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A Vision for Economic Renewal – An American Jobs Agenda

5:10 am in Uncategorized by Leo W. Gerard

"Renewal"

"Renewal" by Auntie P on flickr

Written with Leo Hindery Jr., chair of the Smart Globalization Initiative at the New America Foundation

America is facing a catastrophic jobs crisis. Not since the Great Depression has official unemployment hovered above nine percent – where it is today – for more than 20 months. Millions of American have given up looking for a job altogether. Even worse, real unemployment is more than 18%. Yet Washington overall has obviously yet to embrace a large-scale job creation agenda. Even if we reach consensus around the deficit – the only economic issue even getting any attention these days – it will do little to help the 29 million Americans who are unemployed in real terms. If we do not seriously tackle jobs, our country may never regain its competitive global edge.

We recently co-chaired a Task Force on Job Creation, seeking real solutions to the jobs crisis plaguing our country. This group of policy makers, economists, business and labor leaders developed a series of 15 immediate recommendations for reversing the crisis, outlined in a new report, “Vision for Economic Renewal: An American Jobs Agenda.” We found there are six vital policy areas that our government must address in order to create millions more jobs now: manufacturing, trade and globalization, U.S.-China trade, the infrastructure crisis, jobs in the green economy, and youth unemployment.

Washington is often a city of Chicken Littles, which makes ringing the alarm bell difficult. But once Washington wakes up from its deficit hangover, politicians will realize something that most Americans have known for months: The sky has already fallen. Read the rest of this entry →

Buy American Jobs

8:00 am in Uncategorized by Leo W. Gerard

Efforts by those who never want to hear someone say, “Bye-bye American manufacturing,” converged coincidentally to make June Buy American month.

First, at the forceful urging of U.S. Sen. Bernie Sanders of Vermont, the Smithsonian on June 8 opened an all-American-made gift shop in the National Museum of American History. Three days later, U.S. Sen. Sherrod Brown of Ohio introduced legislation requiring federal agencies to buy only 100 percent American-made flags.

Then, at the Netroots Nation 2011 conference in Minneapolis, Minn. this week, the AFL-CIO will serve American union-made beer, including Schell’s, brewed in Minnesota by members of my union, the United Steelworkers (USW). The Alliance for American Manufacturing will host at Netroots an American-made fashion show at which it will serve USW-member made Kellogg’s Nutri-Grain bars. And the BlueGreen Alliance is distributing to Netroots attendees mercury-free, USW-made, energy-efficient, non-curly cue Oshram Sylvania halogen light bulbs.

All these events occurring before mid-June are significant in an era of stubborn 9.1 percent unemployment, a time when 14 million unemployed Americans are searching for jobs. It’s significant because buying American-made products is buying American jobs. And buying American union-made products is buying good, middle class American jobs.

Eight million American manufacturing workers have lost their jobs over the past 30 years as multi-national corporations off-shored factories. But America still manufactures and the prices of American-manufactured goods, including those made by union workers, are competitive with foreign-made products.

Choosing an American-made product, or North American-made to include my home country of Canada where hundreds of thousands of USW members live and work, means supporting North American workers and the North American work ethic. It means buying products manufactured by willing adults in reasonable conditions, not by children laboring Dickensian hours in dangerous factories. It means reasonable assurance that the manufacturer abided by environmental laws prohibiting the poisoning of the air, ground and water by toxic substances like mercury and lead.

The Smithsonian experience provides the perfect example of how buying American-made products purchases American jobs.

Late last year, Sen. Sanders went to the history museum shop to buy Christmas gifts and discovered the presidential busts there were made in China. He was incensed that an American taxpayer-supported history museum was selling American history memorabilia not made in America. He complained.

While the Smithsonian reviewed the situation, CBS news determined exactly how policies like the museum’s injure the American economy. CBS reporters found a Connecticut woman who had to lay off three workers when the museum stopped selling her hand-crafted, American-made jewelry and replaced them with foreign-made substitutes. Before the change, Merrie Buchsbaum’s “Americana Collection” was among the museum shop’s best sellers. Apparently tourists did not find the prices for her America-made souvenirs to be excessive.

When the museum cut her off, Buchsbaum’s sales declined 20 percent, forcing her to furlough her entire staff. Three jobs is the difference between buying American and buying foreign for just one small supplier of one small gift shop.

