Trade

The Next Debate: China and Trade Deficit

Dave Johnson — Fri, 19 Oct 2012 14:56:15 -0400

Monday's final campaign debate focuses on foreign policy. Will it focus on our policy of running huge trade deficits with China? Every dollar of trade deficits makes our country a dollar poorer. That trade deficit is the deficit that our Washington elites should be worried about.

The China Trade Deficit

For some reason, when we close a factory here,lay off the workers and ship the equipment to China, and then ship the same goods back here to sell in the same stores, that is called "trade." And when we buy vastly more stuff from China than they buy from us, that is also called "trade."

We have a huge "trade" deficit with China. We sent China $28.7 billion dollars in August alone - $295 billion last year. So in one year we transferred $295 billion of our wealth to China.

The trade deficit not only drains the economy and our jobs, it sends essential pieces of our industrial ecosystems out of the country. And this means that it is sending our ability to make a living in the future out of the country, too.

President Obama is working to double American exports, but imports also continue to rise. The problem here is that even if we double exports we continue to drain our economy if the export increase 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.

Trade Deficit Costs Jobs

From, Report On Job Cost Of Trade Deficit With China,

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 Economic Policy Institute (EPI) released the report, The China toll, Thursday.

According to the report,

Between 2001 and 2011, the trade deficit with China eliminated or displaced more than half of all U.S. manufacturing jobs lost over that period. The growing trade deficit with China has cost jobs in every congressional district in all 50 states as well as in the District of Columbia and Puerto Rico.

The total losses include 662,100 jobs from 2008 to 2011 alone—even though imports from China and the rest of the world plunged in 2009 before recovering and surpassing the previous peak reached in 2008. The trade deficit in the computer and electronic parts industry grew the most, displacing more than 1 million jobs in high-tech industries. In fact, rapidly growing imports of computer and electronic parts, including computers, semiconductors and audio-video equipment, accounted for nearly 55 percent of the $217.5 billion increase in the U.S. trade deficit with China between 2001 and 2011.

Again: Half of our manufacturing job loss is lost to the trade deficit with China. ... The trade deficit in the computer and electronic parts industry grew the most, displacing more than 1 million jobs in high-tech industries.

Trade Deficit Makes Workers Afraid

The trade deficit and resulting job loss 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.

Trade Actions

The President has filed several trade complaints against China, including actions involving tires, steel pipes and solar panels. This has made a difference. Just yesterday the WTO found in favor of the United States in a dispute challenging China’s imposition of duties on U.S exports of grain oriented flat-rolled electrical steel (GOES). This ruling ensures that American workers and businesses that make certain types of steel won’t face Chinese retaliatory tariffs.

But these trade actions are just one piece of the big puzzle. Another piece is confronting China's currency manipulation.

The Currency Problem

China manipulates their currency. Because their currency is "weak" goods made there cost as much as 30% less than goods made here, even before you take into account the effect of various Chinese government subsidies and other trade cheating.

There is a bill in Congress to crack down on China's currency manipulation. This is a bipartisan bill that has passed the Senate. In past years this bill has overwhemingly passed in the House, and the current bill has more than 60 Republican co-sponsors.

But that bill cannot get a vote in the House, even with more than 60 Republican co-sponsors. Wall Street's front group The Club For Growth has made the currency bill a litmus test. Politico: Club for Growth warns GOP on China currency bill,

The influential Club for Growth is pressuring Republican presidential candidates and lawmakers to oppose bipartisan legislation cracking down on China’s currency policies.

... The Club for Growth has urged lawmakers to vote no on the bill, warning that the vote will be included in the group’s 2011 Congressional Scorecard, used to measure how fiscally conservative they are.

So Speaker Boehner refuses to bring the bill to the floor for a vote -- because it will pass. And the 60+ Republican co-sponsors in the House refuse to sign a discharge petition that forces the bill to come to the floor for a vote because they fear retaliation from Wall Street.

Romney Says he Will Crack Down On China, Refuses To Actually Crack Down On China

On the campaign trail Mitt Roney says he will crack down on China. He says he will do something about China's currency manipulation on the first day he is in office.

But there is something he will not do: he will not actually crack down on China right now, by pressuring Boehner to bring the currency bill to the floor, or by asking the 60+ Repubican co-sponsors of the bill to sign a discharge petition.

If Romney wants to crack down on China he should crack down on Boehner and House Republicans right now. This needs to be part of Monday's final campaign debate.

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Hey check out what happens when you click these:

Is This Why Romney Won't Talk To Sensata Workers Whose Jobs Are Being Shipped To China?

Dave Johnson — Wed, 10 Oct 2012 14:17:14 -0400

On the campaign trail Romney says we shouldn't ship jobs to China and should "crack down" on China trade problems. But he refuses to help or even meet with the Sensata workers whose jobs are being shipped to China right now.

Why the refusal to line up his actions with his promises? A must-read, must-read, must-read news report explains how part of Romney's $400,000/week income comes from ... get this ... shipping jobs to China!

First, the background...

Sensata - Happening Today

Mitt Romney started the "private equity" firm Bain Capital. Bain purchases companies using "leveraged buyouts" that borrow huge sums using the purchased company's own assets as collateral, uses the borrowed money to immediately pay itself, then cuts costs by doing things like sending jobs to China, cutting wages and manipulating tax rules to cut taxes owed, along with standard big-business practices like consolidating business units, taking advantage of economies of scale not available to smaller competitors, squeezing distribution channels for price cuts, and other practices that bring competitive advantages. (See So DID Mitt Romney Really "Create Jobs" At Staples?) After reorganizing the purchased companies Bain then "harvests" them for profit.

One company Bain Capital purchased is Sensata, a sensor manufacturer that makes key components for our automobile supply chain. Sensata then announced it is closing a factory in Freeport, Ill., and sending the manufacturing and jobs to China. (China is engaged in efforts to dominate American auto supplies. See China Cheating Costs 400K Auto Parts Jobs and Why The Latest Trade Complaint Against China Matters.)

Bain/Sensata brought in Chinese workers and made the Freeport workers train them. Bain/Sensata is moving the equipment out of the Freeport factory and shipping it to China right now. The Freeport employees have set up a camp outside the factory that they call Bainport and are trying to stop the Bain trucks that are moving the equipment out for shipment to China. Supporters were arrested this week, trying to stop those trucks.

