Archive for May, 2010

Is Ignorance Bliss?

Tuesday, May 25th, 2010

After approving one of the largest budget-busting bills in U. S. history (Health Care Reform), the Obama administrations has decided to save money by eliminating the Bureau of Labor Statistics’ International Labor Comparison Program in the Fiscal 2011 Federal budget.

This program provides estimates of international comparisons to equivalent U. S. hourly compensations costs, productivity and labor costs, labor force, employment and unemployment rates, and consumer prices.  This data series is the only one of its kind in the world and has been in operation since the 1960s.  The measly two million dollars saved would be used to fund other BLS programs, such as the unemployment rate or Consumer Price Index.

The justification in the “Terminations, Reductions, and Savings” is that “the data series is used to produce articles, technical papers, or special reports that are not widely used,” which is in direct contradiction to the justification for funding the program in the 2010 budget; i.e., “policy makers through the U. S. government and U. S. business and labor groups who use the data to assess     U. S. economic performance relative to other countries and to provide indicators of the competitive position of the United States in increasingly globalized markets.”

The 2010 Edition has pages and pages of easy to read charts showing data such as industry output as a percent of world industry output in which the United States contribution is 18 percent compared to China’s 12 percent.  The United States still ranked number one in manufacturing output as a percent of world manufacturing output in 2008.  The United States ranked highest in productivity as measured by Gross Domestic Product per employed person at 97.1 compared to China’s rate of 10.2.   India ranked lowest at 7.5

For the first time, the 2010 Edition of Charting International Labor Comparisons included China in its annual series of labor costs based on a 106-page report by Dr. Judith Banister that was commissioned by BLS.   China’s average total compensation for all workers was estimated to be 67 cents per hour in 2007 or about three percent of the average hourly compensation of manufacturing production workers in the United States.   Ten of the 12 European countries, as well as Australia and Canada, had higher hourly compensation than the United States.

Perhaps the Obama administration doesn’t want business and labor groups to have access to data they could use to make decisions on trade policy issues or use to criticize current trade policies.  In the February 12, 2010 issue of Manufacturing & Technology News, retired federal economist, David Martin, commented, “The BLS International Labor Comparisons Office has been documenting global economic change that some people would apparently prefer that we not know about, whether we believe in it or not.  The three-word [Obama] campaign slogan of ‘Yes, we can,’ it would seem, is to be replaced with an older three-word saying, ‘ignorance is bliss.’”

The two largest manufacturing trade associations, the Manufacturers Alliance/MAPI, and the National Association of Manufacturers, have requested the Secretary of Labor and director of the Office of Management and Budget to reinstate the $2 million in funding this program.

If you want to join the effort to reinstate funding for this important program, you can sign the online petition started by Georgetown Public Policy Institute at

Change for the Better in U. S. Patent & Trademark Office

Tuesday, May 18th, 2010

Under Secretary of Commerce and U. S. Patent & Trademark Office Director, David J. Kappos, recently visited San Diego to meet with the San Diego Inventors Forum and the San Diego Intellectual Property Law Association as part of his travels around the country to inform people of his mission to improve the U. S. Patent and Trademark Office (USPTO).

Independent inventors (individuals who are not part of corporations) are anxiously watching the outcome of the proposed Patent Reform Act of 2010, Senate Bill, S515, in which the new process would be a “First to File” system in contrast to the current “First to Invent” system.  The concern of independent inventors is that this bill would favor large companies who can afford to file applications for patents before vetting the new technology because it would alter patent law to effectively kill the grace period by conditioning it on early disclosure.  In other words, an inventor would have to publicly disclose the invention in order to trigger a grace period.  (

According to Director Kappos, the U. S. is already operating as a “first to file” patent system because in 2007, the total number of interference cases for all applications was seven, and only one interference claim involving a small or medium sized entity was decided based on priority alone – out of 441,637 patent granting decisions.  Interference cases are where two inventors file their patents nearly simultaneously and rely on the first to invent criteria during interference proceedings.

