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Kicking Underdogs When They’re Down

1:00 am in Economy by Leo W. Gerard

Americans love an underdog. Maybe it’s an artifact of the American Revolution, when a rag-tag rabble of farmers and frontiersmen defeated the disciplined and well-provisioned military of the most powerful nation on earth.

Even though the United States has usurped most powerful status, Americans still ally with Davids in contests with Goliaths. They love to see a top dog taken down a notch. They rooted for the perennial loser Red Sox in the 2004 World Series and reveled in the win by America’s unseasoned ice hockey team in the 1980 Winter Olympics.

That’s why the sudden surge of right-to-work (for less) legislation is so confounding. Right-to-work (for less) laws are perks for the wealthy, for the top dogs. These laws facilitate destruction of unions. The concerted action of a labor union is a tool that workers use to win fair wages, benefits and conditions from the powerful, from the likes of massive multi-national corporations. At a time of dwindling union membership, at a time when labor union participation is so small as to be nearly negligible, state legislatures across the country are taking up right-to-work (for less) laws that will further decimate union ranks. They’re kicking the underdog when it’s down.

Despite the derisive “big union boss” label that right wingers throw at labor leaders, unions are not the big dogs. Union representation in the United States has declined steadily since the 1950s, following federal legislation in 1947 impeding unionization. Just after World War II, about 35 percent of workers belonged to unions. And those who didn’t benefitted from the higher wages and good benefits that union workers negotiated because non-union employers felt compelled to provide competitive compensation. Last year, the percentage of U.S. workers in unions fell to 11.9, the lowest in more than 70 years.

As unions atrophied and the recession raged, the median income of working Americans declined. Meanwhile, at the top, the big dogs who run corporations continued awarding themselves colossal compensation and bonus packages. Median compensation for executives quadrupled over the past four decades. Last year, most executives got big bumps, whether their companies did well or not. Now, income inequality is greater than at any time since the robber baron days of the 1920s.

Still, somehow, legislatures across the country are rooting for CEOs, the top dogs, and bashing unions. Lawmakers in Ohio, Wisconsin, Arizona, Oklahoma, Idaho, New Hampshire, Tennessee, and South Dakota have attacked public sector unions. Politicians in South Carolina, Minnesota, New Hampshire, even Michigan and West Virginia are pushing right-to-work (for less) legislation. Read the rest of this entry →

America’s Failed Mole-by-Mole Trade Policy

7:54 am in Uncategorized by Leo W. Gerard

This American Car Enthusiast Makes The Point

Last week several groups, including the United Steelworkers, petitioned the federal government to whack the latest trade mole – illegally traded auto parts from China.

With President Obama announcing creation of a new trade enforcement unit in his State of the Union Address, the feds probably will investigate. But even if they whack down the auto parts mole, experience has shown a new mole will pop up.

Mole-by-mole trade enforcement isn’t the solution to America’s massive trade deficit. Although conservative candidates revel in ridiculing Western Europe, America could learn crucial economic lessons from Germany, which doesn’t rely on Whack-a-Mole and maintains trade surpluses, including one with China in auto parts.

The Steelworkers – along with the United Auto Workers, the Alliance for American Manufacturing and Campaign for America’s Future – explained why the federal government must smack down the latest trade problem that has raised its ugly head.

China and several other countries promote their auto parts manufacturers by providing subsidies and engaging in additional practices banned by the World Trade Organization (WTO). As a result, the United States imports more auto parts than it produces, a situation that kills manufacturers and manufacturing jobs here. For example, over the past 11 years, as the U.S. auto parts trade deficit increased by 867 percent, the Unites States lost 45 percent of its auto parts jobs – a total of 419,000.

The reason the groups sought action against China specifically is that its exports of auto parts to the United States have increased faster in the past three years than any other country’s and China supports its auto parts industry in ways that violate its commitments to the WTO.

For example, China provided $27.5 billion in subsidies to its auto parts industry between 2001 and 2010. It’s fine with the WTO if countries subsidize industries that sell their products domestically. But it forbids subsidies for exported products because that distorts the free market, wrongly destroying jobs and industries in the countries that buy those artificially low priced goods.

Beijing also aggressively limited import of American-made auto parts. This is hardly startling. In December, China imposed steep tariffs on imported American-made sports utility vehicles and other large cars. And the WTO affirmed last week that China violated its trade commitments by restricting export of key raw materials. Earlier, the WTO supported President Obama’s imposition of tariffs on tires imported from China because Beijing had violated international trade rules. Read the rest of this entry →

Seeking a Trade Rule Enforcer

8:38 am in Uncategorized by Leo W. Gerard

"10 Yuan Note" by upton on flickr

"10 Yuan Note" by upton on flickr

America is being played.