The Sensata employees heard Romney on the campaign trail, and somehow got the idea that he opposes sending our jobs to China. So they asked him to come to Freeport/Bainport and help them. Read on to learn about Romney's response to the Sensata workers, and how Romney is actually making big money right now from shipping their jobs to China.

"The week before they came they took the American flag down outside the plant. The week after they left they put it back up."

The China Problem – The Public Gets It

During the George W. Bush administration we lost more than 50,000 factories and at least 6 million manufacturing jobs directly to China. (Never mind the effect on the supply chains, the grocery and clothing stores where those people shopped, etc... The foreclosures, the bankruptcies, the misery...) Thanks, George!

This chart from Think Progress shows what happened to our manufacturing base immediately after Bush took office. Seriously, look at this chart and see if you can just guess why we have such a terrible economy today:

The public gets it – the problem is China. Polls show that the public overwhelmingly – by percentages in the 80s and 90s for Democrats and Republicans alike – understands that a huge part of our economic troubles come from the was we have been shipping jobs, factories and industries to China.

ABC News, from July: ‘Made In America’ Policies Hugely Popular, Survey Shows

Nearly 9 out of 10 Republicans and Independents and 91 percent of Democrats said they support “Buy America” preferences, according to the survey, which was conducted by the Democratic-leaning Mellman Group.

Another poll,

When it comes to trade with China, the poll found that voters emphatically support tough action on Beijing’s cheating on currency and other trade obligations.

Another, from a key state: New Zogby Poll: Ohio Voters Favor Boycott of China Over Unfair Trade.

Romney Can Read Polls

One thing the Romney campaign can do is read polls. So Mitt Romney sees the polls and says he wants to do something about China.

The Hill: Romney, campaigning in Ohio, vows to stop China's 'cheating' trade practices

Bloomberg: Romney Ad Says He Will `Stand Up to China': Video

The Hill: New Romney ad says Obama won’t ‘stand up to China’ on trade, jobs

So, on the campaign trail Romney says he will stand up to China's cheating, and opposes companies that send jobs and factories to China.

Romney Refuses To Help – Even Talk With – Sensata Workers

Romney wants to be President, and polls show that the public overwhelmingly wants something done about the problem of jobs and factories moving to China, and the resulting was pressure that puts on the rest of us and on our economy. So Romney says he will do something about it.

But Romney's current actions are opposite his current words. He complains about China currency manipulation, but refuses to ask the Republican House leadership to bring the China currency bill up for a vote, and refuses to ask more than 60 Republican co-sponsors of that bill to sign a "discharge petition" that would force a vote.

And Romney refuses to even meet with Sensata workers. When asked if Romney would help these workers the Romney campaign says Romney will not do it:

"Governor Romney has not worked at Bain Capital for over a decade, but for four years President Obama has been presiding over an economy that is creating too few jobs and sending more jobs overseas. Despite the President being invested in Sensata through his personal pension fund, and the government owning a major Sensata customer in GM, President Obama has not used his powers to help this situation in any way."— Curt Cashour, Romney Campaign Spokesman.

Why is Romney saying he wants to do something about the trade problem with China, but refusing to actually do anything about the trade problem with China? Here is one possible reason why.

Romney Making Big Money From Bain Sending Sensata Jobs To China

A must-read news report today by Sharon LaFraniere and Mike McIntire in The New York Times explains. As Romney Repeats Trade Message, Bain Maintains China Ties (emphasis added, for emphasis),

Mr. Romney also has millions invested in a series of Bain funds that have a controlling stake in Sensata Technologies, a manufacturer of sensors and controls for vehicles, aircraft and electric motors that employs 4,000 workers in China. Since Bain took over the operation in 2006, its investment has quadrupled in value. Bain continues to own $2.6 billion worth of Sensata’s shares.

Two years ago, Sensata bought an operation that made automobile sensors in Freeport, Ill. At the first meeting with the plant’s 170 workers, Sensata managers announced that by the end of 2012 all the equipment and jobs would be relocated, mostly to Jiangsu Province. Workers have staged demonstrations, pleading for Mr. Romney to intervene on their behalf.

Chinese engineers, flown to Freeport for training on the equipment, described their salaries as a pittance compared with Freeport wages. Tom Gaulrapp, who has operated machines at the factory for 33 years, said he fears he will go bankrupt after he loses his job on Nov. 5.

“This goes to show the unbelievable hypocrisy of this man,” he said of Mr. Romney. “He talks about how we need to get tough on China and stop China from taking our jobs, and then he is making money off shipping our jobs there.”

So there you have it. Mitt Romney says he opposes sending jobs to China, and says he will "crack down" on China. But he refuses to do things that he could do right now that would make an actual difference right now. And it turns out that right now he is making big money from Sensata and other companies that are sending people's jobs to China right now.

Laying off American workers – usually shipping the jobs to China – and pocketing their wages for themselves is the story of the rise of the wealth of the 1%, and the decline of the American middle class. It is the Romney/Bain/Sensata business model. And the remaining workers have to do the jobs of the laid-off workers, often for lower pay, and are threatened with losing their jobs, too, if they don't like it.

Please read the entire New York Times report, As Romney Repeats Trade Message, Bain Maintains China Ties. There is much more there about Romney, China, Bain and the huge gap between what Romney says on the campaign trail, and how Romney made his current $400,000/week income and how Bain Capital still makes its money.

Visit the Bainport blog for pictures and details about the Sensata workers who are trying to stop the Bain trucks from shipping the equipment from the factory to China.

More On Sensata

You Should Know About Sensata - It's What The Election Is About

Election Or Not, What Happens To Sensata-Style Workers?

Blocking Bain Trucks To Save Jobs In Freeport – This Is An IMPORTANT Story

Breaking – Arrests At Sensata "Bainport" Camp

Also, see:

Bain Of Our Existence - Go-To place for stories and info about Bain Capital.

Unraveling The Romney/Bain Tax Story,

Romney, Jobs And China – Let's Connect Dots

Rights Report Describes Romney-Owned "Brutal Chinese Sweatshop"

Romney, Republicans Again Side With China Over US Companies

Ohio And China – One Side Promises While The Other Delivers

Update: Here is a Democracy Now! report:

Election Or Not, What Happens To Sensata-Style Workers?

Dave Johnson — Thu, 27 Sep 2012 14:48:46 -0400

A group of workers whose jobs are being outsourced to China is touring the "rust belt." They are trying to make an election point. But what about the day after the election?

