Campaigning in Michigan yesterday, Sen. Barack Obama seemed to be making a case for saving American manufacturing: “These have been disastrous years for our manufacturers.  Manufacturing supports one in six American jobs — jobs that pay more and offer better benefits than other jobs — and we all have a stake in saving them.”

  With polls showing that Americans are increasingly concerned about the economy, Sen. Obama was right to focus on the plight of U.S. manufacturing.  Michigan alone has lost  more than 279,000 manufacturing jobs since 2000, or roughly one-third of all factory jobs.  Such a heavy downshift in industrial employment has grievously affected the state’s economy, with one in eight Michigan residents now receiving food stamps, according to a recent New York Times article.

Obama’s speech in Macomb County, Michigan seemed prudently addressed to the state’s “Reagan Democrats,” the very voters most concerned about job losses.  Both the eventual Democratic nominee and Sen. John McCain will compete for their votes, with the “jobs issue” figuring prominently.

In the conclusion of his speech, Obama noted: “if we want to fight for manufacturers here at home, we have to fight for them around the world. Now, I believe in trade, but I also believe that for America to compete and win in the global economy, trade has to work for all Americans. That means making sure that our workers are competing on a level playing field, and that countries like China aren’t breaking the rules and putting American workers at a disadvantage. Fighting for our workers isn’t bad for business; it’s good for our economy. And it’s how we’ll make sure that the costs and benefits of our global economy are being shared more fairly.”

Hopefully we’ll see a full, continuing debate on these issues as we move toward the general election, with a focus on China’s currency manipulation, dumping, and subsidies.  
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Add one more thing to the list of tainted products from China—lead-based dental veneers and bridges.

Apparently, a 73-year-old New York woman found her dental bridge to be so uncomfortable that she had it removed and checked.  The defective dental piece was found to contain high levels of lead.  A subsequent ABC News investigation found that some Chinese-made dental pieces contain lead levels of 490 parts per million (ppm), more than five times higher than the 90 ppm level considered acceptable for toys.

  These unsafe, lead-based dental pieces are typical of the shoddy products sent from China—where cutting corners and meeting a very low bottom line are considered standard business practice. 

Yes, Chinese imports may be cheap.  But there are very worrying reasons for their low cost.

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From Saturday’s Wall Street Journal: 

China Trade Isn’t Helping U.S. Jobs
May 10, 2008; Page A10

Your editorial (”Indiana to Beijing,” May 6) flunks a basic test that most of our children learn in high school: how to balance an account. The Journal chides Hillary Clinton’s criticism of China’s mercantilist trade policies that distort the free market by citing export figures from Indiana.

However, the Journal does not factor in imports, which have led to a record $256 billion trade deficit with China, costing Indiana more than 45,000 jobs since 2001.

China’s unfair trade practices, including currency manipulation, dumping, subsidies, and lax labor and environmental enforcement have contributed to these market distortions and job losses. Criticism of these policies is not anti-China, but rather pro-rule of law and pro-free market.

Why is the Journal — or for that matter the U.S.-China Business Council — supporting practices by an authoritarian regime that distort the free market?

Perhaps remedial lessons in arithmetic and trade theory are in order.

Scott N. Paul
Executive Director
Alliance for American Manufacturing
Washington

  In a surprisingly frank editorial today, the New York Times tacitly admitted what ManufactureThis has been saying from day one: “The loss of manufacturing jobs, coupled with an achievement gap, is a recipe for perpetually worsening poverty.”

Because we haven’t seen the Times ring alarm bells about manufacturing job losses, it caught us by surprise today to see the stodgy “Old Grey Lady” upbraid the state of Connecticut for an ever widening income gap between rich and poor.  As the editorial pointed out, “Over the past two decades, of all the 50 states, income inequality increased the most by far in Connecticut.”

And what did The Times note as the primary cause of this burgeoning wage disparity?  The loss of good paying manufacturing jobs. 

