The new Economic Policy Institute (EPI) study on U.S. jobs lost to China has garnered considerable media attention.  One of the most frank pieces was a blog article by Bill Lambrecht of the St. Louis Post Dispatch, who observed that “the federal government – with Congress arguably complicit – has done little about trying to force China to value its currency fairly, trim manufacturing subsidies and take other steps to make trade more fair.”

The Associated Press also reported the study quite widely, keying in on some of the key finding’s, including, 2.3 million jobs lost to China since 2001.

EPI’s Rob Scott also discussed the report on The Diane Rehm Show.

To see how many jobs your state has lost to China since 2001, visit AAM’s interactive map. 

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2.3 Million Jobs Lost to China since 2001;  Replacement Jobs Pay Substantially Less, Data Shows; U.S. Advanced Technology Sector Hit Hard by Trade Deficit with China

AAM has just released a report noting that the increasing U.S. trade deficit with China has cost 2.3 million American jobs between 2001 and 2007, including 366,000 last year alone.  The study, authored by the Economic Policy Institute (EPI), found that displaced workers lost an average of $8,146 in 2007, a total of $19.4 billion, as they moved to lower-paying jobs.

Workers producing exports are not doing as well as those who were clobbered by imports, the EPI study reveals. U.S. exports to China are heavily commodities, including scrap products and agricultural goods, while 98 percent of Chinese imports were manufactured products, and average wages earned producing U.S. exports to China paid 4.4 percent less than jobs lost to imports from China.  Thus, continuing trade deficits with China are shifting jobs from higher-wage manufacturing to low-wage commodities.

The report has already received widespread coverage throughout the U.S.  Reuters noted that the report is “likely to fuel debate about free trade ahead of the November elections.”  On the Daily Kos, Tasini notes that the data in the report presents “a crucial link in the collapse of a decent economic future for Americans.”

Read the full report here.

AAM’s Scott Paul published a letter recently in the New York Times, Sunday Business Section, July 20.  His letter rebutted economist Gregory Mankiw’s op-ed which stated that U.S. antidumping laws “are little more than an excuse for special interests to shield themselves from competition.” 

Below is Scott’s letter:

The New York Times
July 20, 2008 Sunday
Late Edition - Final
What Economists Want From Washington

SECTION: Section BU; Column 0; Money and Business/Financial Desk; Pg. 2

LENGTH: 119 words

To the Editor:

In ”What if the Candidates Pandered to Economists?” (Economic View, July 13), N. Gregory Mankiw listed free trade and the repeal of antidumping laws as two of the policies that presidential candidates should embrace if they want economists’ support.

But these two policies conflict. Antidumping laws ensure fair and free competition to help rid the market of distortions. They also ensure that workers and businesses are not harmed by unfair trade practices that weaken our economy and contribute to layoffs.

Both presidential candidates and Congress should strongly support these laws.

Scott Paul

Washington, July 14

The writer is executive director of the Alliance for American Manufacturing.
 

Rising oil prices have caused market turmoil around the globe.  The troubles aren’t evenly spread, though.  As Keith Bradsher reports in today’s New York Times, foreign governments are heavily subsidizing energy prices, particularly for diesel fuel, to cut inflation. The subsidies, “estimated at $40 billion this year in China alone,” have the unfortunate side effect of discouraging consumers from conserving fuel.

  This problem extends in an even more consequential manner to steel production.  As a recent AAM report noted, the provincial and national governments of China are busily subsidizing the energy costs of China’s steel producers by as much as $27 billion since 2000.  Not only is this distorting the world market, but it’s allowing China’s producers to continue full-bore production via outdated, polluting industrial plants. 

As long as China’s massive energy subsidies continue for their domestic steel production, U.S. producers will face an uneven playing field.  And for those worried about the rampant air pollution that has made China’s smog a significant contributor to California’s air pollution, there will be little incentive to shape up and move to cleaner emissions.

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The London Evening Standard reports that, with 11 days to go before the start of the Olympics, Beijing is still a smoggy mess.  It’s anybody’s guess if the air will clear in time for the opening events…

Which number is greater?
(a) $2.7 billion
(b) $100.8 billion

  On Wednesday, Commerce Secretary Carlos Gutierrez trumpeted the good news that the U.S. has achieved a $2.7 billion surplus in manufactured goods with our 14 Free Trade Agreement (FTA) partners during the first five months of 2008.  Gutierrez stated, “Our trade balance with FTA partners has swung from a deficit to a surplus proving that open markets are a key ingredient to the competitiveness of U.S. manufacturing and the health of the U.S. economy.”

Opening up markets or, conversely, reducing barriers to U.S. exports, can certainly be helpful for U.S. manufacturing.  Nothing demonstrates the need to reduce foreign barriers more clearly than the $100.8 billion trade deficit in manufactured goods that the U.S. has racked up with China in the same five months of 2008, according to International Trade Commission (ITC) data.  Because China employs illegal currency manipulation as well as subsidies and dumping, there is no happy news—no improvement in the overall trade balance, no increased opportunities for U.S. manufacturers.

Regarding the 14 FTA countries, a better question is whether or not Free Trade Agreements actually helped the U.S. to achieve balanced trade in manufactured goods.  Possibly this recent export success should be attributed more to a significant decline in the dollar’s value relative to virtually all of their currencies.  And, truthfully, countries like Bahrain and Morocco, for example, possess little in the way of a manufacturing base.  It’s not difficult for the much larger United States to outpace them in manufacturing.  

