An AAM News Wrap-up

A Bloomberg News article yesterday suggests that lost manufacturing jobs is not having a big effect on voters in key states like Iowa and New Hampshire.  AAM’s Scott Paul sounded off on this in a Huffington Post piece debunking the notion that Iowans and New Hampshireans can’t connect the dots between trade policy and electoral politics.

 Scott was also quoted in a Christian Science Monitor article that explored the connection between the U.S. trade deficit and foreign acquisition of U.S. assets.

Finally, analyst Richard Miniter was interviewed on CNN last night regarding the report he recently authored for AAM, “Buyer’s Remorse: How America has Failed to see the Threat posed by Dangerous Chinese Goods and the Case for Safe Trade.”  Rich has been doing TV and radio interviews throughout the country, trying to alert Americans to the potential dangers from unsafe imports from China.  His CNN interview was particularly interesting, and ManufactureThis provides a transcript of the segment below:

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PILGRIM: Three months ago, the head of the U.S. Toy Industry Association promised Americans a safe Christmas saying “We are out to make sure that toys are among the safest things parents can bring to their homes this holiday season.” But with another toy recall just yesterday, five days before Christmas, those assurances ring very hollow. Tens of millions of toys have been recalled this year, most of them made in communist China.

Joining me now is Lori Wallach from Public Citizen and we’re also joined by author Richard Miniter. Welcome to both of you.

I’ll start with you, Lori because I’ve been reading your report, “Santa’s Sweatshop: made in D.C. with bad trade policy; U.S. toy corporations greedy off shoring puts kids at risk.” It is a really compelling read and some of your statistics are interesting. From 1972 to ‘82, we had about a dozen recalls a year, and now this year, we had 120 recalls. It’s about $300 million worth of stuff and tens of thousands of toys are being recalled. What went wrong?

LORI WALLACH, PUBLIC CITIZEN: Well, in that report, we basically track the deliberate decision by the big U.S. toy companies to relocate their production wholesale, overseas to countries where they couldn’t ensure the safety of the products they sold back here. We also document how their profits and CEO pay went through the ceiling, but making toys in unsafe places has resulted in skyrocketing recalls and it was a deliberate choice. This was not an act of god, and then the same companies pushed for trade agreements to lock in this low- road strategy, at enormous risk to all of our safety.

PILGRIM: I looked at the CEO’s salaries in relationship to the salaries of the workers and when it’s outsourced how low the salaries go. It’s shocking stuff. It is an interesting read.

Let me get Richard in on this and Richard, I was very interested in your take on this, because you take it as a very almost academic subject, although you have concrete examples. You talk about how America failed to see the threat posed by Chinese goods and you talk about safe trade. You say the debate is limited, and safe trade is really what we should be pursuing. How do you define that?

RICHARD MINITER, AUTHOR, “BUYER’S REMORSE”: Well the safe trade is United States that is open to trade, that believes in global trade but believes in consumer safety rules, too. It’s not possible to trade with someone without a degree of trust, and trust is fortified through safety regulation. The same safety rules that apply to American-made products sold in America, should apply to imports.

We know that expecting the Chinese to fix this is naive. We know that the Chinese, I went through in my report, buyer’s remorse. I look at Chinese language press accounts. They have dangerous products in their own country made by their countrymen which are killing in one case 16 infants, another case hundreds of adults. So they’re living with dangerous products in their own country and now they’re exporting them to ours.

The question is, are we going to change our border procedures, make these bureaucracies work together, coordinate them and treat it like a national security threat? God forbid if the Chinese actually decided to intentionally ship dangerous products to the United States, we’re wide open, no defense Less than one percent of all containers that come into the United States are inspected.

PILGRIM: You say about one-fifth of the consumer products now in this country are made in China. I was also struck by some of the products thaw mentioned that weren’t on my radar, these lead-coated steel pipes and things that are going into buildings and these are sort of hidden dangers that so we don’t even notice at this point.

MINITER: That’s right and we know that lead in high doses leads to mental retardation in children and it can poison adults as well.

Look the Chinese don’t want to follow American safety standards, yet they want to sell into the American market. We’re going to have a level playing field, I know this term has been abused by some critics of free trade, and I consider myself a free trader but before that, a safe trader. I don’t want people selling products labeled food that’s actually poison and selling medicine that doesn’t actually cure. We went through a period in this country in the mid 19th century where people sold snake oil and other people died. Do we really need to repeat it with a Chinese accent?

PILGRIM: No. Lori, you and I have been talking about this absolutely for at least the last year and before that. You’ve been following this as your life’s work and basically, we look to you to say we’ve all been talking about this for so long but not that much has been done. We’ve had hearings and reports but not that much has been done. What needs to be done and what needs to be done right away?

WALLACH: Well, there are two things that have to happen. To make the improvements in our domestic system, we need to change the Consumer Products Safety Commission. There was legislation passed yesterday in the House on that issue that didn’t deal with import safety in the middle of the biggest import safety scandal in our country’s history.

