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 →

It's not only Michael Jackson that can dance backwards. (Photo: typoyock on flickr)

As the Occupy Wall Street movement spread across the nation last week, politicians in D.C. flipped the bird at protesters – including those camping in Washington’s McPherson Square.

Here’s how: While occupiers sought political focus on the unemployment, impoverishment and foreclosures suffered by the nation’s non-rich 99 percent, politicians considered three major pieces of legislation and passed only the one that will help the wealthiest 1 percent and hurt the remaining 99 percent.

Senate Republicans murdered-by-filibuster the American Jobs Act, which would surtax the 1 percent to provide jobs for the 99 percent. The Senate did pass the currency manipulation bill, but House GOP leaders refused to schedule a vote on the measure that would protect jobs for the 99 percent by punishing countries that undervalue their currencies to artificially lower prices on their exports.

By contrast, both houses of Congress adopted the so-called Free Trade Agreements with Panama, Colombia and Korea, which will, just like their predecessor NAFTA, destroy jobs held by the 99 percent.

It’s incredible. Inexplicable. Inexcusable. In a country where joblessness is a painful 9.1 percent. Where one in five children lives in poverty. Where foreclosures rose again last month. Where a whole movement is growing to protest the appeasement of the rich at the cost of the middle class. In that place, Congress chose to walk backwards. It didn’t take two steps forward – which it could have by passing the currency bill and jobs act. No. It just took a giant step backward by embracing job-killing trade agreements.

It all forces the 99 percent to demand even more loudly: Where’s the jobs? Read the rest of this entry →

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 →

Japan, no economic small fry, challenged China last month. The conclusion of the dispute is a cautionary tale for countries confronting China about currency manipulation.

In September, Japan seized a Chinese trawler captain after his boat collided with two Japanese Coast Guard ships near some East China Sea islands claimed by both countries.

Immediately afterward, China “coincidentally” detained four Japanese employees of Fujita Corp., charging them with filming in a restricted military area. When Japan proposed a prisoner swap, China upped the ante instead — halting shipments of rare earth minerals to Japan. China controls 93 percent of the world’s rare earths, which are minerals essential for manufacturing high-tech and energy-efficient products, from cell phones to wind turbines.

Japan caved, releasing the Chinese captain unconditionally. Suddenly, China rescinded its restriction on rare earth exports to Japan and released three of the four imprisoned Japanese nationals, ending the dispute one captive ahead of Japan.

This incident confirmed China as a burly international tyrant. The caution for countries attempting to negotiate with China is to avoid Japan’s mistake, which was single-handedly contesting the giant. For America, that means seeking an end to China’s currency manipulation by simultaneously pursuing every option the United States has, including formally naming China a currency manipulator, imposing tariffs on imports from countries that undervalue currency and creating a community of allies to campaign together to combat the illegal trade practice.

Rallying partners should be reasonably easy, as Japan, Brazil and the European Union all have exhorted China in recent weeks to allow the value of its currency to freely float on international markets.

Like the United States, each has acted unilaterally. Last week, EU finance ministers confronted Chinese Premier Wen Jiabao at a European-Asian economic summit in Brussels. Wen rejected their demands for China to speed appreciation of the yuan in relationship to the euro.

Also last week, Brazil doubled a tax it charges foreigners who purchase Brazilian bonds. This was an attempt to slow speculation that has increased the value of its currency, the real, by 39 percent against the dollar over the past 22 months.

A day later, Japan announced it would lower its benchmark interest rate and purchase $60 billion in government bonds and securities, both actions designed to lower the value of the yen, which would cheapen its exports.

The Swiss tried intervening in the market in 2009 to hold down the value of its currency, the franc, but failed. Singapore, Thailand, India and Canada have considered it.

So far, America has just attempted to persuade China to stop undervaluing the yuan – a practice that artificially suppresses the price of Chinese exports while at the same time artificially raising the price of imports into China from America and other nations. China’s deliberate currency undervaluation accounts for a significant part of America’s massive trade deficit with China.

Last spring, the United States asked China politely to allow the value of its currency to float up. As the United States awaited China’s answer, the U.S. Treasury delayed issuing its semi-annual foreign exchange report in which it could name China as a currency manipulator, then initiate a formal response.

China replied June 19 that it would allow the yuan to float on international currency markets. Treasury then released its report – which, no surprise, failed to list China as a currency manipulator. Since China’s announcement, the yuan has increased in value less than two percent – this for a currency believed by many economists, including the conservative C. Fred Bergsten, director of the Peterson Institute for International Economics, to be undervalued between 25 and 40 percent.

Annoyed with China’s failure to keep its pledge and angry over unfair trade gutting 2 million jobs from the body of the American economy over the past decade, Congress reacted just before its recess. With massive bi-partisan support, the House passed a bill that would allow the Commerce Department to impose tariffs on imports to counter the effects of currency manipulation. If passed by the Senate and signed by President Obama, it would expand the definition of improper government subsidies to include manipulation of currency to gain trade advantages.

Afterward, just nine days before the next Treasury report on currency manipulation is due on Oct. 15, Treasury Secretary Timothy Geithner, in a speech at the Brookings Institution, offered thinly veiled criticism of China’s persistent manipulation:

“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same. . . This sets off a dangerous dynamic.”

In rebuffing the European Union’s request for revaluing, the Chinese prime minister claimed allowing the yuan to appreciate too quickly would bankrupt Chinese factories as their prices rose to uncompetitive levels, and the resulting exodus of unemployed workers to the countryside would provoke social unrest.

No one wants that. Workers everywhere applaud the rise of millions of Chinese citizens out of abject poverty. But increasing the value of the yuan will benefit Chinese workers at the same time as it begins to balance currencies worldwide. An appreciated yuan effectively increases Chinese workers’ wages.

By deliberately undervaluing its currency, the government of China is waging a stealth trade war against the rest of the world. Independently, the United States must protect its economy, but to reign in this international outlaw, America also must secure the help of a posse.

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 →