currency while denying it. They decry protectionism while practicing it. They've now made a commitment to new energy, but significantly as an export industry, while continuing to open a coal-fired energy plant every week.

So what should the president do when he talks to our bankers in China? In public, for this president particularly, we can expect vision, not fireworks. We can hope for more candid discussions in private, with Secretary of State Hillary Clinton there to provide the needed grit. Here's what we should look for from Obama in public.

1. Forcefully State the New Reality

The President should forcefully state the new reality. We can't go back to the old imbalances. As recovery gains force, there must be adjustments in both surplus nations and deficit nations. This can be difficult and antagonistic or cooperative and mutually beneficial—but one way or the other, it must occur.

The U.S. has already begun. American consumers are tightening their belts, and have begun to save more and to pay down debts. The American government will invest more, and once the economy recovers, lower its deficits. The U.S. will export more and buy less from abroad. We will move to a more balanced trade posture.

Thus the surplus nations—whether Germany in Europe or China and Japan in Asia—must rely less on America as the source of demand. They should be consuming more of what they make. This can be immensely beneficial to their people. Workers should be empowered to gain better wages, and their societies can afford social supports from pensions to paid vacations. Service industries can expand. In emerging from the crisis, regional trade has already expanded faster than exports to the U.S.

2. Invoke the Vision of a New Age

The president should emphasize that the new economy will be built amid a new green industrial revolution. Catastrophic climate change, accelerating beyond scientific estimates, brooks no alternative. This, too, requires wrenching, massive transformation—but it also can be the source for growth and jobs as we balance the global economy.

Addressing catastrophic climate change will generate enormous demand—for new energy, for rebuilding old buildings, for new transportation systems. We will change the way we live, the way we travel, the way we work. This transition will generate new jobs, new inventions and new industries.

This transition can disintegrate into bitter disputes about who is to blame and who is to pay. Instead the president should focus on the challenges and the opportunities it presents. Mandating this transition can also help in the move to a more balanced global economy, fostering decentralized production closer to markets, just as the movement for slow food encourages local farming. Yes, we will need to assist poorer countries and poorer people within each country in the transition. Companies must not be allowed to undermine progress by playing off countries with weak environmental standards against those with stronger ones. But we should not let the costs and the disputes blind us to the opportunity.

3. Make Human Rights the Measure of Progress

The president should publicly reaffirm our commitment to human rights. The Declaration of Human Rights forged after World War II made protection of basic human rights, from freedom of speech to the right to organize to the right to a good job, the central charge of the peace. In the Cold War years, rivalry turned human rights into ideological weapons, with the U.S. championing free speech and property rights and the Soviet Union celebrating economic rights.

Now the president should reassert the reality that basic human rights are indivisible. And increasingly, we understand that they are also economic imperatives. A vibrant market cannot function without the rule of law. Free speech is essential to freedom of contract. To sustain growing economies over time, workers must have the right to organize so the blessings of growth can be widely shared. Basic protections like health care, education and old-age security make it possible for consumer societies to flourish.

4. Show Some Grit in Private

The private discussions will be and should be more contentious. The president needs to make it clear that the old days are over. The U.S. will move to more balanced trade. That means that we'll invest to make our own economy more productive. We'll slowly bring our budget deficits down as the economy recovers.

And we will enforce our trade laws. American states and localities will pass Buy America provisions. China should not be misled by corporate lobbies. It will find more and more resistance if it continues to play by a different set of rules.

The president should be clear about reality. China's currency is undervalued. This feeds the trade imbalances. It threatens China too, as investors will increasingly move to China, assuming that the currency must go up. The Chinese will risk a growing bubble in assets—housing, commercial property, stock markets—that could well expand and burst with destructive consequence. Abrupt unilateral moves could destabilize the dollar. We have a mutual interest in agreeing on currency adjustment.

The Chinese want the U.S. to recognize it as a market economy, to make it more difficult to penalize its trade malpractices. The president should be brutally candid about this. A mercantilist nation that doesn't play by the global rules will not be so recognized. A nation that doesn't enforce labor rights will get special scrutiny. A country that undervalues its currency for trade advantage doesn't qualify. Concessions on this will follow changes in practice, not promises of future reform.

Finally, the president should be frank about his human rights commitments. The U.S. will not seek to embarrass the Chinese generically. But the U.S. will remain an advocate of basic human rights. We will continue to report on violations, and condemn them when they are egregious. The president will meet with human rights champions, including the Dalai Lama.

Moreover, he should indicate that his administration will place increased emphasis on worker rights and decent work, as well as women's rights, both at home and abroad. We will seek to help countries move to empowering workers, to guaranteeing basic rights. We surely will reward those countries that are democracies that respect human rights over those that are not.