The Smithsonian changed its policy, converting the gift shop to an all-American operation with 300 American-made souvenirs. Now it’s called the American History Price of Freedom gift shop.

That price of freedom, the Smithsonian said, is higher in some cases when the souvenir is American-made. For example, the custom, hand-crafted American-made mugs it now sells cost $20 instead of the average $12 price for a foreign-made mug in other museum shops. But U.S. Rep. Nick Rahall of West Virginia, who is preparing legislation tying the sale of American-made souvenirs to future federal funding for the museums, believes Americans will pay a buck or two more “to have their lapel American flag pin say ‘Made in the U.S.A.’”

American products don’t always cost more, however, even when they’re union-made. ABC news investigative reporters discovered that when they removed foreign-made goods from a Dallas family’s home earlier this year and replaced them with American-made products.

In addition, included in the price of North American-made products is the cost of protecting the environment and treating workers with dignity. It’s the price of morality. The United States and Canada, for example, forbid child labor and institutionalized the 40-hour work week. Both countries enforce environmental protection laws forbidding the devastating pollution countenanced by China and some third-world nations.

For example, the New York Times this week revealed that millions of Chinese children suffer from brain and nerve-damaging lead poisoning from unregulated, polluting factories, many of which produce batteries or smelt metal. The Times reported that the Chinese government in some cases conspired with the polluting companies to cover up the problem, denied testing to nearby sick residents and withheld tests results.

The lead poisoning raises the question of what China is doing about even-more-dangerous mercury, which is used by Chinese companies to make those twisty, energy-efficient light bulbs.

In America, Steelworkers are fabricating energy-efficient Sylvania halogen bulbs that look exactly like traditional light bulbs and contain absolutely no mercury. That’s American innovation, American compliance with moral environmental rules and American union labor creating a superior product.

Who knew, though? All anyone hears anymore is that American manufacturing is dead. American doesn’t make anything anymore. That is just not true. Here are some USW-made, terrific North American products:

Jacobson hats
Cutco Cutlery
Kellogg’s Pop-Tarts
Wendell August Forge pewter gifts
Breyers Ice Cream
Cascades paper towels and tissue
Viva and Bounty paper towels
Depend undergarments and Poise pads
Charmin and Angel Soft bath tissue
Puffs facial tissue
Georgia-Pacific Dixie Cups and plates
Cenveo envelopes
Leader Paper Products envelopes and business cards
All-Clad metal cookware
Regal Ware cookware
Speed Queen washers and dryers
Alberto Culver hair care products
Carrier home heating systems
Enderes forged hand tools
Channellock tools
Ideal Roofing steel shingles
Blanco Canada kitchen sinks
Nestle Purina cat litter
Distinctive Design furniture
Barrymore furniture
Star Bedding, Sealy, Spring Air, Springwall, King Koil and Simmons mattresses
Anchor Hocking glass tableware
General Storage containers
World Kitchen Pyrex glassware
A.O. Smith residential water tanks
Gentek Building Products including windows, doors and vinyl siding
American Standard bathroom fixtures
Reynolds Wrap aluminum foil
Fabri-Kal plastic ware
Speakman shower heads
3M O-cell-O sponges
Crown Metal Packaging for food and beverages
Federal White Cement
Shade-O-Matic and Eclipse venetian blinds, shutters and window covers
Valspar pigment for Valspar paints
Lavelle Industries rubber and plastic plumbing components
Harley-Davidson motorcycle parts and accessories
PFERD Milwaukee Brush metal brushes
Alto-Shaam, Inc. ovens and warmers
Shur-Line paint rollers
Goodyear, Bridgestone/Firestone, BFGoodrich, Titan and Yokohama tires.

The tires require caution. Many of those companies have foreign factories that export tires to North America. So the buyer must look for these codes to get American made tires: BE and BF for BFGoodrich, YE, 4D and E3 for Bridgestone/Firestone, UP and UT for Cooper, MD, MJ, MC, and MK for Goodyear and CC for Yokohama. These letters follow the letters DOT on each tire’s code.

In the case of the other products listed, some also operate foreign factories, so it’s always good to look for the Made in America label.

Buy American. Buy American jobs.

Buy American Jobs

5:34 am in Uncategorized by Leo W. Gerard

Buy American

Buy American by sabeth718

Efforts by those who never want to hear someone say, “Bye-bye American manufacturing,” converged coincidentally to make June Buy American month.

