United Steelworkers President Leo Gerard appeared on CNN this morning to discuss a potential rescue package for the U.S. auto industry.  And Gerard is mad—or as he said on CNN, “I’m so angry. I can’t tell you how angry I am.”

Gerard is good and miffed at the view, best characterized by CNN anchor Joe Johns, that “unions and their demands have, in fact, sort of helped lead the auto industry into these kinds of problems.” 

Gerard offered a very effective retort: “How does a person that makes $57,000 a year, who works in excess of 40 hours a week sometimes to get to that level, has some degree of health care, has some degree of pension, how does that cause the problem? The auto industry and General Motors used that as an example, as $200 billion in sales, their labor costs are $10 billion.  That’s five percent of their overall cost. That isn’t the problem.”

Gerard noted that the problem, in many ways, is from Wall Street—“not the first collapse on Wall Street since they deregulated the financial markets.”  Ironically, Gerard points out, Congress has “been giving money hand over fist to the financial industry,” but is reluctant to assist U.S. automakers.

According to Gerard, “auto sales are down across the board. Nissan sales were down 33 percent, Honda sales 22 percent, big three sales about 30 percent, and that’s because people are afraid to buy cars. They’re afraid to lose their jobs. They don’t have credit. There’s no credit available. So, the decline in the industries that we represent are directly results of the collapse on Wall Street.”

To right things, Gerard echoes a theme that should be familiar to ManufactureThis’s readers: strengthen U.S. manufacturing.  As he pointed out: “The problem is, we’ve had economic erosion of the manufacturing base of America for the last seven-and-three-quarters years. We’ve had collapse after collapse, scandal after scandal on Wall Street that has destroyed pension equity…We have a major employer that we have a relationship with, that had a pension fund that was 100 percent funded.  They had to fund that pension through sacrifices we made at the bargaining table. Now all of a sudden they are 70 percent funded. Why is that the workers’ fault? That’s Wall Street’s fault and our government has to step up and do something about it.”

Gerard is right, and one immediate step is to recognize the importance of rebuilding and maintaining a strong domestic industrial base.  But accomplishing this takes the will to enforce existing U.S. trade law, an effort that has been sorely lacking during the Bush administration.

To read a full transcript of Gerard’s appearance on CNN this morning, click here.  His interview appears in the last segment of the full transcript.
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As U.S. lawmakers mull additional bailouts, and the incoming Obama administration works to craft a new stimulus package, China’s ruling regime is toiling furiously to conquer its own fiscal troubles.

This morning, China’s central bank cut interest rates by 1%, the fourth such interest rate cut in the last ten weeks.  The London Telegraph reports that the People’s Bank of China reduced its main borrowing rate by 1.08% points to 5.58%, the “biggest one-off cut since the Asian Financial Crisis in 1997.”

  China is suffering the strange problem of suffering only 7.5% growth this year—which would be a boom for any other country.  But as the Telegraph notes, this is “perilously close to the 7% minimum level of growth that Chinese economists believe is necessary in order to create enough jobs for the 6 million university graduates who will enter the jobs market next year.”

Beijing continually struggles to tamp down labor unrest throughout the country.  The Telegraph reports: “In recent weeks, a series of riots across central and southern China have flowered as disgruntled employees aired their grievances at the downturn…Today, around 500 protesters rioted at the Kai Da toy factory in Dongguan in the Pearl River delta, flipping over a police car and trashing computers in a dispute over payoffs to 80 fired workers. Tens of thousands of factories across the region have already shut their gates.”

One problem for China is that officials have adopted a strict export-oriented approach during the past 15 years.  The nation has tied its fate to the U.S. market, by both pegging its currency to the U.S. dollar and promoting exports over domestic consumption.  While currency manipulation has been distorting world markets for years, the effects have not hit home till now, as the U.S. market has entered a precipitous downturn, with decreased consumer spending.

  China’s slowdown has now extended to its domestic steel producers.  The New York Times notes that a number of key Chinese steel producers have shut down operations due to decreased world demand.  This comes at a particularly unfortunate time for a newly completed, $3 billion steel plant in Ma’anshan, for example.  Furnaces and lines have been shuttered, with rolls of excess steel sitting idle on the plant floor.

Noting China’s track record of dumping product, a great concern for U.S. steel producers is whether decreased demand for steel in China will mean an effort to dump this excess steel in the U.S. market—something for which the incoming administration will need to be exceptionally vigilant.

China’s accelerating woes demonstrate all the more clearly why balanced, mutually beneficial trade must be established between the U.S. and China, something ManufactureThis has been repeatedly urging. 

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With Thanksgiving right around the corner, Americans are focused on food more than any other week of the year. 

Which brings us to some good news — no American has died from eating seafood imported from China.  Yet.

  Nearly 80% of seafood consumed in the United States is imported, and 40% of that fish is raised by aquaculture, or fish “farming” done in ponds or closed off river and coastal areas. At about five billion pounds a year, China is the largest exporter of seafood to the U.S.