The U.S. allowed China to join the club of trading partners in the World Trade Organization (WTO) in 2001 under the condition that China observe club rules.

Over the past decade, however, China has profited immeasurably by ignoring, flouting and circumventing the rules barring market-distorting practices. Among the most destructive of these violations is China’s deliberate undervaluing of its currency, which makes Chinese exports to the United States artificially cheap and U.S. exports to China artificially expensive.

This nurtures Chinese industry and poisons American manufacturing.

In the trade contest with China, the referees have been absent or silent or completely craven on the issue of currency undervaluation, even as it kills U.S. factories and jobs. American workers need a trade rule enforcer. With unemployment above 9 percent, the situation is desperate. American workers can’t be played anymore.

Just last week, the Economic Policy Institute (EPI), a non-partisan think tank, issued a report showing that the trade deficit with China cost the United States 2.8 million jobs since the WTO allowed China into the trading club. Every congressional district in the U.S. lost jobs as Chinese exports to the United States overwhelmed U.S. exports to China.

The trade deficit is the difference between the value of Chinese exports to the United States and U.S. exports to China. It was $84 billion the year China entered the WTO. Last year it grew to $278 billion – a 230 percent increase. Read the rest of this entry →

Colombia FTA: Rewarding Promises Instead Of Performance

7:32 am in Uncategorized by Leo W. Gerard

Uribe protest

Uribe protest by Public Citizen, on Flickr

Tragically, the government of Colombia exhibits the behavior of an addict. And, just as regrettably, the United States is co-dependent, so addicted to so called free trade that it plans to award Colombia an agreement based solely on promises.

Addicts always promise. They’ll stop, they pledge. Their co-dependents desperately want to believe, so they cooperate with the addicts’ demands.

Colombia, the most dangerous country in the world for trade unionists, has pledged to try to stop the murders to persuade Congress to approve a Free Trade Agreement (FTA). Promises, promises.

And the United States has agreed to accept those promises rather than demand performance before signing an FTA. American’s Wall Street banks and multi-national corporations crave another FTA so badly they will believe anything.

When the Colombia FTA was first proposed, Congress refused to approve it because so many trade unionists are assassinated each year by the Colombian military and paramilitary forces that the murders exceed the number of unionists killed in all other countries of the world combined. In 2007, the year that former President George W. Bush completed the agreement, 39 Colombian unionists were slain.

The Colombian government knew why Congress denied approval. It could have responded four years ago by protecting trade unionists and preserving their lives. It did not.

Instead, the murders increased. In 2008, 52 Colombian trade unionists were assassinated, one a week. In 2009, the number declined by 5 to 47, but it was back up to 52 last year. Six have been slain so far this year, including Hector Orozco and Gilardo Garcia, members of the agricultural union known as Association of Peasant Workers of Tolima, who were threatened by the Colombian military just before they were assassinated. Promises, promises.
Read the rest of this entry →

Political Corruption: GOP Embraces the Ken Lay Way

7:57 am in Uncategorized by Leo W. Gerard

The GOP has adopted the Ken Lay principles – that is obfuscation, false statements and feigned innocence. Republicans are obfuscating about the real reason for their opposition to extending unemployment benefits, the way Enron CEO Ken Lay concealed the truth about billions in losses his corporation racked up.

Lay assured Enron workers the corporation was strong – five weeks before it failed. When the nation’s 7th largest corporation collapsed into bankruptcy in 2001, Lay walked away, by his own estimate, with $20 million. By contrast, Enron’s 4,000 workers and creditors left with debts. The employees lost their jobs and pensions, and the creditors lost $65 billion.

Lay cooked the books. A jury, and a judge in a separate case, convicted him of it in 2006 – finding him guilty of fraud, conspiracy and false statements. He obscured Enron’s massive losses with accounting hocus-pocus then lied about it so pervasively and persuasively that in February of 2001, ten months before the bankruptcy, Fortune magazine awarded Enron first place for innovation and second for management quality.

Republican acolytes of the Ken Lay way contend that the federal budget deficit prohibits spending $65 billion to extend emergency unemployment insurance for a year. But, at the same time, they insist the deficit doesn’t constrain extending tax cuts to the richest 1 percent at a cost of $61 billion for the year 2011. It’s masterful. And as corrupt as Ken Lay.  . . . Read the rest of this entry →

China’s Currency Manipulation: Flipping Off America

8:57 am in Uncategorized by Leo W. Gerard

China is disrespecting America.

The Asian giant is an international trade outlaw, and U.S. manufacturers and workers are its crime victims.

