China has amassed $1.8 trillion in foreign currency reserves, the happy byproduct of their continuing global trade surplus.

A big checkbook means lots of disposable income, though, and it seems that Beijing has spent some of it recently on their vastly ramped up space program.  On Thursday they will launch their third manned space mission.

If U.S. consumers want to know where their money is going, they need look no further than the skies above Beijing.

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ManufactureThis’s friend Tom Brokaw weighed in this morning with a rather biting op-ed in the Wall Street Journal.  It seems that Tom is not much happier about a $700 billion mortgage/securities bailout than anyone else.

  Adding a bit of humor to the mix, though, Tom concocted a news story about struggling pawn shop owners, tow truckers, and poster salesmen who seem to have stumbled a bit of late.  All are hoping the Treasury Department will take over their ailing businesses and rescue them from bankruptcy.

As Tom describes it, Barney Baumgartner of Windblown, Wyoming needs help with his little venture, The Big Un 24 Hour Tow Service and Trophy Taxidermy: “He’d be willing to let the government have 80% of his business for a quick cash infusion. He thought something in the neighborhood of $1.8 million should do the trick. That would be enough to gas up his two tow trucks, get some new taxidermy stuffing and clean up that overdue account at the Number 10 Saloon and Casino over in Deadwood, S.D.”

Who knew Tom Brokaw could be so snarky?

More importantly, who expected Wall Street to come crashing down so quickly? 

Well, actually, that one is debatable.  At the root of the problem are lots and lots of failed mortgages—millions of Americans who can’t pay their bills.

And so, the heart of the problem still comes back to what ManufactureThis mentions all the time—jobs, jobs, jobs.  When Americans lose good-paying manufacturing, research, engineering, and science jobs, they find themselves struggling to pay the rent.  Some of them default on their family homes.  And when these foreclosures pile up, the ripple effect is felt from Main Street to Wall Street.

Congress and the Administration are working to prop up the brokers and banks, but they need to fight for good jobs, too.  Step one: start enforcing U.S. trade law.  Taking action on cheating by countries like China will help to re-grow American manufacturing.  And that means the money won’t simply keep leaving the country.  It also means families being able to pay their mortgage each month.

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  The Economic Policy Institute (EPI) has posted an interactive map showing the unemployment rate of each state in August 2008, accompanied by employment gains and losses incurred by each state since the economic downturn.

As EPI points out: “Since the economic downturn began in December 2007, the United States has lost over 600,000 jobs, and the national unemployment rate has risen to a five-year high of 6.1%. States most affected are concentrated largely in the Pacific West, Midwest, and South Atlantic regions, and are led by Michigan (8.9%), Rhode Island (8.5%), California (7.7%), and Mississippi (7.7%).”

Visit EPI’s Snapshot map to see how your state is doing.

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ManufactureThis vents its frustration about China’s cheating, eight days a week.  But it seems we’re not the only ones harping on Beijing’s mercantilist subsidies, dumping, and illegal currency manipulation, all of which are costing the U.S. millions of good paying jobs, according to a recent EPI study.

  The American Iron and Steel Institute (AISI), on behalf of its U.S. member companies, has submitted a written statement to the interagency Trade Policy Staff Committee (TPSC) about China’s non-compliance with commitments it has made to the World Trade Organization (WTO). 

Like AAM, AISI is extremely concerned over China’s continued policy of manipulating the exchange rate of its currency, the Yuan.    AISI notes that a “recent econometric study indicates that China’s currency remains undervalued by at least 35 percent,” and is urging the Administration to “make currency manipulation of the type practiced by China actionable under U.S. trade remedy laws and to pursue WTO action to protect U.S. rights.”

More than likely, action on currency will have to wait for the next administration, which is why ManufactureThis keeps urging voters to demand answers from the presidential candidates on whether or not they’ll hold China accountable for violations of both U.S. and world trade law.

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  The overseas edition of The People’s Daily, the state-run mouthpiece of China’s Communist party, weighed-in last week on America’s “financial tsunami.”  Lamenting the current “sub-prime crisis,” which has “exposed massive loopholes in the United States’ financial oversight and supervision,” the Daily suggested that the “world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States.”

How noble indeed, but loaded with rather considerable irony…

Beijing has pegged its currency, the Yuan, to the U.S. dollar since 1994, which essentially means that China has lashed its mast to that of the U.S. economy for fourteen consecutive years.  Such interdependence has obvious implications, not least the unlikeliness of a “diversified currency” system.  If China now frets about a falling dollar or market instability, the point is rendered moot by their having preferentially locked themselves into a fixed relationship with the U.S.

Many U.S. lawmakers, as well as business and labor leaders, have vociferously protested China’s ongoing currency peg, which acts as a de facto subsidy for Chinese exports.  The EU, too, has grown weary of China’s market manipulation, and has called on Beijing to end the practice.