China and the U.S. have been in a long, intense relationship that is no longer functional. Renegotiating the terms won't be easy. Neither partner can afford a divorce. Both will find it difficult to change their own ways. Neither has exactly been straight with the other in the past. At best, this trip will lead both to agree that something must be done.

Message To Energy Department: U.S. Greenbacks For U.S. Green Jobs

Isaiah J. Poole — Fri, 06 Nov 2009 10:47:13 -0500

News of the potential use of U.S. stimulus funds for a wind power project in Texas that will produce 2,000 Chinese manufacturing jobs—but a scant number of American jobs—has generated justifiable outrage, including a letter from Sen. Charles Schumer, D-N.Y., to Energy Secretary Steven Chu urging him to "deny Recovery Act funding to this project" unless the majority of the manufacturing of the wind turbines is done in the United States.

It's therefore not surprising that today the Chinese firm that is a primary investor in the project, A-Power Energy Generation Systems, is doing some PR tap-dancing to quell the fury.

But PR tap-dancing from A-Power, and especially from the Department of Energy, which opened the door to the potential of this happening, is not enough. Energy Secretary Steven Chu needs to heed a simple demand: American tax dollars for America's economic recovery must support American jobs. Period.

That's the thrust of the grassroots push the Campaign for America's Future is launching today, which aims to flood Chu's office with this message:

The news that a Texas wind farm is seeking stimulus money to create only 30 jobs here but 2000 jobs in China is disturbing, especially since unemployment in America has surpassed 10%.

China has understandably taken steps to stimulate its economy with its funds and move towards clean energy. We should be taking similar steps at home, not using our tax dollars to offshore jobs that could be created here.

I support Sen. Chuck Schumer's call for you to reject any request for stimulus money unless the high‐value components, including the wind turbines, are manufactured in the United States.

This battle goes to the heart of the economic strategy that this nation will pursue to work its way out of recession and lower unemployment, which today was announced at 10.2 percent.

One reason we are having to fight this battle to begin with is the flawed conservative ideology pursured by the Bush administration and its predecessors. A must-read investigation published lat month by Russ Choma at the American University School of Communications pointed out that while European governments were laying the groundwork for a green manufacturing economy, we "dithered."

The reliance on foreign companies for development of wind energy appears to be at least partially tied to the U.S. government’s resistance to subsidize a home-grown wind energy industry until now. With so few U.S. companies in the business, the door was open for foreign companies to walk away with the bulk of the grants. European companies, in particular, are well positioned to collect stimulus benefits for clean energy.

“Europe was light years ahead of us, in terms of developing these alternative resources,” said Gregory Jenner, a tax attorney and former acting and deputy assistant secretary of the treasury for tax policy, who co-authored a guide for energy companies hoping to collect stimulus money. “The fact that a lot of the European companies are coming over to the U.S., they just see this as an untapped market. Now that the incentives are starting to work out ... it's going to be just like a gold rush for them.”

While the U.S. has dithered with temporary tax incentives for producers, European governments have awarded permanent tax breaks and large subsidies to wind energy companies and poured vast sums into research and technology.

As a consequence, the article says, "European turbine-manufacturers have dominated the world market and continue to do so in the U.S. Indian-manufactured turbines are swiftly moving into the U.S. market as well, complementing Japanese manufacturers who have long been here."

As for China, The Washington Post reported last month that "the government has closed down old cement and coal plants [and] subsidized row upon row of new wind turbines," seeking to generate 120 gigawatts of power from wind by 2020, four times what the United States generates from wind today. And China's government, unlike the United States, sets demands for domestic production.

Earlier this year, a report by the Renewable Energy Policy Project, a think tank that has worked with labor and environmental groups, warned the Obama administration and Congress that it was important that the country has a deliberate policy of focusing government green-energy resources on creating American jobs.

For every megawatt of new wind power capacity — enough potential clean electricity to power up to 300 homes — REPP estimates 4.85 Full Time Equivalent (FTE) jobs are created to manufacture, install and then operate and maintain the wind farm. About 70-75 percent of the total labor required for a typical wind turbine or solar panel is in manufacturing the various component parts that could be supplied by existing U.S. businesses. These are the potential “green jobs” that are key to revitalizing the U.S. and global economy. Without new policies promoting domestic manufacturing, an unnecessarily large portion of these jobs will remain overseas.

We are now seeing that prophecy about to come true. It is time for the Obama administration and Congress to work together on the policies and incentives that will foster the growth of green-energy manufacturing, not just green-energy consumption. It makes no sense to substitute dependence on Middle Eastern oil with dependence on Chinese or European wind and solar technology—not when we have the expertise, the workers and the facilities to build renewable energy products, and especially when taxpayers rightfully demand that every stimulus dollar possible be used to get U.S. workers back into solid jobs.

Let's send Chu that message today.