First, at the forceful urging of U.S. Sen. Bernie Sanders of Vermont, the Smithsonian on June 8 opened an all-American-made gift shop in the National Museum of American History. Three days later, U.S. Sen. Sherrod Brown of Ohio introduced legislation requiring federal agencies to buy only 100 percent American-made flags.

Then, at the Netroots Nation 2011 conference in Minneapolis, Minn. this week, the AFL-CIO will serve American union-made beer, including Schell’s, brewed in Minnesota by members of my union, the United Steelworkers (USW). The Alliance for American Manufacturing will host at Netroots an American-made fashion show at which it will serve USW-member made Kellogg’s Nutri-Grain bars. And the BlueGreen Alliance is distributing to Netroots attendees mercury-free, USW-made, energy-efficient, non-curly cue Oshram Sylvania halogen light bulbs.

All these events occurring before mid-June are significant in an era of stubborn 9.1 percent unemployment, a time when 14 million unemployed Americans are searching for jobs. It’s significant because buying American-made products is buying American jobs. And buying American union-made products is buying good, middle class American jobs.

Eight million American manufacturing workers have lost their jobs over the past 30 years as multi-national corporations off-shored factories. But America still manufactures and the prices of American-manufactured goods, including those made by union workers, are competitive with foreign-made products.
Read the rest of this entry →

Time to Wield the Foreign Policy Stick

9:35 am in China, Economy, Foreign Policy, Korea, Labor by Leo W. Gerard

Map of China (source: CIA World Factbook)

America plays the role of abused partner in its relationship with China. Although the Asian giant repeatedly injures U.S. industry by violating international trade rules, America has responded, almost exclusively, by pleading and begging for China to stop.

China says it’s sorry. And continues to violate the rules. America respectfully beseeches China to discontinue manipulating its currency, and China says it will. Then it allows the value to increase a completely insignificant amount. Still America does nothing. Nothing. It simply accepts the abuse.

U.S. Sen. Bob Casey, D-Pa., and Michael Williams, senior vice president of U.S. Steel stood with me Wednesday at a press conference in Pittsburgh to urge President Obama in his meetings this week with Chinese President Hu Jintao to announce that America is done with soft talk. We want President Obama to tell President Hu that America has heard enough promises; the United States is bucking up and pulling out that big stick that Teddy Roosevelt carried in foreign policy negotiations.

This is a rare issue on which politicians, Republican and Democrat, manufacturers and organized labor all agree. Here’s what Sen. Casey said at the press conference, “In my estimation, and that of a lot of Americans, the time for talking is over. The time for action is now.” He, Sen. Sherrod Brown, D-Ohio, and Sen. Debbie Stabenow, D-Mich., plan to introduce legislation next week to force the federal government to hold China accountable, to enforce compliance with World Trade Organization (WTO) rules – rules that China agreed to comply with when WTO countries permitted it to join even though it is a non-market economy.  . . . Read the rest of this entry →

The Voters’ Message: Manufacturing a Solution

8:45 am in Business, Economy, Employment, Labor, Manufacturing by Leo W. Gerard

No doubt voters sent a message last Tuesday. Deciphering it correctly is crucial.

Republican cryptographers interpreted the election results that gave the GOP control of one house of Congress as a directive to demolish everything produced over the past two years – health care reform, Wall Street re-regulation and economic stimulus. In fact, like the Blues Brothers, they believe they’re on a mission from God. Unlike Jake and Ellwood who set out to save an institution, Republicans intend to crush the President, and if a crippled leader means the nation suffers, well, too bad.

Republicans got it wrong. The electorate wants construction, not destruction. Voters want cooperation, not gridlock.

President Obama properly decoded the message and reached across the aisle, inviting Republicans to a White House summit. At that meeting, he will attempt to collaborate with politicians bent on his annihilation, which is like trying to navigate a mine field. But in these negotiations, there is a safe zone. That is manufacturing. The electorate wants American manufacturing restored to greatness. Voters know industrial revitalization would create good, middle class jobs, strengthen national security and improve the economy.

Some Republicans already have shown a willingness to cooperate on this issue. Just before the midterm recess, 99 Republicans voted with Democrats to pass by 348 to 79 the Currency Reform for Fair Trade Act, which would enable the Commerce Department to impose import tariffs to offset the detrimental effects of manipulated currencies. This is vital in places like Ohio, Michigan and Pennsylvania where manufacturing has been decimated by Chinese exports sold at artificially low prices. Products from several Asian countries are falsely cheap because the governments intervene in the market to suppress the value of their currencies against the dollar.