Specifically, the editorial said: Over the last 20 years, Connecticut has lost a third of its manufacturing jobs, replacing them with lower paying service-sector jobs. Virtually no additional jobs have been created.

This is precisely the problem that unfair trade from countries like China has wrought.  It’s hard to see how a laid-off manufacturing worker, who downshifts from a good-paying factory job to hourly wages earned in a retail position, can afford the basic necessities to support a family.  And so, we’re happy to see the New York Times recognize the inherent problem.

Sadly, the Times seems to have given up on U.S. manufacturing.  With 3.5 million factory jobs lost since 2000, it’s possible they see the dismantling of industrial America as a fait accompli.  But if the United States is to survive as a world leader—with First World standards and a self-sufficient military—it must remain a healthy manufacturing base.  Thus, it’s unfortunate that the Times is so ready to throw in the towel vs. China and other countries that continue to swallow large chunk’s of once-vibrant American industry.

In addition to reforming the trade policies that have allowed competitors to undercut key sectors from steel to printed circuit boards, our best and brightest in Congress need to focus more on boosting R&D, with greater investment in high-tech manufacturing sectors, and enforcement of the trade laws on our books—namely, the ones adopted to bolster our factories and protect our workers from illegal dumping, subsidies, and currency manipulation.

Perhaps if we’d been following a more vigilant course in the pat 15 years, we wouldn’t see states like Connecticut, where minimum wage service-sector jobs are depended on to do what middle class manufacturing jobs once did.

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Earlier this year, AAM was concerned that the presidential candidates were not discussing China.  Sure, they were slapping NAFTA around a bit.  But they were overlooking the bigger problem of unbalanced trade with China.

  As the recent primaries have unfurled, however, it’s clear that the debate has shifted.  In a May 3 Indianapolis Star analysis, reporter Ted Evanoff, noted the “import binge” that has taken a toll on U.S. manufacturing.   And with the presidential primaries boiling over, he pointed out that ”presidential aspirants Hillary Rodham Clinton and Barack Obama are on the campaign trail in Indiana insisting they favor trade-reform measures that could save factory jobs.”  In meetings with the Indianapolis Star, both candidates expressed support for action on China’s illegal currency manipulation, which has helped to boost China’s annual trade surplus with the U.S. to $256 billion.

In fact, Evanoff noted, “both candidates describe yuan manipulation as the speed pedal China uses to accelerate its economy.”

It would seem that the mainstream media is now asking the candidates some important questions.

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  Washington Post Global posted a piece today by John Pomfret that seems to mirror recent China pandering.  Rather than berate China for its ongoing protectionism (which distorts the free market), or address the brutality used against its own people, he’s chosen to lecture Hillary Clinton for criticizing Beijing.  Unfortunately, his editorial takes a rather convoluted approach to the facts.

THEREFORE: ManufactureThis wishes to set the record straight and offers the following rebuttal to Pomfret’s missive:

John Pomfret seems to undercut his own arguments when he freely acknowledges the “tainted imports” that come from “sleazy” Chinese companies and the Chinese government.  He also recognizes a “massive trade imbalance” with China.  And yet, inexplicably, he finds this “close relationship with China” to still be “crucial to American interests,” no matter the unfavorable terms.

Pomfret seems willing to ignore what even children understand– namely, that rules matter.  Beijing is cheating on not only currency issues, but also, dumping, subsidies, intellectual property theft, labor rights, and environmental standards.  While these may collectively produce the “low-cost imports” that he celebrates, it’s worth considering the serious net losses that come from closing U.S. factories and sending jobs overseas.

Pomfret praises the Chinese for revaluing their currency, the Yuan, by roughly 18% over the past three years.  In doing so he’s still implicitly recognizing China’s ongoing, illegal currency manipulation.  And at a time when the dollar is falling worldwide, Beijing has only marginally altered is position, leaving the Yuan still grossly undervalued by approximatey 40%.