Sensata Workers - More Jobs Going To China

Two weeks ago I wrote about the workers at the Sensata factory, You Should Know About Sensata - It's What The Election Is About,

Workers facing outsourcing by Bain Capital are camping outside the Sensata factory in Freeport, Ill. They are asking Mitt Romney to show up and help save their jobs. They say they will stay camped there until Romney shows up and stands with them – or with Bain.

Mitt Romney can can use this to show us if he wants to be president of the whole United States, or just president of, by and for the outsourcing 1 percenters.

All Mitt has to do is show up and help these workers. He says he is not part of Bain, and wants to be President of all of the country. Mitt Romney can can use this to show us if he wants to be president of the whole United States, or just president of, by and for the outsourcing 1 percenters. He could - and should - do that.

The Bain Workers Bus Tour

Workers from Sensata have left Missouri and are stopping in are stopping in Iowa, Wisconsin, Michigan, Ohio, Pennsylvania, Virginia, Florida, the presidential debate in Hempstead, NY -- and are (eventually) heading toward Boston where both Bain Capital and the Romney headquarters are located.They want Romney and Bain to ask them not to send their jobs to China. You can read about their progress at BainWorkerBus.com.

The thing is, these workers might be at this plant, run by this company, but there are millions of workers - millions - in the same boat. Or whose jobs have left or are leaving on the same boat, anyway.

The Chart That Says It All

It is more than just these Sensata workers -- they are a symbol of the damage that our terrible "trade" policies have done and are doing to our country. A company can just close a factory here, open it there, bring the same stuff back to sell in the same stores here and call that "trade?" And they can get tax breaks for doing that? They can use the threat of doing that to bust unions and cut our wages? Polls show that We, the People overwhelmingly want this changed, yet it doesn't change.

Look at the chart in this post at Think Progress: After Nearly A Decade Of Declines, Manufacturing Jobs Begin Rebound. It shows what happened to our manufacturing base literally immediately after George 'W' Bush took office. Seriously. Look at this chart and see if you can just guess why we have such a terrible economy today.

During the Bush administration we lost more than 50,000 factories and at least 6 million manufacturing jobs directly to China. (Never mind the effect on the supply chains, the grocery and clothing stores where those people shopped, etc... The foreclosures, the bankruptcies, the misery...) We have a huge trade deficit with China -- money that we send to China and then complain that there is not enough money to do things here.

Imagine how our economy would be doing if we had actual trade with China, where we buy things from them and they buy just as many things from us?

After The Election

After the election the country is going to be diverted into a battle over how much more damage we can do to ourselves. Instead of addressing the trade deficit -- the cause of our budget and jobs deficit -- our plutocrat-funded elites are going to play a Shock Doctrine game of whipping up hysteria about the budget deficit. They are going to terrify the public about "the fiscal cliff" that occurs when the Bush tax cuts expire, and when the deal that put off the hostage-taking over the debt ceiling cuts the military budget, and then the safety net.

Instead of addressing jobs and inequality and wage stagnation and trade and climate and crumbling infrastructure and manufacturing policy and, and, and, they are going to all try to outdo each other offering ways to cut the things that We, the People do for each other -- all to keep taxes low for the super-wealthy. Some call this the "Grand Bargain" where they offer up austerity -- working so well in Europe -- instead of jobs.

Bob Borosage wrote about an alternative approach. Since Jobs Fix Deficits, let's wait on attacking the budget deficit until there are enough jobs. He calls this a "Jobs Trigger" - enough jobs triggers the time to cut the deficit. From Good Jobs First: No Grand Bargain Without A Jobs Trigger,

Poll after poll shows that voters are concerned most of all about jobs and the economy. Yet in Washington and on the campaign trail, attention has turned to deficits and how to get our books in order.

[. . .] The presidential candidates and Congress should be pressed to adopt a budget version of the “jobs trigger.” Putting people back to work is the first step to getting our books in order. So Congress should pass a fiscal trigger as part of any grand bargain: Comprehensive deficit reduction measures will kick in only when the economy is moving, and unemployment comes down to 5 percent or so.

Please go read the whole post, We must all demand a jobs trigger after the election. Jobs first, then fix the deficits.

And to fix jobs, we have to fix "trade." We have to stop this idea that it is OK to close a factory here, open it there, then send the same goods back here to sell in the same stores, and use the threat of doing that to even more of us to force wage and benefit cuts, bust unions, etc.

Ohio And China -- One Side Promises While The Other Delivers

Dave Johnson — Wed, 26 Sep 2012 14:09:59 -0400

Ohio is the center of the Presidential election, and the center of the fight over manufacturing policy and trade policy. Polls overwhelmingly show that the public gets it that the trade deal with China is the core of the problem. So both campaigns are making promises to fix the problem. One difference, though, is that one side just makes promises while the other side has actually delivered.

Promises

Mitt Romney is well aware that Ohio voters overwhelmingly want action on China and is promising that he will take action on China's currency manipulation on the first day he is in office. However, he is not taking actions that he could take today -- actions that would show the public that he means it and show that he is able to lead the Congress to get things done. He could today, right now, immediately ask House Republicans to bring the China Currency Bill up for a vote. The bill has more than 60 Republican co-sponsors, and passed the Senate 63-35, with 16 Republicans voting yes.

Mitt Romney could prove he means it, cold prove he can lead, and could make a difference for Ohio's manufacturers right now. He could ask Speaker Boehner to allow this bill to come up for a vote, and if Boehner won't do it he cold ask the 60+ Republican House co-sponsors of the bill to sign a discharge petition asking that the bill they co=sponsored be actually voted on. This would force a vote, and Mitt Romney would have proven to Ohio voters that me actually means it.

This was discussed on a call yesterday with Ohio Rep. Tim Ryan. Isaiah Poole reported on the call in his post, Romney's Inaction On China Speaks Louder Than Words,

Ryan said in a call organized by the Alliance for American Manufacturing and the Campaign for America's Future that Romney has done nothing to break the legislative logjam, which makes his criticism of President Obama "laughable," he said. "They have zero credibility on this issue," he said of Romney and House Republican leaders.

... Romney has said in campaign ads that he would name China a currency manipulator "on day one," and on Monday campaign spokesman Andrea Saul underscored the pledge while accusing President Obama of "leading from behind on taking on China."