In June of 2007, the FDA issued an official Import Alert for five species of Chinese fish including shrimp, catfish and eel because of the high level of bacterial contamination and chemicals banned in the United States that were discovered through import tests.  This should not surprise anyone, as the production and transportation of seafood in China is fragmented and safety regulations widely ignored. 

Environmental regulations in China are also ignored, and while half of China has sewage treatment available, the other half doesn’t, resulting in an estimated 4 billion tons of waste (yes, that kind of waste) being dumped into lakes, river, and ocean areas. Because much of China’s aquaculture takes place in water contaminated with raw sewage (yes, that kind of sewage), fish farmers try to compensate by adding dangerous anti-microbial agents and pesticides. 

Corruption in the Chinese food inspection system is rampant, and last year the head of China’s food safety agency committed suicide rather than face a extensive corruption probe.   Manpower at the FDA is dangerously limited, with the agency only inspecting about 1 – 2% of seafood imports.  Of the seafood import inspections done in the last year, 54% of these product shipments failed U.S. safety standards.  Additionally, the FDA often uses private inspectors – paid by the Chinese exporters – to provide “independent” analysis of seafood products. 

Despite rampant safety concerns, the FDA is now considering lifting this Import Alert, which would trigger a 2007 agreement between our Department of Health and Human Services and the Chinese government that would shift safety compliance to the Chinese government.   This evokes a fishy version of the rooster guarding the henhouse.

U.S. government agencies must send a strong message to Chinese exporters by pursuing a vigorous inspection process and aggressively publicizing information about failed inspections.   FDA should require “country of origin” labeling on all seafood products, perform a full resource allocation review, and perhaps get in line for a bailout of its own.

Consumers should regularly check safety alerts at www.FDA.gov, ask their favorite grocery chain what seafood safety it has in place, and make sure that they wash and cook fish completely when preparing it at home.

And perhaps be grateful that the Pilgrims served turkey and not shrimp.

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Daily Kos’s Johnny Venom was kind enough to link to AAM’s ‘Keep it Made in America’ video in this week’s ‘Manufacturing Monday.’  A rather astute economic populist, Johnny watched the video for “Are We Gonna Make It In AMerica This Year” and said of the Kathy Garrison song, “If I didn’t do Manufacturing Monday, her song probably would’ve inspired me to do this column!”

  Thanks Johnny, and good to work with you.

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The U.S. imports million of pounds of fish each year.  Unfortunately, as the volume of imported seafood has steadily increased between 2003 and 2006, the number of samples taken for laboratory testing by the Food and Drug Administration decreased by 25 percent.

  The Food and Drug Administration (FDA) is simply swamped by these massive fish imports.  According to a new report by Food and Water Watch, “less than one in a million pounds of seafood imported into the United States are tested in laboratories for Salmonella, Listeria, chemical and drug residues, metals, and pesticides.”

Apparently, the FDA’s field laboratory resources and staffing are simply inadequate for the vast amount of food that needs to be checked.

A prime example is that, unfortunately, the FDA waited several years to issue a ban on fish from China in 2007 after finding “very high failure rates for illegal veterinary drugs and chemicals on the imports for several years – including violations much higher than the FDA admitted in 2007.”

Food and Water Watch notes that one of the solutions proposed by the FDA to monitor imports is “using private laboratories hired by exporters to certify which exporters and products are safe.”  Needless to say, the self-interest of exporters like China calls in to question the reliability of such a plan.

Some key findings of the report:

* Imported seafood shipments grew by 15 percent between 2003 and 2006, and the volume grew by 11 percent to 5.4 billion pounds. During this same period, the number of imported fish samples taken for laboratory analysis fell by 25 percent.

* The number of laboratory tests the FDA performed declined by 27 percent from 9,552 laboratory tests in 2003 to 6,995 tests in 2006.

* Between 2003 and 2006, about one in 11 (8.7 percent) of FDA laboratory tests on imported seafood turned up unacceptably high levels of disease, decomposition or adulteration.

To read all recommendations and key findings from the new report, entitled ‘Laboratory Error,’ click here.

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ManufactureThis is continuing our Q&A with Michael Stumo of the Coalition for a Prosperous America…

What do you think the U.S. needs to do in order to rebuild its manufacturing base?
 
  We need to fully rework our trade policies.  Free trade is a fraud.  Fair trade is a good start.  Smart trade is a goal we have to shoot for.  That means we have to respond to, and neutralize, foreign currency manipulation.  Asian countries intervene in currency markets to keep their currency values low in comparison to the dollar.  It is uncontroverted that China’s currency is undervalued, we believe by 35%.  That is a 35% subsidy to Chinese exports to us, and a 35% tariff on our exports to them.

We have to neutralize foreign country border taxes.  Virtually all other countries have a consumption tax, like a value added tax.  The average level is 17%.  The tax is border adjustable because they charge incoming goods with the tax, and pay companies a 17% tax rebate when exporting goods.  It is like a tariff and an export subsidy, which is why it is a “border adjustable” tax.  The tax is WTO legal, however.  The only country that does not do this is the U.S.  In the past 40 years, we have decreased our tariffs and so have other countries, but the other countries have largely replaced their tariffs with border taxes resulting in no net change. 

