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What is the Secret behind China’s Cheap Prices?

Tuesday, August 16th, 2011

It might not be what you think it is.  Most people would say it’s no secret and that the answer is obvious – lower wages in China compared to the United States.  However, that answer is only partially true.  Why?  Because labor is only one part of the total cost of a product, and in many cases it’s as low as 20% of the total cost.

Let’s compare two simple products that are primarily made in China:  a stuffed toy animal for a baby and a Frisbee.  The stuffed animal is comprised of textile material for the cover, stuffing, two eyes and a nose.  The material must be cut into pieces, sewn together, and stuffed.  The nose, eyes, and mouth are usually a pattern of thread that is sewn on the face piece before the toy animal is sewn together and stuffed.  The cutting of the pieces may be done by hand or by machine, but the pieces are sewn together by a worker using a high speed sewing machine.  The stuffing is usually blown into the stuffed toy by a machine, but the insertion point is closed by hand.   This type of a product is considered to be a high labor content product with labor being about 70% of the total cost.

On the other hand, a Frisbee is made of plastic resin (beads or pellets of plastic) in a process that is called plastic injection molding in which the resin is heated in a molding machine to a viscous state and is then injected into a mold, after which the molded part is automatically popped out of the machine in a matter of seconds.  The mold can be designed to make several parts at once at the push of a button, and a fully automated machine can be set to run continuously 24 hours a day with very little monitoring by a worker.  The highest expense in producing a Frisbee is the cost of making the mold (also called tooling), and that cost is amortized into the piece price of the parts so that the higher the volume of production, the lower the cost of the amortized tooling that is added to the cost of the part.  A Frisbee is considered to be a low labor product at about 20% of the total cost.

What are other factors of the total cost for the “China price”?  First, there are the actual costs of the materials used to manufacture the product, which would be the textile material and stuffing for the toy animal and the plastic resin for the Frisbee.  Because of the high volume of materials and resins ordered by Chinese companies, the pricing would be as low as it could be.

Second, there are the wages for the workers directly involved in producing the parts.  Labor is abundant and cheap in China because even though 300,000 have risen into the middle class and above, this still leaves one billion people living at the poverty level.  At any one time, there are an estimated hundred million workers who are unemployed and underemployed, which is about equal to the number of Americans employed in full time jobs.

All employees in China have the right under law to join the ACFTU, which claims some 170 million members and is controlled by the Communist Party.  ACFTU has a monopoly on trade unionizing in China and creation of competing unions is illegal Party leaders have ensured that the ACFTU has a monopolist position.  They don’t want autonomous unions springing up, because of the potential threat to their authority.  In 2008, collective bargaining became a requirement of the Labor Contract Law that went into effect, forcing most companies – including most foreign owned ones – to create an ACFTU chaptered trade union within them.

However, there are about 1,000 protest demonstrations occurring every week in China, even at the risk of beatings, demotions, dismissal, and even torture.  As a result, wages have finally been rising by about 15% per year over the past four years.  It took some suicides by workers in the summer of 2010 to achieve additional improvement in wages and working conditions at plants that were more like prison camps with dormitories for workers to live on site and fences around the buildings so workers couldn’t leave the premises.

Third, there are the costs of compliance to health and safety regulation and environmental regulations.  These costs are less expensive in China than in the United States because the Chinese government imposes few health and safety or environmental regulations.  China doesn’t provide workman’s compensation insurance for their workers so workers hurt on the job don’t receive any compensation when they are injured to the point that they are disabled.  Although China has its own environmental protection agency, the environmental protection laws are generally ignored and not enforced, especially at the local level.  So, Chinese companies have the advantage of being able to dump just about any odious byproduct into the air or waterways.   Six of the top 20 most polluted cities of the world are in China, and China has been designated as the world’s most polluted nation in several studies.  There is one city in China where the land, air, and water are polluted with mercury so the residents are really the “living dead” because there is no cure for mercury poisoning, which is eventually fatal.  The World Health Organization estimates that 750,000 people a year die in China as a result of the effects of pollution.

Next, there is the cost of taxes and duties.  China is one of over 150 countries that utilize a Value Added Tax (VAT) system.  It is a tax only on the “value added” to a product, material, or service at every state of its manufacture or distribution.  The VAT rate is generally 17 percent, or 13 percent for some goods.  Chinese companies receive a VAT refund from the government for materials of products produced for export.   American imports to China are charged a VAT, but the U. S. doesn’t have a VAT to charge Chinese imports.