Ryan, however, said that it's Romney and House Republican leaders who are not leading at all. Ryan, who is one of the cosponsors of the bill with Rep. Sander Levin, D-Mich., said that if Romney was serious about the currency manipulation issue, "he should have been calling on Speaker [John] Boehner to bring up my bill, knowing that he would get 350 votes."

Note - audio of the call can be heard by clicking through to Isaiah Poole's post, Romney's Inaction On China Speaks Louder Than Words.

Deliveries

Some of the reasons that Ohio is swinging toward Obama in the election polling were outlined in the call with Rep. Ryan. Marcy Wheeler reports, in her post, Congressman Tim Ryan’s 4 Reasons Obama Is Winning Ohio,

...I asked Ryan for the four top reasons why Obama is doing so well in OH.

He listed, in order:

1. The auto bailout (Ryan’s district also includes GM’s Lordstown Chevy Cruze plant)

2. Obama’s successful WTO trade complaint against China’s tire dumping (which affected Akron)

3. The Administration’s investment in education and research

4. Mitt’s campaigning against Proposal 2, which protected collective bargaining for OH’s public workers

Point 1: Ohio's manufacturing economy - and American manufacturing generally - depends on the centuries-old ecosystem of suppliers, infrastructure, public schools, colleges and universities, tool-builders, designers, transportation systems, and the rest of the components that together enable manufacturing to occur and thrive. After the financial crisis both GM and Chrysler were having trouble getting the financial that would otherwise have been available to them, so the Obama administration stepped in and provided that financing. Had this not occurred that entire ecosystem would have collapsed. This would have meant that not only GM and Chrysler went under but all the of suppliers, etc., would have also gone under, and this would have cascaded into Ford and many other manufacturers collapsing as well.

Point 2: The tire industry is very important to Ohio. China was attempting to take over this industry by selling tires below cost. If they had succeeded in this tens of thousands of jobs, and many factories and their suppliers would have gone under. The Bush administration refused to file even a single trade complaint against China, and we lost over 50,000 factories and several million direct manufacturing jobs, along with their supply chains and corresponding jobs.

More Actions

The Obama administration recently filed a trade case against China for government subsidies of auto parts that are sold in the US. China is trying to seize the auto industry in the same way they were allowed to seize the steel and other industries. As described above, the auto industry is central to the American manufacturing ecosystem, and it is crucial to our future competitiveness that we maintain a level playing field, where American companies can fairly compete.

In the post, Why The Latest Trade Complaint Against China Matters, I explained,

Why This Matters

The auto industry is targeted for takeover by China because it is seen as a(nother) key provider of high-paying jobs, export revenue and therefore national economic strength. The Seattle Times explains, in WHY IT MATTERS: China's auto parts industry.

The United States, China and other governments see the auto industry as an important source of higher-paid jobs and export revenue. The 2008 global crisis fueled complaints in the West that Chinese policies on a wide range of industries might be wiping out jobs abroad.

Chinese automakers exported only about 500,000 autos last year, mostly to the Middle East, Southeast Asia and other developing markets. But its producers of tires, aluminum wheels, radios and other components are making inroads in U.S., European and Japanese markets. They have yet to break into the top ranks of suppliers along with companies such as Delphi, Visteon or Europe's Michelin and Bosch. At the lower end of the market, Chinese suppliers are increasing their global share, putting pressure on smaller Western competitors.

China's strategies, from the same article,

Beijing has an array of strategies to support industries targeted for development, ranging from clean energy to mobile phones to autos. Companies can receive tax breaks and low-cost bank loans, energy and land.

The WTO allows research grants and some other aid, but critics say China violates rules that prohibit making exports a condition of support. They say Chinese policies have encouraged auto parts manufacturers to shift production to China, hurting employment abroad.

The key:

Employment in the U.S. auto parts sector shrank by roughly half between 2001 and 2010, while U.S. imports of auto parts from China have increased seven-fold, according to the Obama administration.

Enough Ohio voters understand just how important auto, tire and other manufacturing jobs are to the state's economy, and the economy of the entire region and our country. Mitt Romney opposed the auto bailout, saying that the companies, their suppliers, their workers, the small businesses that depend on their workers, the communities where those workers and businesses reside, and the states the depend on those factories, suppliers, jobs and communities should all just be left to fend for themselves.

This election is a battle over whether we will be a fend-for-yourself economy -- or a we-are-in-this-together economy that understands ourselves as a country and understands manufacturing as an ecosystem of vital components. History -- and China and even evolution -- prove that nurturing ecosystems is what makes an economy function. Isolated individuals bravely striving on their own against mighty and powerful forces might sound great to the teenagers who worship Ayn Rand novels, but it just doesn't work in the real world.

Why The Latest Trade Complaint Against China Matters

Dave Johnson — Tue, 18 Sep 2012 12:57:00 -0400

The Obama administration has filed a trade complaint against China for violations involving "extensive" government subsidies for autos and auto parts.

From Reuters, at HuffPo: Barack Obama: China Auto Subsidies 'Directly Harm Working Men And Women',

"These are subsidies that directly harm working men and women on the assembly lines in Ohio and Michigan and across the Midwest," Obama told a campaign rally. "We are going to stop it. It is not right, it is against the rules, and we will not let it stand."

Why This Matters

The auto industry is targeted for takeover by China because it is seen as a(nother) key provider of high-paying jobs, export revenue and therefore national economic strength. The Seattle Times explains, in WHY IT MATTERS: China's auto parts industry.

The United States, China and other governments see the auto industry as an important source of higher-paid jobs and export revenue. The 2008 global crisis fueled complaints in the West that Chinese policies on a wide range of industries might be wiping out jobs abroad.

Chinese automakers exported only about 500,000 autos last year, mostly to the Middle East, Southeast Asia and other developing markets. But its producers of tires, aluminum wheels, radios and other components are making inroads in U.S., European and Japanese markets. They have yet to break into the top ranks of suppliers along with companies such as Delphi, Visteon or Europe's Michelin and Bosch. At the lower end of the market, Chinese suppliers are increasing their global share, putting pressure on smaller Western competitors.

China's strategies, from the same article,

Beijing has an array of strategies to support industries targeted for development, ranging from clean energy to mobile phones to autos. Companies can receive tax breaks and low-cost bank loans, energy and land.

The WTO allows research grants and some other aid, but critics say China violates rules that prohibit making exports a condition of support. They say Chinese policies have encouraged auto parts manufacturers to shift production to China, hurting employment abroad.