Obama and China: Vandalism or Vision?

Robert Borosage — Wed, 30 Sep 2009 11:08:15 -0400

"Vandalism" screams the cover of The Economist, depicting President Obama leaving an ice pick in the tire of free trade. (No racial overtones there; after all, as the president explained, he was black before he was elected.)

When the president imposed tariffs on Chinese tire imports, following the ruling of the independent International Trade Commission, the free trade establishment went ballistic. Former Chase CEO David Rockefeller took to the op-ed pages to warn of the threat of surrendering to the protectionist instincts of Obama's union allies. Editorialists from The Washington Post to The New York Times sternly rebuked the president for deviating from the free-trade gospel. Surely, the heavens will tremble; trade wars impend; the apocalypse of Depression-era Smoot-Hawley tariffs are about to descend upon us.

Nonsense. Obama isn't descending into the old trade debate. Remarkably, he has added another explosive issue to his already crowded agenda: that of transforming America's global economic strategy. At the G-20 meetings in Pittsburgh, he succeeded in gaining international approval—including that of the Chinese—for a continuing review of the unsustainable imbalances in the global economy. The decision on Chinese tires may just be the president suggesting that he may put some teeth into digesting that change.

As it is in health care, climate change and financial reform, the challenge is inescapable. America can't go back to borrowing $2 billion a day from abroad to act as the world's consumer. Americans can't go back to spending more than they make, maxing out credit cards and treating their homes as an ATM machine. Those days are over.

That means, as the president has said, the U.S. must spend less and invest more. We must produce more at home and export more. If that is the case, then inevitably the surplus countries, the mercantilist nations that have used export-led growth to drive their economies—China, Germany, Japan and others—also have to change course. They have to save less and spend more, import more and export less. If they don't generate increased demand while the U.S. cuts back, then the recession will return with a vengeance. This entails wrenching changes in public policy and private attitudes. But what's clear is that the old imbalances were and are a constant peril, supplying the kerosene for the contagion that laid waste to the global economy.

At Pittsburgh, President Obama insisted that the leaders of the world's major economies make this a centerpiece of their agenda. He exacted an agreement—despite the stated skepticism of Germany's Chancellor Angela Merkel and China's leaders—on a framework for "strong, sustainable and balanced growth." The G-20 countries agreed to set priorities, report annually on their own domestic policies, and monitor one another, with the IMF serving as an independent goad.

Cynics dismissed the agreement as toothless. There's no enforcement mechanism except naming and shaming (which hasn't exactly proved effective in dealing with China). The IMF has been warning about these imbalances for years to no effect. China and Germany vigorously resist any external questioning of their national economic policies. Merkel dismissed global imbalances as an "ersatz" issue. Tu Jianhua, director general for international trade in the Chinese commerce ministry, tweaked the West, noting that "I'm not sure that one country's leader calling another to import more represents market practices." The G-20 couldn't even get a murmur concerning currency manipulation (a central Chinese strategy) in the document.

The cynicism may be deserved. But here's where the Obama decision on tire tariffs has bite. As the free-trade zealots admit, tire imports barely register on U.S.-China trade accounts. The decision is important for its symbolism, not its substance. That's why the free-trade lobby howls about protectionism.

But the president may well have moved beyond the screamers to an adult discussion. He's telling the Chinese that these staggering imbalances can't continue. We should both adjust, preferably in a coordinated fashion. But the U.S. is serious about changing the game. If we can't do that cooperatively, then we'll find a way to do it independently.

Now, this is a dance that makes the tango look demure. The U.S. is the world's largest debtor. We're telling our leading banker that we're changing our wastrel ways, so they'll need to find a different way to prosper. But the U.S. is hardly in a position to dictate policy to the Chinese. They've already sent tremors through the bond market by raising doubts about our finances.

Will Obama succeed? It's hard to know, for this transformation will require major reconstructive surgery to economies at home and abroad, compared to which health care reform is a mere face-lift. In the short term, consumers, sobered by their losses in the Great Recession, are tightening their belts on their own. Savings by U.S. households have soared to four times the rate of 2008 before the financial collapse. Chinese exports are down 23 percent from last August. But once the economy recovers and people go back to work, Americans may well go back to borrowing and spending. And we know that Wall Street has already reopened the casino.

One thing is clear. As in health care, energy, and financial reform, Obama has once more addressed an inescapable challenge that his predecessors ignored. He has once more aroused the ire of one of the most powerful lobbies—in this case, the global corporations and the free-trade zealots that have dug this country into a deep hole. Once more, he has done so cautiously, in small steps, ready to compromise, hoping not to offend. Once more, he's invited Americans—and the world—into an adult conversation about what is to be done. And once more, he's likely to be greeted by hysteria and insult, graphically illustrated by The Economist's disreputable cover.