On top of this, China’s national government policies allow their manufacturers to use trade cheats.   For example, there are unbalanced tariffs, such as the 2.5% for a car entering America vs. 25% for a car coming into China.  In addition, the Chinese government requires foreign firms to have a Chinese “partner” company, who maintains the majority interest, takes most of the profits, and has the real control of the company.  More seriously, China now requires U. S. companies to share their technology and relocate their R&D centers to China if they want to have access to Chinese markets.

Above all, there is the ever-present currency manipulation, where China undervalues their currency by an estimated 30-40%, which simply makes every product that China ships out 30-40% cheaper than those of a potential American competitor.

Finally, China has a national strategy of what is called “dumping.” “Dumping” is defined as the act of a manufacturer in one country exporting a product to another country at a price that is either below the price it charges in its home market or is below its cost of production.

The goal of “dumping” is to capture the market or destroy the competition for a particular product or commodity so the price to the end user or consumer is lowered way below the competition, often below cost. “Dumping” is one of the strategies China uses as a neomercantilist country.  Neomercantilism is a term used to describe a policy which encourages exports, discourages imports, controls capital movement and centralizes currency decisions in the hands of a central government. The objective of neo-mercantilist policies is to increase the level of foreign reserves held by the government, allowing more effective monetary and fiscal policy.

While dumping is not prohibited by the World Trade Organization (WTO) agreement, GATT Article VI allows countries to act against dumping where there is genuine (“material”) injury to the competing domestic industry.  Countries are allowed to act in a way that would normally break the GATT principals of binding a tariff and not discriminating between trading partners. Typically, antidumping action means charging extra import duty on a particular product from the exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry.

The number of U.S. dumping cases against imports from China is up, and more than 50 categories of goods from China are now subject to U.S. antidumping duties. Some of these product categories are: steel fence posts, iron pipe fittings, aluminum extrusions, tires, hand trucks, ironing tables, wooden bedroom furniture, and paper products.

Thus, the secret of China’s cheaper prices is a complex, national strategy of China to become the preeminent superpower of the 21st Century.  Sun Tzu, author of “The Art of War,” would be impressed with how his descendants have used his military strategies to dominate the world economy.

Posted in General, Trade Policy | 2 Comments »

How Free Trade Agreements Lead to Job Loss and Wealth Gaps

Tuesday, August 2nd, 2011

Since the year 2000, the United States has lost over 5.5 million manufacturing jobs, nearly 50,000 manufacturing companies, and racked up an annual trade deficit with China of $273 million in 2010, up from $83.8 million in 2000.  These escalating trade deficits with China have far-reaching effects, particularly on American workers.  This article will examine the impact of free trade with China as documented in two of the annual reports submitted to Congress by the bi-partisan, 12 member U. S.-China Economic and Security Review Commission (USCC).

The 2007 report included a case study of the local impact of trade with China on North Carolina.  The USCC report stated “the accelerating decline in North Carolina’s manufacturing employment is due in large measure to increasing competition from imports mostly from China . . . The combination of China’s 2001 admission to the World Trade Organization (WTO), which gave it quota-free access to U.S. markets for its textile and clothing exports, and the subsequent U.S. grant of Most-Favored (Trading) Nation status that lowered most tariffs on Chinese imports, battered North Carolina’s textile and apparel industries, and they never recovered.”

During the period of 2001 -2007, the number and proportion of jobs in the North Carolina services sector increased.  This shift put downward pressure on wages because manufacturing historically paid substantially higher wages than the services sector.  The shift also reduced the number of workers receiving such fringe benefits as retirement and health insurance, in part because some of the displaced workers were able to find only part-time jobs that often do not offer benefits.

Because a greater proportion of North Carolina’s workforce had manufacturing jobs than any other state, North Carolina’s workforce was more vulnerable to competition from imports than the workforces of other states.  North Carolina’s manufacturing economy was made even more vulnerable by its concentration in the import-sensitive sectors of textiles, apparel, and furniture.   According to the National Council of Textile Organizations, the U. S. textile industry dropped from the worlds second in basic manufacturing industries in 1991 with $244 billion in sales, down to third in 2002 with $60 billion in sales.11 North Carolina is one of the southeast states that had a large number of textile companies.