China illegally subsidizes its export industries and unlawfully manipulates its currency. That kills U.S. industry and destroys U.S. jobs. Earlier this year, the Obama administration asked China nicely to allow its currency value to float up naturally on international markets. On June 19, China said it would.

And then it didn’t.

That’s flipping the bird at America.

Before China’s June 19 promise, bipartisan groups of lawmakers in the U.S. House and Senate proposed legislation that would force the U.S. Treasury Department to even the score and to call China out for what it is: a currency manipulator. Hearings on the bills are being conducted this week.

Pass the legislation. It’s time for America to flip the bird back.  . . . Read the rest of this entry →

End the Denial; Label China a Currency Manipulator

6:10 pm in Uncategorized by Leo W. Gerard

America and China share a terrible delusion. They are in denial about currency manipulation. Both officially state that China is not devaluing its currency.

In mid-March, Chinese Prime Minister Wen Jiabao flatly denied that China deliberately suppresses the value of its currency against the dollar, a practice that decreases the price of its exports and increases the cost of America goods imported into China. Similarly, the U.S. Treasury Department, which is required by the Omnibus Trade and Competitiveness Act of 1988 to name foreign currency manipulators in bi-annual reports, has not in the past decade and a half called out China — including in the past two reports submitted during the Obama administration.

China and America decline to acknowledge what everyone else knows: China suppresses the value of its currency to gain a trade advantage over America. The New York Times reported on the practice in a story published March 14 describing how currency manipulation has worked wonders for Chinese industry while killing American manufacturing.

Treasury Secretary Timothy Geithner came to Pittsburgh, home of the United Steelworkers’ International Headquarters, this week to talk about the competitiveness of U.S. manufacturing. He visited a modern Allegheny Technologies Inc. specialty steel mill and met privately with business and union leaders. We deeply appreciate his time and attention. What he must do now, as a first step in leveling the playing field with China, is insist that the Treasury label China as a currency manipulator in the next report, which is due April 15.

That would end the denial – at least on the U.S. side — and could set in motion sanctions to reduce the manipulation or at least the effects of it. Ending the imbalance would create between 1.5 million and 3 million U.S. jobs, without Congress passing a new stimulus bill, without adding a dollar to the national debt.

America has talked to China about this problem for too long. Three years ago, AFL-CIO President Rich Trumka, who was then the federation’s secretary-treasurer, wrote that over the previous seven years warnings had proved worthless:

“The script is always the same. The Treasury Department admits there is a problem but can’t find a technical violation of the law. Then comes a warning against Congress taking action that is followed by a promise of increased dialogue with the Chinese government.”

That dialogue never produced effective results. China briefly allowed its currency value to increase by about 15 percent against the dollar from July 2005 to July 2008. China stopped the revaluation at the height of the world economic crisis. The 15 percent rise now has been offset by increased productivity in China, according to conservative economist C. Fred Bergsten, the free-trader and currency expert from the Peterson Institute for International Economics. So the net effect of the brief Chinese currency float is zero.

Still, U.S. Trade Representative Ron Kirk is suggesting more dialogue. He told the Associated Press in Brussels late in March, “. . .my first preference is always to see if we can’t build a partnership to work with China to see if we can’t get a resolution sooner rather than later.”

This inexplicable response came after Chinese premier Wen Jiabao denied that China’s currency – called renminbi and traded in a denomination called yuan — was undervalued. And China’s Vice Commerce Minister Zhong Shan said, “It is wrong for the United States to jump to the conclusion that China is manipulating currency from the sheer fact that China is enjoying a trade surplus. . .Besides, it’s wrong for the United States to press for the appreciation of the renminbi and threaten to impose punitive tariffs on Chinese exports. That is unacceptable to China.”

It is unacceptable to America to continue countenancing China’s currency manipulation.

It’s too costly to America.

It works like this. Chinese exporters are paid in dollars. They exchange them for yuan in Chinese banks. No matter the value of the dollar on the international free market, the state-controlled market in China pays 6.83 yuan for every dollar. While the value of the dollar fluctuates against the Euro and other market-based currencies from day to day, China determines its exchange rate to be 6.83 every day.

In a market-based economy, the value of currency in an export-strong country increases. That is what would happen to the yuan if China stopped interfering in the exchange rate. Essentially, demand for Chinese goods would raise their prices. But that doesn’t happen in China because the government stops it. China’s manipulation has caused the yuan to be undervalued by between 20 and 40 percent, according to even the most conservative economists.

The result is that every time a Chinese company sells a $1 product in the U.S., it has received a subsidy from the Chinese government of as much as 40 cents.