Voters know that punishing currency manipulators, dealing boldly with violations of international trade rules like forced technology transfer and copyright abuse, and ending tax incentives to outsource jobs would help reverse the decline of American manufacturing.  . . . Read the rest of this entry →

On Labor Day, Work to Save the Middle Class

8:31 am in Uncategorized by Leo W. Gerard

This Labor Day feels gloomy. It’s a celebration of work when there is not enough of it, a day off when too many desperately seek a day on.

America has commemorated two Labor Days since this brutal recession began near the end of George Bush’s presidency in December of 2007. Now the relentless high unemployment, the ever-rising foreclosures, the unremitting wage and benefit take-backs have replaced American optimism and enthusiasm with fear and anger.

Happy Labor Day.

On this holiday, we can rant with Glenn Beck, kick the dog and hate the neighbor lucky enough to retain his job. Or we can do something different. We can join with our neighbors, employed and unemployed, our foreclosed-on children, our elderly parents fearing cuts in their Social Security lifeline and our fellow workers worrying that the furlough ax will strike them next. Together we can organize and mobilize and create a grassroots groundswell that gives government no choice but to respond to our needs, the needs of working people.

We can do what workers did during the Great Depression to provoke change, to create programs like Social Security and achieve recognition of rights like collective bargaining. These changes were sought by groups to benefit groups. In a civil society, people care for one another. And America is such a society – one where people routinely donate blood to aid anonymous strangers, children set up lemonade stands to contribute to Katrina victims and working families find a few bucks for United Way.  . . . Read the rest of this entry →

What’s Green, White and Blue? American Jobs

9:13 am in Uncategorized by Leo W. Gerard

Red, as in furiously red, defined the day last fall when a consortium of companies announced it wanted $450 million in U.S. stimulus money to build a wind farm in Texas, creating 2,000 jobs in China and 300 in America.

Now, nine months later, things have cooled down and turned around. In a deal with the United Steelworkers (USW), two Chinese companies have agreed to build as much of the wind turbines as possible in America, using American-made steel, and creating perhaps 1,000 American jobs.

The deal is a result of white collar Chinese executives negotiating with blue collar union officers to create green collar jobs in the U.S. The agreement defies stereotypes about unions as constantly combative, excessively expensive and environmentally challenged. The USW has a track record of engaging with enlightened CEOs for mutual benefit. It has a long green history. And it has worked to return off-shored jobs to the U.S.

The USW, like the Democrats in the House and Senate with their Make It in America program, is devoted to preserving and creating family-supporting, prosperity-generating manufacturing jobs in America. And if they’re green, all the better.

Billionaire investor Wilbur Ross has first-hand experience negotiating with unions, including the USW, to sustain U.S. manufacturing. He describes it positively. Here he is on PBS’ Charlie Rose on Aug. 2:

“I have found the leaders of big industrial unions, the steelworkers, the auto workers, they understand dynamics of industry at least as well as the senior management of the companies.”

Ross talked to Rose about dealing with the USW during the time when he was buying LTV Steel:

“We worked out a contract that took 32 job classifications down to five, changed work rules to make it more flexible and most important of all, we put in a blue collar bonus system. . .We became the most efficient steel company in America. We were making steel with less than one man hour per ton. The Chinese at the time were using six man hours per ton. We were actually exporting some steel to China.”

Ross accomplished that while paying among the highest wages for manufacturing workers in America.

The USW approached the Chinese companies that planned the $1.5 billion Texas wind farm, A-Power Energy Generation Systems Ltd. and Shenyang Power Group, the same way it did Ross. The meetings occurred with the help of U.S. Renewable Energy Group, a private equity firm that facilitates international financing and investment in renewable energy projects. Jinxiang Lu, chairman and chief executive of Shenyang Power, said talking to the union enabled him to see its “vision for win-win relationships between manufacturers and workers.”

For the USW, this deal means the Chinese firms will initially buy approximately 50,000 tons of steel manufactured in unionized American mills to fabricate towers and rebar for the 615 megawatt wind farm in Texas, will employ Americans at a wind turbine assembly plant to be built in Nevada, and will employ more American workers in green jobs at plants constructing the blades, towers and thousands of other wind turbine parts.