There’s a twist here, too: the U.S. trade balance typically improves during a time of recession.  That’s because, with less money in the average worker’s pocket, consumption of imports tends to fall.  Thus, a dip in imports is yet another fragmented indicator of recession, and so, rather than being a sign of strength, the improvement in our trade balance signals possible, broader economic problems.

The main point is that when you stand a $2.7 billion surplus (spread across 14 countries) next to a mammoth $100.8 billion shortfall, you see a rather big net loss.  Specifically, you see a loss of American manufacturing jobs, a loss of productive capacity, and a potentially diminishing self-sufficiency in national security.

Thus, ManufactureThis, while not wanting to rain on Secretary Gutierrez’s parade, would ask him to focus on the bigger numbers and not nip at the margins.  But that would require getting tough on China’s repeated violations of world trade law, including the aforementioned dumping, subsidies, and illegal currency manipulation—something Gutierrez and the administration have been oh-so-reluctant to do.

Secretary Gutierrez might want to take another look at his interpretation of the facts, or cast a longer glance at China.

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For those of you who are curious about Beijing’s worrisome smog and grey skies, Der Spiegel ran a fascinating set of photos detailing both air quality concerns and algae blooms “caused by pollution and untreated sewage.”

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  If print and TV ads are any indication, it’s going to be China’s season.  The New York Times reports that McDonald’s, Nike, and Pepsi, are among the major brands that are already cheering on the People’s Republic.  Pepsi, for example, offered a limited edition “Go Red for China” promotion earlier this year.

Just why are these companies so eager to adopt the Olympic team of the world’s most populous communist nation? 

The Times notes that China is a “dream for consumer product companies.”  According to Jonathan Chajet, strategic director at Interbrand, “For most international brands…China is the growth market for the next 10 years.”

Curiously, rising nationalism in China may make imported goods a tough sell.  The Times article points out that “China’s growing economic clout and increasing nationalism among its youth — as well as the newfound strength of its homegrown brands — pose challenges for foreign companies trying to woo its growing middle class.”

More significantly, China’s consumers have a higher savings rate than their American counterparts, and tend to purchase mostly the major essentials of daily living.

Perhaps the real reason for promoting China is to better market China’s exports to a hungry world.  Chinese computer maker Lenovo is one of the Games’ “global sponsors,” and it can’t hurt for them to further promote their brand.

The bottom line is that more manufacturing investment in China leads to more imports coming back to the U.S.  And so multinationals that have located their factories in China are undoubtedly going to be rooting for their new favorite home team.

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A New York Times editorial today took the Olympic Committee to task for “complicity” in not having “held China to their word” regarding expected political and journalistic freedoms.  According to the Times, “China has jailed critics, denied visas and threatened news organizations that negative coverage could jeopardize their chance to cover the Games.”

  Such behavior gives new meaning to the phrase “China Cheats.”  In virtually every sphere, from brutality in Darfur and Zimbabwe, to martial law in Tibet, to “police intimidation and bribery” throughout mainland China, the ruling regime in Beijing fails test after test of basic human rights.

And so, this Olympics deserves particular scrutiny because it involves questionable “press freedoms for foreign reporters.” 

While U.S. manufacturers compete against a stacked deck with China, truth in journalism now seems to be doing so as well.

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So, the Consumer Electronics Association (CEA) hit the streets yesterday with a 28-state bus tour aimed at promoting “the importance of trade to creating jobs and driving U.S. economic growth.”  The bus tour, headlined, “America Wins with Trade,” was launched in Manhattan with speeches by New Your City Mayor Michael Bloomberg and Computer World CEO Rachelle Friedman.

  CEA President Gary Shapiro said that launching the tour in New York would be a good start since Manhattan “represents the power of trade and free markets.”

Funny that the CEA is so concerned about free markets.  China, with whom the U.S. racked up its largest ever bilateral trade deficit in 2007 ($256 billion), is notorious for violating free market principles.  The subsidies, dumping, and illegal currency manipulation employed by Beijing distort the open market.  Such practices also cost millions of U.S. manufacturing jobs, so it’s no wonder that Americans are starting to view trade policy with a critical eye, or what the CEA patronizingly refers to as “naysayers.”

If the CEA really wants to make a case for fair and balanced trade, they might try to emulate the national tour that AAM launched back in 2007.  AAM supports trade, which is why we held a series of Town Hall meetings throughout the country to help unravel the doublespeak and misrepresentations that plague many discussions of trade policy. 

For example, the CEA notes that the consumer electronics industry “is projected to generate $1.4 trillion in direct business activity this year and directly employ more than 4.4 million Americans.”  Sounds good, but it fails to acknowledge that while the U.S. exported $146.4 billion worth of consumer goods in 2007, it imported a much greater $474.9 billion worth.  Such large and continuing deficits in various hi-tech sectors mean that, rather than earning higher wages in the manufacture of consumer electronic equipment, more and more American workers are being forced to downshift to hourly retail work selling foreign-made electronic goods at the local mall.

And so the CEA takes to the road with what ManufactureThis politely deems an incomplete message.  It is nice to know, though, that our idea of taking the trade discussion to the people has found imitators.  After all, imitation is the sincerest form of flattery.

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