The key:

Employment in the U.S. auto parts sector shrank by roughly half between 2001 and 2010, while U.S. imports of auto parts from China have increased seven-fold, according to the Obama administration.

400,000 Jobs Lost, 1.6 Million More At Risk

In January three separate reports were released showing how China's illegal subsidies and other trade violations were causing job loss and damaging our supply chains. The Alliance for American Manufacturing (AAM) described the reports in New Reports Show China’s Illegal Trading Practices Endanger U.S. Auto Supply Chain,

More than 400,000 jobs in the U.S. auto supply chain have been lost since 2000. One major problem is China's persistent violations of World Trade Organization (WTO) rules, and another 1.6 million U.S. jobs are at risk unless China's illegal trading practices are curtailed, according to three separate reports released in January of 2012.

Taken together, these three reports show beyond a shadow of a doubt that China's blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale are undercutting companies in the U.S. auto supply chain.

The three reports from January:

Growing Threats to the U.S. Auto-Parts Industry from Heavily Subsidized Chinese Tires and Parts, conducted by Robert E. Scott and Hilary Wething of the Economic Policy Institute (EPI), notes that a substantial portion of jobs in the U.S. auto industry are in the auto-parts sector, with direct and indirect auto parts jobs in virtually every state. The report concludes that “every one of these [1.6 million U.S.] auto-parts jobs is individually at-risk from this unfair trade competition.” Research by AAM has found that the auto parts sector comprises 75% of employment in the U.S. auto industry.
Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011, conducted for EPI by Usha C.V. Haley, cites $27.5 billion in government subsidies to the Chinese auto-parts industry and notes that China’s central government has committed to disbursing an additional $10.9 billion in subsidies for industrial restructuring and technological development of the industry.
China’s Support Program for Automobiles and Auto Parts Under the 12th Five Year Plan, by Stewart and Stewart, a prominent law firm that has won cases challenging China’s unfair trading practices, offers evidence that the massive government subsidies being given to Chinese producers, which are in violation of China’s WTO commitments, will continue for years to come unless challenged by Congress and the President.

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.”

Job Fear From Trade Deficit Is What Happened To Jobs And The Middle Class

Dave Johnson — Wed, 11 Jul 2012 12:13:48 -0400

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.

Yesterday's Jobs Emergency Hollowing Out The Middle Class examined the reasons that our economy has shifted in ways that enrich a few at the top while the rest of us fall further and further behind. This is called "hollowing out" because the middle class is disappearing while the money goes to the top and the people fall to the bottom. In it I quoted Dean Baker on the real cause of the hollowing out. I want to repeat this part of the post for emphasis. Baker writes that last decade's manufacturing job loss is because of the trade deficit. From the post:

Dean Baker responds, in Income Is Definitely Being Redistributed Upward, but Why Do We Think It's Technology? at the Center for Economic and Policy Research's Beat the Press, (emphasis added to emphasize):

...the piece refers to the millions of manufacturing jobs that the United States lost over the last decade. The biggest factor behind the job loss was not technology; productivity growth in manufacturing was not markedly faster in the 2000s than in prior decades. The main factor leading to job loss was the growing U.S. trade deficit.

The predicted result of an over-valued dollar is the loss of jobs and lower wages in the sectors of the economy that are exposed to international competition. However, the availability of low-cost imports raises the living standards of those who are protected from international competition.

The latter group would include highly paid professionals, like doctors and lawyers. Note that it is not technology that protects these professionals from seeing their wages depressed by competition from their low-paid counterparts in the developing world, it is deliberate policy. While it has been the explicit goal of trade policy to put manufacturing workers in direct competition with workers in the developing world, the barriers that make it difficult for qualified doctors, dentists, and lawyers in the developing world to work in the United States have been left in place or strengthened.

Once again, for even more emphasis: "The main factor leading to job loss was the growing U.S. trade deficit. The predicted result of an over-valued dollar is the loss of jobs and lower wages in the sectors of the economy that are exposed to international competition. ... it is deliberate policy."

And for more emphasis: "The main factor leading to job loss was the growing U.S. trade deficit. The predicted result of an over-valued dollar is the loss of jobs and lower wages in the sectors of the economy that are exposed to international competition. ... it is deliberate policy."

Job Fear

When you close factories and ship them out of the country people lose their jobs. And the rest of the people are afraid of losing their jobs, so they "keep their heads down." Companies can make them accept lower wages. They work longer hours. They even stop taking vacations and sick days. They certainly don't ask for raises or better working conditions. This terrible job fear everyone has helps a few at the top get even richer.

This is why corporate profits are the highest ever. From the recent post, Here Is Why Our Elites Are Not Fixing The Economy,

When we had democracy, We, the People made the rules and we ran our country and our economy for our benefit. Now that we are a plutocracy things are different. The reason our elites are not doing anything to fix the economy is because from their viewpoint, things are just fine.

... The reason our leaders are not doing anything to fix the economy is because, from the viewpoint of our real leaders, the economy is working just fine.

Trade Deficit Is The Root

From last month's post, 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 Root

Pick a national problem, and the odds are that our trade imbalance is aggravating it. Our trade deficits literally suck money out of the country. When looking up the numbers I had to double check, our annual trade deficits are so huge. In the chart below that first line under the dates represents $100 billion. Look at what happened in the late 90s, when we opened the China flodgates. (Click to enlarge):

In the 70's the trade balance dipped below zero because of oil, and the country responded with conservation and the beginning of the search for alternatives -- until Reagan. To make matters worse, Reagan preached "free trade" -- as in use cheap foreign labor to break American unions. (But Reagan also enforced rules against "dumping" and other trade violations.) The real break in our balance of trade clearly begins around the time that NAFTA and the World Trade Organization went into effect, and then went absolutely nuts after China was brought in. Between 2001 and 2009 we lost 1/3 of all of our manufacturing jobs, more than 50,000 factories, and entire industries. We drained trillions of dollars out of our economy.

Why Can't We Fix This?

This is so hard to fix because the trade imbalance that drains our country transfers great wealth and tremendous power to a few. The trade deficit results from allowing companies to just pack up American factories and industries and move them to China. This lowers labor costs, which translates to profits for the few at the top. This wealthy few use some of that wealth to buy off our government and shower us with propaganda to let them keep this scheme going. And it creates jobs fear.