For the Chinese companies, the USW, the largest manufacturing union in America, will use its long list of industry contacts to help construct an American supply chain essential to amass the approximately 8,000 components in a wind turbine. The idea is to collaboratively create a solid manufacturing, assembly, component sourcing, and distribution system so that this team – the Chinese companies, U.S. Renewable Energy Group and the USW — will build many more wind farms after the first in Texas.

Additional wind farms mean more renewable energy freeing the U.S. from reliance on foreign oil. As U.S. Sen. Sherrod Brown, D-Ohio, says, there’s no point in replacing imported foreign oil with imported wind turbines. For energy and economic independence, green manufacturing capacity and green jobs must be in the U.S.

This deal does that. And there’s nothing unusual about foreign companies employing Americans. Many Americans, including USW members, already work in factories owned by many different foreign national companies, including German, Russian, Japanese, Mexican, and Brazilian, with names like Bridgestone-Firestone, Arcelor-Mittal, Rio Tinto, Grupo Mexico, Svenska Cellulosa AB (SCA) and Severstal.

In at least one other case, action by the USW forced the hand of a Chinese company to move jobs to the U.S. Tianjin Pipe, the world’s largest manufacturer of steel pipe, said it could not export profitably to the United States if tariffs rose above 20 percent. This was after the USW and seven steel manufacturers filed a petition with U.S. trade agencies in April of 2009 accusing China of illegally dumping and subsidizing the type of pipe used in the oil and gas industry. The union won that case this past April, and the U.S. Commerce Department imposed import duties ranging from 30 to 100 percent to give the domestic industry relief from the unfair trade practices. To continue selling in the U.S., Tianjin Pipe had no choice but to build an American pipe mill. Construction is expected to begin in Texas this fall on the $1 billion plant to employ 600 by 2010.

Although the USW is cooperating with A-Power and Shenyang Power, it will not back off its trade cases involving exported Chinese steel, pipe, tires, paper and other manufactured products. The stakes for U.S. jobs are just too high.

Back in 1990, when green was not as trendy, the USW recognized that the environment would be among the most important issues of the era and issued the report, “Our Children’s World.” Since then, it has steadily promoted green — became a founding member of the BlueGreen Alliance and Apollo Alliance, which promote renewable energy and renewable energy jobs.

Good, green American manufacturing jobs. Establishing American energy independence. It is win-win. And it’s getting a green light now.

For the Strength of Rosie the Riveter: Make It in America

8:23 am in Uncategorized by Leo W. Gerard

Rosie the Riveter defiantly rolls up her blue work shirt to show off a brawny bicep. She’s a symbol of American strength.

She worked in a manufacturing job, one of millions that constructed the defense machine that won World War II for the Allies. She said, “We can do it.” And America did.

Now, however, shuttered U.S. factories and off-shored manufacturing are sapping American strength. The nation has lost more than 40,000 manufacturing plants and one-third of its manufacturing jobs, nearly six million, over the past dozen years. China is on the verge of overtaking the U.S. in manufacturing output. And Americans know it. Late in April, 58 percent of 1,000 likely voters told pollsters they believed America’s economy no longer led the world.

They also told pollsters they supported enacting a national manufacturing policy to promote resurgence of domestic production — a return to the days of a robust Rosie the Riveter and a country that could secure its independence with dynamic manufacturing capability.

Democrats in Congress heard that message. They’ve created a program called “Make It in America.” They plan to pass a series of bills to create an environment in which both Americans and American manufacturers make it. “We want everybody to make it in America,” House Speaker Nancy Pelosi said as she described the plan to 2,000 bloggers and progressive activists at Netroots Nation 2010 last week in Las Vegas.

After all the support America has given the financial sector – estimated to total more than $4 trillion – it’s time for Congress to invest in the productive sector, the one that creates jobs, real wealth and American power.

“We must stop the erosion of our manufacturing base, our industrial base, our technological base,” the Speaker told Netroots Nation, “It is a national security issue to do so, if we had no other justification,” she said, adding that there are, of course, plenty of other reasons.

She said the strategy is to pass “one bill after another” supporting American manufacturing. The House started last week with two, one to ease American industries’ access to raw materials and parts and another to improve specialized workforce training.