The North Carolina Employment Security Commission’s Labor Market Information Division followed the employment prospects of 4,820 workers laid off from bankrupt Pillowtex in 2003, which was the largest mass layoff in North Carolina history.  “About 40 percent of the laid-off workers had not yet found work, three years after they lost their jobs, and for those who have, take-home pay isn’t as much as they were making at Pillowtex.”  The article reported that North Carolina has been the most impacted state in the nation by layoffs due to trade.  Between 2004 and 2006, almost 39,000 North Carolina workers were certified by the Trade Adjustment Assistance program as having lost jobs to trade, more than 10 percent of the U.S. total of 387,755.”

According to the Social Science Research Institute (SSRI) of Duke University in North Carolina, there
were 2,153 textile and apparel plants in North Carolina employing 233,715 people in 1996.  By 2006, the apparel industry had experienced a 70% decline in jobs and 55% loss of plants.  The textile industry by comparison had only lost 63% of jobs and 32% of plants from 1996 to 2006.

“Trade agreements can profoundly affect state and regional economies and particular industries.  While trade agreements that lower import barriers among America’s trading partners have the potential to benefit American exporters, North Carolina appears to have realized few if any substantial benefits from China’s admission to the WTO, and the net effect of trade with China since its accession appears to be negative overall for North Carolina’s economy.”  It isn’t just people losing jobs and not being able to find other employment that pays as well as their former jobs, “hundreds of small towns throughout North Carolina impacted by plant closures are dying.”

How does the downturn in the textile industry in the South affect other regions of the country?  San Diego is a long way from North Carolina so you wouldn’t expect there would be much impact.  However, the San Diego region has a large number of companies manufacturing sporting vehicles, such as dune buggies, go-karts, mini-motorcycles, etc.  The connection is that the Southeast has traditionally been the largest market for go-karts, and the majority of U.S. textile companies were located in the Southeast.  A San Diego company that has manufactured parts for go-karts for over 40 years revealed that their sales of go-kart parts had dropped significantly in the past ten years in the Southeast.  Go-karting is mainly a hobby of blue-collar workers, such as textile workers.  Many of the thousands of workers who lost their jobs in the textile and apparel industry were not able to find equally well-paying jobs in other manufacturing sectors.  The average weekly salary for a U.S. textile worker was $487 in 2002, 38 percent more than the average salary of $301 for a worker in a retail store, such as Wal-Mart.  When a family’s disposable income drops drastically, money for non-essentials, such as go-karts is cut or goes away altogether.

The loss of these well-paid manufacturing jobs in North Carolina’s textile industry may have resulted in families losing their homes and/or being forced to relocate to other areas of the country to find jobs.  Taking lower paying jobs in their own communities may have resulted in families no longer being in the middle class income range.  And, those who haven’t been able to find any work or only part-time work may have even dropped down to the poverty level.

What about all the jobs that were supposed to be created in the green and clean technology industries?  Is our free trade agreement with China as part of the World Trade Organization having an effect on these industries also? This is of particular concern because the Obama Administration has repeatedly emphasized green technology’s role in job creation and highlighted green technology in its 2010 National Export Initiative, which is intended to double the level of U.S. exports within five years.  According to the U.S. Department of Commerce, the green sector has the potential to fuel economic growth in the immediate future.  More than two dozen states have also identified green technology’s potential to create jobs and to revitalize manufacturing areas that have been damaged by imports, outsourcing, and the loss of export markets abroad.

The USCC’s 2010 Annual Report to Congress discussed China’s green energy policies and efforts to promote alternative energy sectors as part of its analysis of the U.S.-China relationship in several areas.

 

One key development in 2009 was a ban in China on deployment of turbines of less than 1,000 kilowatts for most projects, on the grounds of inefficiencies.  The ban had a discriminatory effect on imported turbines, since most of the smaller models are produced by European and American companies.  Larger wind turbines are more expensive and require substantial new investment to build but require comparatively less maintenance and can be more efficient, because they require fewer installations.  But the larger wind turbines require new investment by manufacturers.  Many foundries in the United States, for example, are reluctant to invest in new, larger molds for the larger turbine casings unless they can be guaranteed a substantial production run.  Chinese state-owned foundries are under no such profit constraints.

“U.S. firms are losing global market share in the green technology sector, mostly to China, with solar panel manufacturing experiencing a particularly severe loss.  As various sources have noted, China became the largest producer of solar panels in the world in 2008, shipping 2,600 megawatts of photovoltaic panels, enough for about one-third of annual world supply.”