We need to give the powers to the inspection agency, for instance, to inspect overseas, to stop things apt the border, to require importing companies to post bonds so their goods can be recalled, to make them suggest them selves to U.S. jurisdictions for enforcement actions so the playing field is level for the U.S. companies and the foreign companies.

But to make those improvements to increase inspections, to do the things that need to be done you have to change the trade rules as well. And the reason why is currently under the World Trade Organization, NAFTA and CAFTA, there are ceilings on the level of safety standards the U.S. can apply to imported goods and domestic inspection rates have to be the same as international import inspection rates. Even though an import from China has no safety inspection we can’t inspect at a higher rate because of trade rules.

PILGRIM: Right, we’re limited. Richard, any thoughts on how to change the system?

MINITER: First of all, I think the Bush administration’s plan announced last week is insufficient. They’re only going to inspect ten product lines coming from China out of the thousands of goods, and the Chinese haven’t even agreed to when we can send those inspectors.

But firstly, I think the Chinese have to stop denying American health inspectors who want to go to China to inspect these subcontractors of American companies. Those visas have got to stop being denied.

Secondly, we have got to form a safe trade center where all of the agencies that look at border security and product safety come together — the FDA, the Consumer Products Safety Commission, Customs and so on — can share information. I think it should be modelled on the Counterterrorism Center that brings together the CIA, the FBI and these other agencies.

If there is a major problem that emerges, these groups can then mobilize quickly, as opposed to now, where these are separate silos, they barely communicate with each other. And that bureaucracy can magnify — that bureaucratic failure can magnify the size of any failure.

We can’t afford to wait. We have got to act now.

PILGRIM: That sounds like a very sensible, sensible plan. Richard Miniter and Lori Wallach, thank you for joining us tonight.

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In its semi-annual report on world currencies yesterday, the Treasury Department declined to cite China as a currency manipulator.  A formal designation as a “manipulator” would have opened up China to potential penalties.

Interestingly, everyone in the world recognizes that China deliberately intervenes in world markets in order to depreciate its currency, the yuan.  The EU and Japan have begun pressing China for immediate action on the yuan.  And Treasury Secretary Henry Paulson, like his predecessor, John Snow, has repeatedly urged Beijing to revalue.

 Somehow, though, this latest semi-annual Treasury report once again finds wiggle room to let China off the hook.  China will only take the Administration seriously once it is designated as a manipulator.  It’s too bad the Administration doesn’t realize this. 

At what point will the Administration legally acknowledge what it, nearly every economist, and our friends in the EU already know:  China manipulates its currency to gain an unfair trade advantage, harming American businesses and workers.  How many shuttered U.S. factories, how many laid-off U.S. workers, how large a trade deficit must be reached?

The U.S. is on track to hit a $250 billion dollar trade deficit with China this year, 1/3 of our total trade shortfall.  Beijing’s predatory currency manipulation is responsible for a significant share of that gap.

The Chinese government is looking after its own interests.  The question is, when will our Administration do the same?

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 The Financial Times reported yesterday that Britain, Germany, and France will hold an economic summit next month to deal with “financial turbulence” in world markets.  While hedge funds and investments will certainly be on the roster of discussion topics, one can also presume that the leading EU countries will ponder how to deal with Chinese and Asian currency manipulation.

A coordinated realignment of Asian currencies relative to the euro and dollar is one of the best steps that can be taken to promote global financial stability.

Noting the spirit of cooperation involved in pulling EU leaders together for next month’s summit, ManufactureThis wonders if they would also be willing to join in a slightly larger Roundtable—one along the lines of that suggested last week by Rob Scott of the Economic Policy Institute (EPI ).  In a prescient Washington Times op-ed, Scott called for a new Plaza Accord in which the major economic powers could come together to hammer out the currency imbalances that are currently distorting world markets.  Chief among these is China’s grossly undervalued yuan—a millstone for U.S. manufacturers, and now a thorn in the side of the EU and Japan.

It’s going to take concerted action to fix an unsettled world picture, but this is exactly what’s needed right now—cooperative work to fix a common problem.
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According to the latest figures from the Commerce Department, the U.S. trade deficit fell slightly in the third quarter of 2007, to its lowest level since the first quarter of 2004.  This decline is easily attributed to a weakening dollar, which has benefited U.S. exporters and reduced the trade deficit.

 Curiously, though, this boon for U.S. manufacturers has been limited to trade with Canada and the Euro-zone countries.  While the overall trade deficit has fallen with them, it has instead risen sharply with China.

Rob Scott of the Economic Policy Institute (EPI) noted this strange occurrence today in an interesting article, pointing out that “the dollar has lost only 9% against the Chinese yuan since 2002, and…has actually risen slightly in value against the Japanese yen.”  As he explains it, “these countries intervene heavily in currency markets to prevent the dollar from falling against their currencies, boosting their competitiveness against U.S.-based production.”

Thus, thanks to a rigged currency system, the yuan, like the currencies of other Asian central banks, has remained tied to the dollar and essentially stayed in place.

This currency intervention has been a key force in driving China’s manufacturing juggernaut.  And, as EPI noted in a report earlier this year, the consequences have been dramatic.  Since 2001, the U.S. has lost 1.8 million jobs specifically due to unbalanced trade with China.