The proposed bill would create a new micro-entity category that would allow fees to be reduced by 75 percent for inventors with five or fewer employees and fewer than five prior patent applications.  The USPTO currently offers a 50 percent discount for small entities (under 500 employees) in virtually every fee category, which is further reduced by another 50 percent for small entities and independent inventors who use the electronic filing system.  The proposed legislation would also strengthen patent rights and lower litigation costs in patent disputes.

Since Mr. Kappos was appointed director last year, the USPTO added a 800 number “hot line” for inventors, and they are close to setting up a tracking “dash board” that will let inventors know when their application will have its first office action.  They changed hiring practices from hiring new college graduates to hiring people who have had some previous experience in industry.  They are hiring 300 more patent examiners this year and plan to hire 1,000 more in the next two years to help reduce the backlog of 750,000 patent applications.  They have also been aggressively providing training to the current 7,000 patent examiners.

An Ombudsman Pilot Program has been set up to assist applicants with issues that arise during the patent application process.  When there is a breakdown in the normal process, the ombudsman can assist in getting the process back on track.  Last fall, the Office instituted a pilot program designed specifically for the independent inventor, “Product Exchange,” which gives the opportunity to select one application of critical importance to an inventor that would receive expedited review of that application in exchange for permission to stop working on another application that is no longer important to the inventor.

One of the few concrete things the Obama administration has done in the last year to benefit the American economy is the appointment of David Kappos by Secretary of Commerce Gates.  Director Kappos is a former engineer and patent attorney who strongly believes that if our country is going to successfully compete in the global economy, it is going to be on the” back of innovation.”   Mr. Kappos said that the USPTO is committed to providing America’s innovators with the tools they need to put their ideas to work, which means providing high quality patents in a timely manner and giving inventions reliable Intellectual Property protection.  His goal is to help inventors bring their goods and services to market, to build economic opportunity, and maintain America’s place as the innovation capital of the world.  I share the same belief that ingenuity and innovation is the key to saving America’s manufacturing industry, and the changes already made and planned in the USPTO will help achieve this goal.

Can U. S. Stop China’s Currency Manipulation?

Tuesday, May 11th, 2010

The U. S. Department of Commerce reported that the U. S. trade deficit widened more than expected in February as exports rose to the highest level in 16 months, but this gain was offset by a bigger jump in imports, reflecting increased demand for consumer goods from clothing to televisions.  While exports of manufactured goods increased 1.6 percent, imports increased 3.9 percent.  Manufactured goods comprised 80 percent of U. S. merchandise exports in February; however, manufactured goods also accounted for 75 percent of merchandise imports.   This shows that an increase in consumer spending doesn’t create jobs for Americans because the vast majority of consumer goods are now manufactured in China.

To meet the President’s goal of doubling exports in five years, exports must grow at an annual rate of 15 percent.  How can this be achieved if imports continue to exceed exports?

One way would be to put pressure on China to allow its currency to rise in value against the dollar.  China sets the value of its currency, the yuan, to always equal a set amount of other currencies that includes the dollar.  When the dollar loses value, China buys dollars through U S. Treasury securities so that the yuan’s value is always within a targeted range lower than the dollar to keep Chinese goods cheaper than U. S. goods.

C. Fred Bergsten, head of the Peterson Institute for International Economics recently told the House Ways and Means Committee that the Chinese yuan is undervalued by about 40 percent against the dollar, and Hong Kong, Malaysia, Singapore, and Taiwan are undervaluing their currencies as well to avoid losing sales in markets where they compete against China.  If these currencies were allowed to rise against the dollar to the proper levels, he believes it would trim America’s trade deficit by $100 billion to $150 billion annually and could result in an additional 600,000 to 1.2 million jobs.