Job fear makes people want to "keep their heads down," not make waves, not appear demanding or ungrateful, lest they lose their jobs. It keeps people inside. It keeps people from organizing unions. The organizers are fired, and the threat to just hire cheaper people if you don't stop this is very real. People are afraid.

High unemployment helps the rich get richer. It brings them more power. Every claim to "create jobs" gains power, be it through cutting taxes on big corporations, cutting government oversight of what corporations do, passing laws restricting unions, you name it -- hand the treasury over to big corporation sand they will "create jobs."

So don't count on the "job creators" to be creating very many jobs, as long as high unemployment means the highest profits in history, and a "job fear" public that will vote to support any big-corporate scheme that promises to "create jobs."

In Why Can't Apple Make Your IPhone In America?, presented at Netroots Nation,

When people have a say they say they want better pay, health care, retirement, vacations, sick pay, protections, worker safety, clean environment and taxes to support the country – things like that – the very things China offers to let our businesses escape from.

So what China offers is that China is “business-friendly.” Because people there do not have a say, so they can’t ask for the things people should have.

Corporate conservatives here say we should be more business friendly, we should lower wages, lower taxes, stop taking care of the environment, stop all those pesky health and safety and environmental inspections, stop telling businesses what they can and cannot do, and all the rest. They say we should be more like China.

What they are saying is that we should abandon the benefits that democracy brought to We, the People – the 99%

in order to enrich a few people – the 1%.

When we opened up our borders to goods from China, and let this treatment of workers and the environment offer advantages to our elites,

we made democracy a competitive disadvantage.

... China offers these things to our business leaders for a reason. This is the reason : China sees itself as a country, and we no longer do.

China competes with us as a country. But our businesses see themselves as GLOBALIZED, not as part of a country.

So since we – at least our businesses – no longer see themselves as part of a country we are not responding to this competition. We are not mobilizing to fight back.

In fact, China has essentially recruited our own business leaders to fight against our own government.

By helping a few at the top get rich China has essentially recruited our own businesses leaders to fight against our own government.

Again: By helping a few at the top get rich China has essentially recruited our own businesses leaders to fight against our own government -- and us.

Obama Takes Action On China Trade

Dave Johnson — Thu, 05 Jul 2012 13:40:58 -0400

What did you think the word "trade" meant? You probably thought it meant we buy from them, and they buy from us, and we both get richer. I'll bet you never thought "trade" means we buy from them, and they don't buy from us, and they get richer and we get poorer, did you? I'll bet you never thought "trade" meant we close factories here, move them over there and bring the same goods back here to sell in the same stores (except the people who worked in those factories don't have jobs anymore, and the rest of us get pay and benefit cuts) did you? Well, guess what, suckers.

Chinese Goods Swamp American Markets, American Goods Not Allowed In Chinese Markets

Look around you at all the Chinese-made goods in our stores. Now, think about this: China just doesn't let a whole range of American-made goods into their country. Automobiles are an example. In 2011, around 18 million vehicles were sold in China. But China allowed only 106,000 American-made vehicles into their market. China's deal is, if you want to sell in China you have to build a factory in China.

Trade Enforcement Action Today

So today the United States is initiating a World Trade Organization (WTO) suit against China. China has imposed tariffs on American-made cars , which severely limits how many can be sold in China. Toldeo Blade: China to face accusation of unfair trade,

Demonstrating a tough line on trade with China, the Obama Administration will file an unfair trade complaint today against China's new duties on some American-made cars and sport utility vehicles, including the Toledo-made Jeep Wrangler.

A senior administration official told The Blade Wednesday the United States will file the case with the World Trade Organization in Geneva, accusing China of putting illegal duties on $3.3 billion worth of U.S.-made auto imports.

... Republican challenger Mitt Romney, a native of Michigan and the former governor of Massachusetts, said the free market, aided by government guarantees for postbankruptcy financing, should have determined the future of GM and Chrysler, an argument he made in a 2008 New York Times essay headlined "Let Detroit Go Bankrupt."

The Presidential Campaign

While there have been a series of trade enforcement actions by the Obama administration, and actions like today's take months to prepare, today's campaign-trail announcement was clearly intended to draw contrasts between the President's enforcement and Repubican Presidential candidate Mitt Romney's past statements on trade.

SF Chronicle: Obama Hammers Romney Bain Record With China on Ohio Bus Trip.

The WTO complaint came as Obama began a two-day bus trip in Ohio and Pennsylvania. The “Betting on America” tour, as his campaign has dubbed it, runs through areas reliant on the auto industry. The label is designed to draw a contrast with presumed Republican presidential nominee Mitt Romney, a former private- equity executive whose business made investments overseas.

Romney’s experience “has been in owning companies that were called ‘pioneers of outsourcing,’” Obama said. “My experience has been in saving the American auto industry, and as long as I’m president, that’s what I’m gonna be doing.”

Time, Swampland: Obama Welcomes Campaign Season with China Trade Complaint

“It’s campaign season, again,” Barack Obama announced Thursday, after emerging in the sweltering summer heat behind hay bales and before a giant American flag draped across the roof of a nearby building. Then he pivoted to a policy decision his advisers say has nothing to do with the season.

“This morning, my Administration took new action to hold China accountable for unfair trading practices that harm American automakers,” Obama said. “Let me tell you something, Americans are not afraid to compete. We believe in competition. I believe in trade. I know this, Americans and American workers build better products than anybody else, so as long as we are competing on a fair playing field we will do just fine, but we are going to make sure competition is fair. That is part of what I believe.”

The Time story points out that Romney has opposed trade enforcement:

In 2009, Romney criticized Obama for taking too hard a line against China, after Obama imposed tariffs on Chinese tires, after claiming that China was dumping them on U.S. markets. “President Obama’s action to defend American tire companies from foreign competition may make good politics by repaying unions for their support of his campaign, but it is decidedly bad for the nation and our workers. Protectionism stifles productivity,” Romney wrote in No Apology: The Case For American Greatness, which he has since referred to as blueprint for his 2012 campaign.

The World Trade Organization later ruled that Obama was legally justified in bringing the sanctions against Chinese tires.

Auto Parts, Too

This action attempts to enforce trade rules on automobiles, but China is also using trade violations in an attempt to take over the strategically important auto-parts industry. In February I wrote about the problem of China's cheating and how even while out auto-manufacturing jobs are returning, auto-parts jobs are not.