Our trade policy must neutralize this unfairness through new or renegotiated trade agreements, or we can consider shifting our tax system to institute a VAT while decreasing our reliance on income taxes for revenue. 

The Congress must decide upon a national trade and economic strategy to guide trade negotiators, instead of letting the U.S. Trade Representative office take the lead.  USTR, it appears, just tries to get an agreement, like filling a quota.  Congress must take more control, rather than be presented with a take-it-or-leave-it trade agreement with a gun-to-the-head timeline for decision.

America must retain its ability to set its product and food safety standards, and make sure imports comply.  Otherwise our domestic standards system is a leaky sieve… ineffective.  We have 100 years of food safety improvements under our belt, but imported seafood and melamine tainted milk products eviscerate our system.  Shoddy steel from China is in our buildings and bridges.  We need not trade away our safety and disadvantage our domestic producers in this way.

The Coalition for a Prosperous America is working on these problems.  Farmers, manufacturers and labor are collaborating together aggressively to spread the message in Congressional districts across the country, as well as in DC.

  The new Guns ‘n Roses album, ‘Chinese Democracy,’ is not being welcomed wholeheartedly by Chinese authorities.  According to the Associated Press, the album has aroused Beijing’s anger, ostensibly because of its title.

In China, words like “democracy” are blocked by web filtering software because they are considered a threat to the ruling regime’s tenuous hold on power.

According to the AP, the title track of the new GNR album also makes a reference to the Falun Gong meditation movement that was banned by China, furthering alienating GNR frontman Axl Rose from Beijing.

It looks like Axl has done his part to help show the world that Beijing is a repressive regime.  Unfortunately, both his new album and this particular blog entry will never reach the eyes and ears of the people of China.

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  Over the weekend, Barack Obama proposed stimulus legislation that envisions the creation of an estimated 2.5 million new U.S. jobs.  Specifically, he’s calling for rebuilding of U.S. infrastructure as well as making new investment in green energy programs and technology.

Rather than the simply repeat Bush’s tax rebate plan, Obama’s proposal suggests cycling money into the U.S. economy through infrastructure projects that necessarily mean hiring and paying workers for construction and repair of roads and bridges. 

  In order to get the greatest benefit from the money spent, any such infrastructure spending must necessarily be sourced from American-made steel, cement, and other supplies.  If equipment and materials are purchased from China instead, for example, there’s simply no benefit for domestic U.S. manufacturers, no new factory job creation.

Chinese steelmakers already benefit from a host of subsidies, as well as illegal currency manipulation.  To purchase more steel from China at a time when world demand is slowing, would only add to domestic American steel woes.

Congress must insist on using taxpayer funds on American-made equipment and supplies.

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ManufactureThis has been conducting guest Q&A segments, with various participants invited to share their views on manufacturing in the United States.   We spoke with Mike Mitchell, an AAM Field Coordinator based in Indiana.

   When and why did you get involved in trying to save U.S. manufacturing?

Mike Mitchell: I first got involved  in saving the manufacturing industry around December of 2007.  The reason I got involved is because by saving our manufacturing , not only would we make our economy strong, but our country as well.

Where did you work in manufacturing, or as a Steelworker, prior to joining AAM?  What did you do?

I worked at US Steel Gary works in Gary,Indiana, in maintenance as a electrician.  

When you visit your old mill, what’s going on there?  Is it still in business?  Have there been layoffs?

Prior to my retirement in 2006, I worked in the 46”slab mill {shut down}, 44 bloomer mill {shut down}, 160/210 plate {sold}. I retired out of Steel producing 1-Bop.   At the Gary works plant there have been layoffs due to the economy.

What do you think the U.S. needs to do in order to rebuild its manufacturing base?

The United States needs to first strength its trade laws  though better trade legislation and enforce those trade laws once they are in place. That would be a start in the right direction in rebuilding our manufacturing base. 

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  Yesterday, AAM hosted a conference call to discuss the U.S. auto industry crisis.  AAM Executive Director Scott Paul offered talking points in favor of some form of rescue for the Big Three, noting that the overall American economy is on the line.  As he explained it, the auto industry has an enormous multiplier relationship throughout the U.S. economy.  And thus the old adage: So Goes Detroit, So Goes America.  

The reason for this is that the U.S. auto industry supports as many as one in 10 American jobs, and is the largest domestic customer for steel, plastics, electronics, computer chips, iron, copper, and aluminum.

In an insightful editorial, Scripps Howard’s Ann McFeatters picked up on Paul’s observation that the 1979 Chrysler bailout worked.  McFeatters noted that ”The loan was paid back, the government got an additional $500 million, and the nation got the family minivan.”

  Congress continues to mull a rescue for the auto industry.  As  they do, ManufactureThis provides a link to yesterday’s conference call, which featured a lively discussion.  Anyone wanting to learn more about the current auto crisis is encouraged to tune in by clicking here.

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