That makes competition extremely difficult for U.S. companies that don’t get such subsidies. It is a primary cause of the U.S. trade deficit. China’s share of the U.S. non-oil goods trade deficit tripled since 2005. China accounted for 80.2 percent of the entire U.S. non-oil trade deficit with all countries in the world in 2009.

That costs the U.S. jobs. The Economic Policy Institute released a study in March showing that since 2001 when China joined the World Trade Organization, 2.4 million jobs have been lost or displaced in the U.S. as a result of the growing trade deficit with China.

Unions, industry leaders, and both Republican and Democratic politicians are all sick of the talking about manipulation. During a Congressional hearing on the undervalued yuan in March, Nucor Corp. Chief Executive Officer Dan DiMicco complained about U.S. inaction, saying, “We are in a trade war. We just haven’t shown up for it.”

In mid-March, 130 Congressmen, including 40 Republicans, sent a letter to Secretary Geithner asking him to label China a currency manipulator in the April 15 report. They also asked Commerce Secretary Gary Locke to apply countervailing duties on Chinese imports. That would be legal if China’s devalued currency is deemed an export subsidy, and they said that has been clearly demonstrated.

Just a day later, a group of U.S. senators, including Republicans Lindsey Graham of South Carolina and Sam Brownback of Kansas, introduced the Currency Exchange Rate Oversight Reform Act of 2010 to penalize countries like China that undervalue their currency to artificially discount their products exported to the U.S. The legislation, if passed, would effectively compel the Treasury Department to cite China for manipulation.

“We’re fed up,” Graham told the New York Times:

“China’s mercantilist policies are hurting the rest of the world, not just America. It helped create the global recession that we’re in. The Chinese want to be treated as a developing country, but they’re a global giant, the leading exporter in the world.”

China remains in denial. They’re so far in denial, this is what Mr. Wen said:

“I understand some economies want to increase their exports, but what I don’t understand is the practice of depreciating one’s own currency and attempting to force other countries to appreciate their own currencies, just for the purpose of increasing their own exports.”

That is exactly what China has done to increase its exports.

It requires China to essentially buy $1 billion worth of dollars a day. If the Chinese stopped currency manipulation, the value of those dollars would decline against the Chinese yuan, and the Chinese Treasury would suffer a significant loss on its investment – at the same time Chinese exports would rise in price.

That is why China continues to deny manipulation.

But every day America remains in denial costs the U.S. additional manufacturing bankruptcies and unemployment.

Secretary Geithner raised hopes that Treasury would end the denial when he said of China during his visit to Pittsburgh, “It is important that they take the steps they said they would to take their currency to a more flexible system.”

***

Click here to tell the Treasury Department to stop denying that China is manipulating its currency.

Some Jobs Taxpayers Don’t Need to Buy

4:52 pm in Uncategorized by Leo W. Gerard

Can’t buy me love
Everybody tells me so
Can’t buy me love
No, no, no, no

From the 1964 Lennon/McCartney song,
“Can’t Buy Me Love”

Maybe you can’t buy love, but you can buy a job.

Franklin Delano Roosevelt did it with the Works Progress Administration during the Great Depression. And the $787 billion stimulus package passed in February created jobs to relieve what is now 10.2 percent unemployment.

Both came at the cost of taxpayer dollars. Now, as labor and business leaders, economists and politicians gather Dec. 3 for President Obama’s Jobs Summit, some are calling for a second stimulus. These include Nobel-Prize-winning economist Paul Krugman. He says the initial stimulus was too small and insufficiently focused on jobs.

Krugman recommends instituting a reduced version of FDR’s Works Progress Administration (WPA), offering public-service employment, the kind that left solid WPA bridges, bus shelters and other monuments that serve citizens to this day across this country. At a cost of $40 billion a year for three years, the Economic Policy Institute (EPI) estimates this would create a million jobs. Krugman also endorses the EPI’s recommendation of tax credits for employers who add jobs.

A second stimulus is completely reasonable at a time when there are six unemployed Americans for every job opening and when it takes six months on average for an unemployed worker to find a job, the longest since the Great Depression. But the Obama administration already has sent out signals that it doesn’t want Jobs Summit solutions to worsen the federal deficit.

Fine. There are ways to create jobs that don’t have to be bought. One is to enforce and strengthen trade policy.

Chicken Littles all over this country ran around screaming, “A trade war is coming! A trade war is coming!” in September when President Obama enforced trade law by imposing tariffs on Chinese tires being dumped in this country. That flood of Chinese tires had cost 5,000 American workers their jobs.

The Chicken Littles, always wrong, were mistaken about a trade war. China never engaged in one. And now, Cooper Tire has announced a $10 million expansion of its Findlay plant, creating 100 new jobs, and tire factories across the country have increased hours. Read the rest of this entry →