When Secretary Geithner was interviewed recently on CNN, he said, “ I think they’ll come to decide it is in their interest . . . I think it is quite likely that they move over time.”   Is he really that naïve?  China allowed the yuan to appreciate by about 20 percent from mid-2005 to mid 2008 but halted the rise after the global economic crisis began to cut deeply into its exports.  If that is the case, why did the U. S. trade deficit continue to grow between 2005 and 2008?  It actually reached a high of $268 billion before it dropped to $226.8 billion in 2009.

Under a 1988 trade law, the Treasury Department must report to Congress every six months on whether any country has been found manipulating its currency to gain trade advantages.  The report was due by April 15th, but Secretary Geithner requested a three-month extension in early April.

A group of 14 U. S. senators recently unveiled legislation that would provide for penalty tariffs to be imposed on Chinese imports if China does not allow its currency to rise in value.  Democrat Senators Sherrod Brown and Debbie Stabenow and Republican Senators Sam Brownback and Lindsey Graham co-sponsored the bill. In the House, 130 members sent a letter to the President urging a tougher approach on China’s currency manipulation.

A good reason why Obama was elected is that Americans were tired of losing jobs.  It’s high time that actions by the Obama administration match his campaign rhetoric.

Forcing Fair Trade with China?

Wednesday, May 5th, 2010

Will the Obama administration have the courage to force fair trade rules on China?  The Moneynews headline “U. S. to Force Fair Trade Rules on China” of April 13, 2010 sounds strong, but what Treasury Secretary Timothy Geithner actually said in an interview before a meeting of the American Society of Newspaper Editors, didn’t sound forceful to me.

While he said, “We will be very forceful and aggressive in making sure we are promoting changes for the prospects of a level playing field in those market,” he also said that “We have an enormously productive, beneficial relationship with China today … It’s hugely important to companies large and small across the country.”

Sure, the Federal government benefits from a relationship with China because China is a large lender to the U. S. Government by buying U. S. Treasury securities to support the value of the dollar.  In February 2010, China owned $877.5 billion, which represents 33 percent of the total $2.4 trillion outstanding Treasury securities

And yes, China is important to manufacturers who have outsourced their manufacturing to China and retailers who buy “made in China” goods to sell in their stores.  But, is the U. S. Federal government’s financial dependence on China beneficial to the American manufacturing industry as a whole and to American workers?

The 2.4 million Americans who lost their jobs since 2001 as a result of the nation’s growing trade deficit, largely with China, say “NO.”   According to a report released by the Economic Policy Institute (EPI), on March 23, 2010, high-tech industries are losing jobs faster than any other sector of the economy.  The computer, electronic equipment and parts industries experienced the largest growth in trade deficits with China, 26 percent of all jobs displaced by trade between 2001 and 2008.

Since China entered the World Trade organization in 2001, the U. S. trade deficit with China rose by $186 billion, from $84 billion in 2001 to $170 billion in 2008.  In 2009, China was responsible for more than 80 percent of the total United States non-oil trade deficit in goods.

California and Texas were the hardest hit for high-tech manufacturing jobs, and North Carolina was hit hard for the textile and furniture industries.  Other populous states like New York and Illinois also had major job losses.   Using data in the EPI report, the Alliance for American Manufacturing created an interactive map showing the impact by Congressional District.   Since manufacturing jobs create three to four other jobs, the real number of jobs lost is three to four times higher.  California lost 370,000 jobs, with the worst hit location being the Silicon Valley region.  Texas lost 193,700 jobs, and North Carolina lost 95,100 jobs.

The impact of the China trade deficit isn’t restricted to job loss, the report found.  Competition with low-wage workers from les-developed countries has driven down wages for workers in manufacturing and reduced the wages of workers in other industries also.

It’s time to wake up and realize that free trade isn’t free when Americans wind up destitute from losing their jobs.  Free trade with China and other Asian countries is destroying our economy and costing Americans their jobs.  The job you save by the actions you take may be your own.