U.S. and Chinese firms are both engaged in active research and development for electric vehicles and their fuel cells or batteries.  To spur the entry of electric vehicles into the market, China has created a mandate for increased vehicle emissions standards in the next ten years, with plans to reduce gasoline consumption by vehicles 60 percent by 2020.  This is expected to spur the development of an electric vehicle market.

Recent reports have noted that China is considering a new technology transfer requirement for foreign automakers.  China’s Ministry of Industry and Information Technology is ‘‘preparing a 10-year plan aimed at turning China into ‘the world’s leader’ in developing and producing battery-powered cars and hybrids,’’ according to executives at four foreign car producers familiar with the plan.

In the area of alternative energy, China is following a familiar pattern of choosing an industry sector and showering it with a comprehensive mixture of subsidies and incentives.  In this case, China also intends to establish certain alternative energy industries as ‘‘national champions’’ able to dominate world export markets.  China has already developed the world’s largest manufacturing capacity in solar panels.  Its capacity is far larger than that needed to satisfy domestic demand; 90 percent of the solar panels manufactured in China are exported.  China also has a large number of installed wind turbines and is rapidly developing new technology for a growing global market.  China’s domestic wind turbine industry operates behind a protectionist barrier.  Only the largest wind turbines may be installed in China.  This excludes many U.S. and European turbines, which are typically smaller.

What have been the long term effects of the loss of manufacturing jobs on America’s working class?  On July 25, 2011, the Pew Research Center released a report based on their analysis of new census data, which shows that the wealth gaps between whites and minorities have grown to their widest levels in a quarter-century.  I believe that this is the direct result of the loss of manufacturing jobs in the last decade, exacerbated by the loss of jobs in the construction industry since 2007 with the burst of the real estate bubble.

The numbers are based on the Census Bureau’s Survey of Income and Program Participation, which sampled more than 36,000 households on wealth from September-December 2009.  Census first began publishing wealth data from this survey, broken down by race and ethnicity, in 1984.

Household wealth is the sum of assets (houses, cars, bank accounts, stocks and mutual funds, retirement accounts, etc.) minus the sum of debt (mortgages, auto loans, credit card debt, etc.).  It is different from household income, which measures the annual inflow of wages, interest, profits and other sources of earning.  Wealth gaps between whites, blacks and Hispanics have always been much greater than income gaps.

The median wealth of white U.S. households in 2009 was $113,149, compared with $6,325 for Hispanics and $5,677 for blacks, according to the analysis released Tuesday by the Pew Research Center. Those ratios, roughly 20 to 1 for blacks and 18 to 1 for Hispanics, far exceed the low mark of 7 to 1 for both groups reached in 1995, when the nation’s economic expansion lifted many low-income groups to the middle class.  The white-black wealth gap is also the widest since the census began tracking such data in 1984, when the ratio was roughly 12 to 1.

According to the Pew study, the housing boom of the early to mid-2000s boosted the wealth of Hispanics in particular, who were disproportionately employed in the thriving construction industry.  “After reaching a median wealth of $18,359 in 2005, the wealth of Hispanics …declined by 66 percent by 2009…  Among blacks, who now have the highest unemployment rate at 16.2 percent, their household wealth fell 53 percent from $12,124 to $5,677.”

“Typically in recessions, minorities suffer from being last hired and first fired. They are likely to lose jobs more rapidly at the beginning of the recession, and are far slower to gain jobs as the economy recovers,” said Harrison, who is now a sociologist at Howard University. “One suspects that blacks who lost jobs in the recession, or who have tried to help family members or relatives who did, have now spent whatever savings or other cashable assets they had.”

Asians lost their top ranking to whites in median household wealth, dropping from $168,103 in 2005 to $78,066 in 2009. Like Hispanics, many Asians were concentrated in states like California hit hard by the housing downturn. More recent arrivals of new Asian immigrants, who tend to be poor, also pushed down their median wealth.

In San Diego, the factory floor is comprised primarily of Asians, Vietnamese, Cambodian, Laotian, and Hmong, many of whose families came to the United States as refugees, with little formal education.  The balance of manufacturing workers is mainly Hispanics, with a small percentage of whites and blacks.  In other parts of the country, this mix of factory workers may comprise a higher number of working class whites and blacks who were able to get jobs in manufacturing with only a high school diploma or GED.