All this currency rigging has had a profound effect on the world economy, with a number of disturbing consequences.  Currency fixing and huge energy subsidies have enabled China to vault atop the world’s list of steel producers while simultaneously becoming the largest producer of both CO2 and SO2 gases.  And since 2001, unbalanced trade with China has cost the United States 2.3 million jobs, at a loss in wages estimated at $19.4 billion in 2007 alone.  China’s ongoing trade surplus has also helped it rack up $1.8 billion in foreign currency reserves, allowing it to be one of the chief purchasers of debt from Fannie Mae and Freddie Mac.

Bottom line: China is quite complicit in many of the woes currently roiling world markets.  And so it’s quite rich of them to complain about instability in the U.S. after they helped get the ball happily rolling.  Thus, if U.S. lawmakers can’t get China to change its cheating ways, the proper recourse is to take unilateral action and utilize existing trade law to break the cycle.

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  On Thursday, August 21, the Alliance for American Manufacturing (AAM) held a national Town Hall meeting in Denver to discuss the importance of strengthening U.S. manufacturing and reforming our trade policies. 
 
A six-minute highlight video of that Town Hall, which was televised on C-Span, has now been posted on YouTube.  Please click here to watch this brief video.  We encourage you to rate it and to email it to your friends.
 
AAM will be holding nine more “Keep it Made in America” Town Hall meetings in October.  To learn more about them, or to attend one in your state, please click here.
 
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By now, the word is out—the Federal government will ensure a roughly $1 trillion bailout of troubled financial houses. 

  First there was the recent $60 billion Bear Stearns bailout.  Then the massive Freddie/Fannie bailout, estimated to cost anywhere from $500 billion to $1 trillion.  And then, just the other night, the Fed announced the $85 billion bailout of AIG insurance, an enormous global entity with over $1.1 trillion in assets.

The U.S. is going broke very rapidly.  Each day, we borrow roughly $3 billion from overseas, just to stay afloat:
-The federal government borrows $1 billion a day to pay its existing debts and obligations;
-U.S. consumers add another $2 billion in daily debt as they consume a huge net influx of foreign-made goods.

Simply put, the money keeps leaving the country.  The only way to keep financing this lifestyle is to keep borrowing from overseas–from generous lenders such as China and Japan.

Prudence and old-fashioned horse sense seem needed here.  The U.S. must start producing more of its own goods, generating its own wealth, and finding ways to keep money in the country.  Top of the list on this should be to revitalize American manufacturing.  A productive economy generates wealth.  It doesn’t borrow it.

You can read AAM’s basic outline of how to revitalize American manufacturing by clicking here.

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The Associated Press’s Marty Crutsinger reported on the latest U.S. trade figures yesterday, and cited AAM’s Scott Paul regarding U.S.-China trade:

Critics contend the administration has not done enough to combat unfair Chinese trade practices. U.S. manufacturers say the Chinese keep the yuan undervalued by as much as 40 percent against the American dollar. That makes Chinese goods cheaper for American consumers while making U.S. products more expensive in China.

“Washington needs to stand up for American workers and manufacturers before hundreds of thousands of more good jobs move offshore,” said Scott Paul, executive director of the Alliance for American Manufacturing.

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Statement on July trade deficit from Scott Paul, Executive Director, Alliance for American Manufacturing (AAM):

  “The $62.2 billion trade deficit that America racked up in July is yet another reminder of the consequences of flawed trade policies and the continued crisis in American manufacturing.  Some may take solace in export growth last month, but the real story is China’s continuing, lopsided trade relationship with the U.S. 

“Our trade deficit with China rose to $24.9 billion last month, the second highest on record.  In 2007, this trade gap cost the United States 366,000 jobs, and we’re on pace to match that in 2008. 

“The trade deficit with China is not a product of market forces.  Rather, it is the result of Beijing’s mercantilist policies and Washington’s unwillingness to respond.  China must honor its commitments on issues such as eliminating industrial and energy subsidies, ending the deliberate misalignment of its currency, and allowing greater market access for U.S. goods.  China should also enforce its own labor and environmental laws. 

“Washington needs to stand up for American workers and manufacturers before hundreds of thousands of more good jobs move offshore.”

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  New data released today shows that despite a global slowdown, China racked up a record $28.7 billion trade surplus last month, a roughly 15% jump from the previous month.

Clearly, China’s mercantilist approach to trade is working quite well for them—no matter that it may come at the rest of the world’s expense.

The EU and WTO have recently voiced concerns over China’s currency manipulation—and with good reason.  But are Sens. Obama and McCain paying attention?  Do they have plans to address China’s market distorting practices?  The U.S. presidential election campaign would seem like a good time for them to talk about it.  ManufactureThis is waiting.

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