China Cheating Costs 400K Auto Parts Jobs,

This week three new reports described even more continuing damage to our economy caused by China's trade cheating -- and our own lack of response. Even as the auto industry recovers and auto-assembly jobs are returning, the auto-parts industry and jobs are not.

... The reports describe Chinese trade violations and calculate the damage done to our economy:

Growing Threats to the U.S. Auto-Parts Industry from Heavily Subsidized Chinese Tires and Parts, from EPI. The report concludes that “every one of these [1.6 million U.S.] auto-parts jobs is individually at-risk from this unfair trade competition.” ...
Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011, ... says there are $27.5 billion of Chinese government subsidies to their auto-parts industry with an additional $10.9 billion in subsidies for industrial restructuring and technological development of the industry coming.
China’s Support Program for Automobiles and Auto Parts Under the 12th Five Year Plan, ... says China's subsidies to their auto-parts companies are in violation of China’s WTO commitments, but will continue unless we enforce trade rules.

Trade Deficit - One Root Of Many Problems

Dave Johnson — Mon, 04 Jun 2012 12:56:27 -0400

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 Root

Pick a national problem, and the odds are that our trade imbalance is aggravating it. Our trade deficits literally suck money out of the country. When looking up the numbers I had to double check, our annual trade deficits are so huge. In the chart below that first line under the dates represents $100 billion. Look at what happened in the late 90s, when we opened the China flodgates. (Click to enlarge):

In the 70's the trade balance dipped below zero because of oil, and the country responded with conservation and the beginning of the search for alternatives -- until Reagan. To make matters worse, Reagan preached "free trade" -- as in use cheap foreign labor to break American unions. (But Reagan also enforced rules against "dumping" and other trade violations.) The real break in our balance of trade clearly begins around the time that NAFTA and the World Trade Organization went into effect, and then went absolutely nuts after China was brought in. Between 2001 and 2009 we lost 1/3 of all of our manufacturing jobs, more than 50,000 factories, and entire industries. We drained trillions of dollars out of our economy.

Causes

Energy. The trade imbalance started with OPEC and the oil price shocks in 1970s, and oil imports since then. This is a huge problem but the beneficiaries of this trade imbalance fight to keep things the way they are. (By the way, 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. Also, FYI, Koch brothers == oil.)

"Asymmetries." One-sided trade relationships are now draining money from our country at a dramatic rate. We are much more open to imports than many of our "trading partners" are. We buy from them, they don't buy from us -- and we just let this continue year after year.

"Strong" dollar policies, combined with currency manipulation by others. A strong dollar is great for Wall Street, but is terrible for manufacturers and producers. When the dollar is "strong" it means that goods made here cost more than goods made elsewhere. The dollar went way up in the early 1980s because of the borrowing following the Reagan tax cuts for the rich and the trade deficit went up along with it. Dollars had to be purchased to buy our bonds, creating a "demand" for them, which increased their "price," contributing significantly to the then-record U.S. trade deficits. Meanwhile, we let countries like China manipulate their currencies to make them "weak," which means goods made there cost must less in world markets.

Trade cheating. Many countries violate trade rules (like manipulating currency), which brings them a competitive advantage in world markets. We don't call them on it for various reasons, largely because powerful interest groups benefit from the cheating. When goods from elsewhere cost less than they should it undermines our own manufacturers and producers, but the lower prices enrich distributors, retailers, and others.

The Trap

Here is the trap of our one-sided trade agreements: these "free-trade" agreements increase exports. The reason this is a trap and a problem is that they increase imports more. So, on the one hand the agreements create and enrich interest groups that push for continuation and expansion of the agreements, while on the other hand they increase trade deficits, which drain our economy.

Example: We opened up trade with China. China lets their imports grow, so we have some appearance of increasing sales to China, but they keep barriers while manipulating currency and subsidizing their companies, and their exports to us grow faster than their imports from us, which increases the imbalance. They can steadily reduce their import barriers and let their currency rise slowly, giving the appearance of moving toward open trade and providing what appear to be incentives to keep the relationship going, but by also increasing their exports they continue to drain us.

The Answer: Balance

We must balance our country's trade. Of course, to do that we must understand ourselves as a country again. Our competitors certainly do.

We're A Country. Deal With It.

Here's the important thing to understand, even if you think the idea of "countries" is out of date, and don't think of the United States as a country is important anymore: Others see themselves as countries and they organize their countries to win as countries. And you don't live in those countries. They see us - this geographic region we live in -- as a country, even if we do not, and they plan their efforts accordingly. They attack us as a country and you happen to live in the geographic region called a country that they are attacking. So as they seize the jobs and factories and industries from our country all of us who happen to live within the geographic borders that we refuse to call a country lose out economically, whether we believe we are part of this country or not. This means we have to respond as a country regardless of whether our ideology says we shouldn't. We are under economic attack as a country, so national government still matters as the only force capable of organizing a national response.

Our government must say that the amount coming in must match the amount going out. Period.

(Note, The Causes of the U.S. Trade Deficit, Robert A. Blecker, Ph.D., August 19, 1999 is a good read.)

Apple/Foxconn Promises -- We'll See

Dave Johnson — Fri, 30 Mar 2012 13:17:41 -0400

The "independent" audit of working conditions at Apple's Chinese manufacturing supply chain is out, and it is not good. Workers are being exploited in ways that violate human rights standards and laws, and letting them get away with this is costing us our own jobs. Apple's suppliers promise to improve conditions, make workplaces safer, stop forcing such long hours and lift wages. Foxconn even says they'll start obeying Chinese law -- but not until next year! If this really does happen can China keep its competitive advantage?

"Free Trade"

By opening up so-called "free trade" we made democracy a competitive disadvantage. We just let in goods made in places where people have no say, and as a result there is no environmental protection, little worker protection, terrible working conditions, very low wages and terrible exploitation of people. So of course that undercuts goods made where people have a say, and therefore demand better. We made We, the People having a say (democracy) into a competitive disadvantage! Because we make this mistake we lost millions of jobs, tens of thousands of factories, and entire industries. We devastated out not just towns and cities, but entire regions. (See Free Trade Or Democracy, Can't Have Both.)