Currency manipulation is considered one of the more serious transgressions of world trade law, and it’s hard to see why Pomfret makes apologies for Beijing’s regime.  A further irony, though, is that, while Pomfret points to a 300% increase in U.S. exports to China since 2000, he neglects to mention that the U.S. trade deficit with China has also jumped 300% in the same period.  His selective use of the facts overlooks the cost of this increasing deficit– more than 1 million manufacturing jobs lost in “Pennsylvania, Ohio, Indiana, North Carolina, and Michigan,” the states that he specifically points to as benefiting from “rapidly growing exports to China.”

Facts are stubborn things, and an objective appraisal shows the United States being taken advantage of by a repressive regime with only its own stark interests at heart.  This should be unacceptable no matter the criteria, be it sound business practice or simple humanitarianism.

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File this under: “How ironic.”  Apparently, a factory in the Guangdong province of China has been making “colorful flags” that turned out to be pro-Tibet banners.  The order for the flags had come from an overseas buyer.

  The owner of the factory told Chinese authorities that the emblems had been ordered from outside China, and he did not know that they stood for an independent Tibet.  Workers in the factory eventually recognized the flags after doing research online.

There’s two ironic points here.

One, China will manufacture ANYTHING.  If you want cheap toys, or amazingly inexpensive medicine, just order it through a Chinese factory.  They’ll happily knock out a product.  Of course the low sticker price may reflect shoddy materials or toxic ingredients.  But there’s little oversight in China, so “Let the buyer beware.” 

Two, China is currently marching through Tibet, brutally repressing its citizens as they demonstrate for self-government.  One can therefore assume that pro-Tibet messages and Tibetan flags are not currently welcome in the mainland.

And so we have a company that was merely ticking out its latest order, just running the machine as fast as possible, when it inadvertently violated national policy.  Those flags would likely have been shipped for use at one of them many pro-Tibet demonstrations that have sprung up around the world of late, as the Olympic torch winds its way toward Beijing.

  Chinese officials have raced to stop shipments of the Tibetan flags from leaving China.  There’s no word if they also tested the flags for lead-based paint.

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In an April 27 editorial, the New York Times asked, “Is trade the problem?”  And, while admitting that “trade can disrupt lives,” the piece essentially dismissed Americans’ worries about lost jobs and declining manufacturing, citing “advances in technology” as the key culprit for shifts in the economy.

AAM director Scott Paul published a rebuttal in yesterday’s Times and noted among other things that the great economic challenge of our time–China– was never mentioned in the piece:

May 4, 2008
Letter
China’s Unfair Trade

To the Editor:

A very important word was missing from “Is Trade the Problem?” (editorial, April 27): China. No thoughtful discussion about the impact of trade on workers, consumers and America’s economic future can take place without recognition of the role that China plays in today’s global marketplace.

While many factors affect employment and wages in the United States, it’s wrong to minimize or dismiss the role of trade, especially with China. Our lopsided trade deficit with Beijing — $256 billion last year alone — highlights its market-distorting practices, including subsidies, dumping, currency manipulation, counterfeiting, and lax labor and environmental standards.

These unfair trade practices have cost 1.8 million American jobs since 2001, according to an Economic Policy Institute study. American consumers pay in other ways: unsafe and uninspected food, toys and medication, and higher local taxes when factories close. Until we insist that China honor its commitments, American workers will continue to lose.

Scott Paul
Executive Director
Alliance for American Manufacturing
Washington, April 27, 2008

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Statement from AAM Executive Director Scott Paul regarding the latest jobs report: 

“We’re in a jobs crisis.  America lost another 46,000 manufacturing jobs last month.  While Washington cheers the tax rebates, it continues to ignore the structural challenges that face manufacturing.  Unless Congress and the Administration hold China accountable for its cheating—which is the single greatest factor contributing to manufacturing’s woes—and get serious about making American manufacturing more competitive, these job losses will grow every month.  The economy is top of mind for voters in Indiana, North Carolina, and all over America.  It’s time for all three presidential candidates to offer a vision for jobs and manufacturing in the future—and it’s crucial for Congress and the Administration to act now.”

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