In addition, Speaker Pelosi said, House leaders want to address currency manipulation – the deliberate undervaluing of currency to make a country’s exports artificially cheap and imports into that country artificially expensive. Currency manipulation by China, for example, is believed by both conservative and liberal economists to be adding as much as 40 cents to every dollar of the cost of U.S. products exported to China and discounting Chinese goods sold in the U.S. by 40 cents on every dollar.

“There is a strong interest in our caucus in holding China accountable for manipulation of currency. That would make a tremendous difference in our trade because currency manipulation is really a subsidy to their exports to America – an unfair advantage,” the Speaker said at Netroots Nation.

Other bills Speaker Pelosi hopes to pass soon include $5 billion in tax credits for domestic manufacturers that produce components for alternative energy and a requirement that foreign manufacturers keep at least one worker stationed in the U.S. so the company can be officially served with court papers. Also, there’s a bill by Illinois Congressman Daniel Lipinski that would require each U.S. president to produce a manufacturing strategy in the second year of office and to review progress annually.

The survey that prompted Democrats to create the “Make It in America” program was commissioned by the Alliance for American Manufacturing (AAM) and conducted by Democratic pollster Mark Mellman and Republican pollster Whit Ayres. They found that likely voters believed creating manufacturing jobs was more important than reducing the federal deficit and more important than cutting government spending.

The survey also showed strong support for policies requiring the government to buy American-made goods. Similarly, it showed 92 percent of the Democrats, Independents and Republicans surveyed had a somewhat or very favorable impression of American-made products and felt the quality of products manufactured in American exceeded those made in China, Japan, India and Germany.

Americans now even prefer U.S.-made cars: An Associated Press-GfK Poll in April showed 38 percent of Americans favor U.S. vehicles. Asian brands got 33 percent.

Chrysler takes advantage of that sentiment in its commercial for the new Grand Cherokee. The words are chilling:

“The things that make us American are the things we make,” it begins.

“This has always been a nation of builders, craftsmen, men and women for whom straight stitches and clean welds were matters of personal pride. They made the skyscrapers and the cotton gins, colt revolvers, Jeep 4-by-4s,” the ad continues.

“These things make us who we are,” the narrator says. Yes. The things Americans make, make the country strong.

To the sound of a sledge hammer pounding a railroad spike, the narrator goes on to describe the reborn Grand Cherokee, “This, our newest son, was imagined, drawn, craved, stamped, hewn and forged here, in America. It is well-made and it is designed to work. This was once a country that made things, beautiful things, and so it is again.”

Well, not quite. Chrysler may make a terrific Grand Cherokee in Michigan. But American manufacturing needs some help. And with unemployment stuck at 9.5 percent, so do the American people. “Make it in America” is that aid. The AAM poll showed 85 percent of those who said the U.S. had lost economic leadership believed America could regain it.

Americans believe we can still do it.

***

Make sure Congress acts. Join the One Nation Working Together march on Washington Oct. 2 to demand good jobs, as well as Wall Street and immigration reform.

We are No. 2; We are No. 2!

9:00 am in Uncategorized by Leo W. Gerard

For 110 years America has reigned as the world’s number one manufacturing nation. Next year, China is expected to wrest that title from the United States.

Last year, the U.S. manufactured $1.7 trillion worth of goods; China fell second at $1.6 trillion. Next year, China is expected to edge out America with production worth $1.87 trillion.

America will be Number 2. And unlike the Dutch at the world cup, America is losing the crown it held for a century, not seeking a first-time anointment.

It doesn’t have to be this way. China’s manufacturing sector is using the equivalent of steroids to attain the title. It deliberately devalues its currency, an outlawed practice on international markets. Devaluation means China’s exports are artificially cheap in the U.S. and American exports to China are falsely expensive. It’s no puny sum either. The discount for Chinese products sold in America is as much as 40 percent. – 40 cents on the dollar.

Allowing China to devalue its currency devalues American workers and businesses. Chinese currency manipulation is driving American manufacturers out of business and America workers into unemployment. For 110 years, American factories and workers have proved they can compete and win against all comers in the world. They can continue to do that if Congress places tariffs on Chinese exports to the U.S. or taxes them to compensate for the 40 percent price break the Chinese government arranges for its manufacturers.

Inaction means the U.S. government disrespects American workers and manufacturing in a way that the Chinese government does not. China deliberately manipulated its currency value to protect and preserve Chinese manufacturing jobs as the worldwide recession deepened in 2008.

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.”

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