That 1.8 million lost jobs statistic has become a well-bandied figure of late, with presidential candidates like Hillary Clinton lamenting it at various debates.  The question then is which, if any, presidential candidates would actually take strong action to correct the situation.  Until they do, the U.S. trade deficit will continue to rise.
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Our Town Hall meeting in Rock Hill, SC last week showed again how important economic issues are to voters.  Here’s a quick look back:

BUPKIS

Etymology: Yiddish– lima beans.

Noun: bupkis, absolutely nothing; nothing of value, or substance.

EXAMPLE: Treasury Secretary Paulson went to China and all we got when he came back was bupkis.

Related terms diddly , diddly-squat , peanuts , squat , zilch

 Yessiree, Hank Paulson went to Beijing this week and came back empty-handed.  No luck whatsoever regarding illegal subsidies or currency manipulation.  But as he explained, he wasn’t in a hurry to chat with his counterparts about the undervalued Yuan: “we do not talk about how fast is fast.”  Thankfully Paulson vowed to crack down on “economic nationalism” in both countries.

This latest, fruitless round of talks shows that neither Paulson nor the administration is serious about addressing the currency issue.  But what’s desperately needed is strong leadership.  In yesterday’s Washington Times, Robert Scott of the Economic Policy Institute (EPI) made the very good point that what’s needed now is a serious, multinational effort along the lines of the Plaza Accord pushed by Ronald Reagan in 1985. 

Without serious concerted action like that of 20 years ago, we’ll simply see more useless chit-chat diplomacy.

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A high number of Chinese-made toys and other gifts will be sold this holiday season.  Unfortunately, they come in a year already marked by lead-tainted toy trains, dolls coated with date-rape drugs, and a record number of other defective goods from China. 

 While these hazards have been well documented in the media, the threat has not passed.  AAM has just released a new report detailing why U.S. consumers face a continuing danger from unsafe imports.  Written by best-selling author and former Wall Street Journal editorial page writer Richard Miniter, Buyer’s Remorse: How America has Failed to see the Threat posed by Dangerous Chinese Goods and the Case for Safe Trade documents the dangers posed by unsafe Chinese imports and outlines steps that the U.S. government should take to keep Americans safe this holiday season.

Many Americans have become greatly concerned about safe products and the United Steelworkers (USW) have taken action by launching a “Stop Toxic Imports campaign.”  As part of the campaign, they’ve  has produced a video featuring Steelworker kids that focuses on protecting children from dangerous, imported products. 
 
Titled “Toxic Toys,” the video has been posted on YouTube and urges members of Congress to take immediate action to protect U.S. consumers from toxic products entering our country.

It’s an important message that should be placed front and center. As AAM director Scott Paul noted on CNBC earlier this week, no “free trade” agenda should be allowed to come before an emphasis on the safety of U.S. families.
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Today CNN reported that economic issues are the top concern of 29% of voters, soundly displacing Iraq as the most important issue.  This is the latest in a string of recent polls showing economic issues at the forefront of voters’ minds. AAM has known this to be true for some time.  It’s a key reason why we’ve been conducting our national campaign of Town Hall meetings.

Tonight AAM holds its sixth “Keep it Made in America” event.  This one is in Rock Hill, South Carolina, a city hard-hit by job losses over the past seven years.  Just like in Iowa, New Hampshire, Ohio, Pennsylvania, and New York, South Carolina voters are joining with us to call upon the presidential candidates to stand up for them, for their families and their communities.  American jobs are at risk and Americans expect their new president to aggressively tackle the economy.

As the CNN poll shows, toxic toys from China and the unceasing loss of good-paying jobs are giving voters good reasons to worry about their economic security.  The candidates have an opportunity — in their debates today and tomorrow — to articulate that they understand and have the right plans to solve these challenges as president.

Our senior analyst, Kerri Houston, discussed this in a timely op-ed in today’s Greenville News.  It’s apparent that voters deserve real answers from the candidates. Let’s hope the candidates are listening.

 PS: AAM Director Scott Paul appeared on CNBC today to discuss Treasury Secretary Paulson’s latest trip to China.  Watch it here.
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AAM lands in South Carolina today for another “Keep it Made in America” Town Hall meeting hostedby John Ratzenberger tomorrow night in Rock Hill. 

The Rock Hill Herald’s Adam O’Daniel wrote a good preview of the event.

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  AAM’s Scott Paul appeared on CNN’s Lou Dobbs last night to discuss a new report by the Bureau of Labor Statistics that manufacturing employment in the U.S. is projected to decrease by 1.5 million job in the next 10 years.

CNN reporter Bill Tucker noted that since 2000, the U.S. has lost more than 3 million manufacturing jobs.  He asked Scott why these manufacturing job losses are so significant for the U.S. economy. 

Scott responded: “These jobs support four or five other jobs in the economy. They have a great multiplier effect. The fact is these retail jobs don’t have that kind of multiplier effect. We’ll see fewer opportunities down the road for young people or for people who don’t have college degrees.”

To learn more about the importance of manufacturing for the U.S. economy, AAM has posted an informational video on YouTube.

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