Free People Won't Tolerate That

A recent groundbreaking New York Times story by Charles Duhigg and Keith Bradsher, How the U.S. Lost Out on iPhone Work, exposed how workers are treated by Apple's suppliers. Summary: Steve Jobs told President Obama, "Those jobs aren't coming back," because factories in China have people living in crowded dorm rooms where they can be rousted in the middle of the night and made to work 12-14 hour shifts, 7 days a week, standing the whole time, for very little pay, using toxic chemicals, and all kinds of other violations of human rights. Corporations can't get "performance" and "efficiency" and "productivity" -- profits -- like that out of free people who have a say, so they move their operations over there and lay off workers and close factories over here. (Important note: it's not just Apple, Apple is the biggest so the company name is really shorthand for the real culprits: namely, all of them.)

The FLA Report

This NY Times story had quite an impact. Apple was worried that people's knowledge of their exploitation of workers in China might affect profits. So Apple responded by hiring the Fair Labor Association (FLA), a "labor monitoring group" that has no actual organized labor organization participation, to conduct an audit of working conditions at Apple's Chinese suppliers. The report found numerous violations of labor standards and even Chinese law. For example, the report found "numerous instances where Foxconn defied industry codes of conduct by having employees work more than 60 hours a week, and sometimes more than 11 days in a row." In addition, the report "also found that 43 percent of workers had experienced or witnessed accidents, and almost two-thirds said their compensation “does not meet their basic needs.”

TPM: Apple Supplier Foxconn Violated Workers Rights, Audit Finds,

The 60-plus hour work week found at the factories is above both China’s official legal maximum, 49 hours, and the maximum standard allowable by the Fair Labor Association (FLA), the organization that Apple paid to conduct what it said would be an independent audit.

... The FLA inspection also revealed that “more than 43 percent of the workers report that they have experienced or witnessed an accident,” and “a considerable number of workers felt generally insecure regarding their health and safety,” especially pertaining to aluminum dust, which caused an explosion at a factory in the city of Chengdu in 2011 that killed four workers and injured 77, as the New York Times reported.

Apple's Own Published Standards Violated Chinese Law!

Chinese law limits weekly work time to 49 hours but "industry code" and Apple's standards limits weekly hours to 60. That Apple's (and other companies) own published standards violate even Chinese law demonstrates they were aware they were ignoring the law and using what they could get out of the workers. It demonstrates that these companies are knowingly engaged in illegal exploitation of workers, for profit. It also demonstrates that the Chinese government has been ignoring its own laws.

HuffPo: Foxconn Apple Factories Violated Chinese Labor Laws, According To Fair Labor Association

The Washington-based Fair Labor Association says Hon Hai Precision Industry Co., the Taiwanese company that runs the factories, is committing to reducing weekly work time to the legal Chinese maximum of 49 hours.

That limit is routinely ignored in factories throughout China. Auret van Heerden, the CEO of the FLA, said Hon Hai is the first company to commit to following the legal standard.

Apple's and FLA's own guidelines call for work weeks of 60 hours or less.

Promises

In a PR attempt to soften the impact of the FLA report, Apple's suppliers made promises to improve.

NY Times, Electronic Giant Vowing Reforms in China Plants,

Responding to a critical investigation of its factories, the manufacturing giant Foxconn has pledged to sharply curtail working hours and significantly increase wages inside Chinese plants making electronic products for Apple and others. The move could improve working conditions across China.

And, get this, they promise to start obeying the law -- by July of next year,

Foxconn’s promises include a commitment that by July of next year, no worker will labor for more than 49 hours per week — the limit set by Chinese law.

WaPo: Pledge by Apple’s iPhone manufacturer in China could set off new round of wage hikes,

Foxconn, owned by Taiwan’s Hon Hai Precision Industry Co., promised to limit hours while keeping total pay the same, effectively paying more per hour. Foxconn is one of China’s biggest employers, with 1.2 million workers who also assemble products for Microsoft Corp. and Hewlett-Packard Co.

From the HuffPo story,

"The report will include new promises by Apple that stand to be just as empty as the ones made over the past 5 years," said SumOfUS.org, a coalition of trade unions and consumer groups, ahead of the release of the report.

And from the TPM story,

“For months now, SumOfUs.org members have been calling on Apple to clean up the working conditions in its supply chain in time to produce the next iPhone be the first ethical iPhone,” the spokesperson told TPM, “That hasn’t changed at all. Our campaign is going to continue until real workers see real improvements — and so far Apple has been all talk and no action.”

We'll See

This is one of those "believe it when we see it" situations. Phrases like "lip service" come to mind. We'll see. Apple's supplier promises to start obeying the lay -- by July of next year! Wow.

But here is a question: where is our government on this? American companies are breaking laws overseas, exploiting workers and violating human rights standards. They are hoarding the resulting cash offshore to avoid paying their taxes, when we have a national deficit. These actions by these companies are wiping out our jobs and communities. Where is our government on this?

Click here to see the Fair Labor Association report.

Trade

The Next Debate: China and Trade Deficit

The China Trade Deficit

Trade Deficit Costs Jobs

Trade Deficit Makes Workers Afraid

Trade Actions

The Currency Problem

Romney Says he Will Crack Down On China, Refuses To Actually Crack Down On China

Is This Why Romney Won't Talk To Sensata Workers Whose Jobs Are Being Shipped To China?

Sensata - Happening Today

The China Problem – The Public Gets It

Romney Can Read Polls

Romney Refuses To Help – Even Talk With – Sensata Workers

Romney Making Big Money From Bain Sending Sensata Jobs To China

More On Sensata

Election Or Not, What Happens To Sensata-Style Workers?

Sensata Workers - More Jobs Going To China

The Bain Workers Bus Tour

The Chart That Says It All

After The Election

Ohio And China -- One Side Promises While The Other Delivers

Promises

Deliveries

More Actions

Why The Latest Trade Complaint Against China Matters

Why This Matters

400,000 Jobs Lost, 1.6 Million More At Risk

More Trade Actions - Wind Turbine Towers, Washing Machines

Why Sell Under Cost?

Washing Machines

Wind Turbine Towers

Problem: No US Industrial Strategy

Job Fear From Trade Deficit Is What Happened To Jobs And The Middle Class

Job Fear

Trade Deficit Is The Root

The Root

Why Can't We Fix This?

Obama Takes Action On China Trade

Chinese Goods Swamp American Markets, American Goods Not Allowed In Chinese Markets

Trade Enforcement Action Today

The Presidential Campaign

Auto Parts, Too

See Also

Trade Deficit - One Root Of Many Problems

The Root

Causes

The Trap

The Answer: Balance

Apple/Foxconn Promises -- We'll See