For the past 60 years, the manufacturing sector offered the best opportunity for persons with only a high school diploma or GED to have upward mobility — starting at an entry level wage, but having the opportunity to advance to better paying jobs through experience, training, and education.  With millions of manufacturing jobs gone, the opportunity to live the American dream is disappearing.  As a nation, we are in danger of becoming a two-class society of rich and poor, haves and have-nots, with the rapidly disappearing middle class.  We must stop this slide into becoming a third-world country.   It’s time for us to review our unilateral free trade agreement with China that only seems to benefit China at the cost of jobs and even whole industries in the United States.

Posted in Cleantech, Outsourcing, Trade Policy | No Comments »

Korea Free Trade Agreement – Beneficial or Harmful?

Tuesday, April 19th, 2011

The Korea Free Trade Agreement (KORUS), originally signed on June 30, 2007 is one of three FTAs that have been concluded but not yet implemented by Congress.  The other two are the Colombia FTA, signed on November 22, 2006 and the Panama FTA, signed on June 28, 2007.

Because of shared authorities on trade and differences of views between successive Congresses and presidents, these FTAs, struck with countries that the United States counts as friends and allies, have been stuck in a procedural no-man’s land between the White House and Congress.

On December 4, 2010, President Obama announced that he had obtained supplemental concessions from the South Korean government on autos significant enough to justify his decision to transmit an implementing bill to Congress. This gave KORUS renewed political life.

As the 112th Congress began, the new Speaker, John Boehner, said that the House intends to move on all three trade pacts.  On January 25, the House Ways and Means Committee held a hearing to consider all three FTAs, setting the stage for consideration of these agreements by Congress in the coming months.

The agreement is an integral part of the President Obama’s efforts to increase opportunities for U.S. businesses, farmers and workers through improved access for their products and services in foreign markets and supports the President’s National Export Initiative goal of doubling of U.S. exports in five years.

According to the Fact Sheet by the U.S. International Trade Commission (ITC), the agreement will promote the further integration of the U.S. and Korean economies and enhance the competitiveness of U.S. businesses in the world’s 12th largest economy.  The agreement is an important demonstration of the Administration’s advancement of free and fair trade and will complement the Obama Administration’s efforts to expand business opportunities for the United States in Asia, including through such initiatives as the Trans Pacific Partnership.  The estimated tariff cuts alone in the U.S.-Korea trade agreement will increase exports of American goods by $10 billion to $11 billion.  The Agreement would eliminate tariffs on over 95 percent of industrial and consumer goods within five years.

The U.S.-Korea trade agreement will open Korea’s $560 billion services market to highly competitive American companies – supporting jobs for American workers in sectors ranging from delivery and telecommunications services to education and health care services.

The U.S-Korea trade agreement creates new opportunities for U.S. manufacturers seeking to export to Korea in two ways: first, it eliminates tariffs, or duties, charged when U.S. exports come into Korea; and it addresses non-tariff barriers to U.S. exports – whether by eliminating barriers that are in place today, or by establishing a framework to prevent non-tariff barriers from arising in the future.  Under the agreement, U.S. exports of aerospace, automotive, consumer goods, electrical/electronic goods, metals, scientific equipment, and shipping and transportation equipment will gain duty-free access to the Korean market.  Beyond tariffs, the agreement establishes strong new rules on how Korea will develop regulations applied to U.S. exports, and contains state-of-the-art protections on intellectual property rights (IPRs).

The U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea’s 49 million consumers, giving American agricultural producers more market access in two ways – by getting rid of tariffs charged when U.S. exports come into Korea, and by laying out a framework to tackle other barriers to U.S. exports –even those that might arise in the future.  Tariff eliminations on Korea’s existing 40 percent tariff will further boost beef exports, saving an estimated $1,300 per ton of beef imported to Korea – savings that would total $90 million annually for U.S. beef producers at current sales levels.

The U.S.-Korea agreement expands U.S. firms’ access to the $100 billion Korean government procurement market, creating new opportunities for exporters, and ensuring that U.S. firms will get to bid on contracts on a level playing field with Korean firms. At the same time, the agreement’s government procurement rules ensure that certain American business sectors – such as small businesses or textile companies bidding on Department of Defense procurement – do not face foreign competition for key government contracts here at home.

The agreement’s procurement obligations also maintain American environmental and labor safeguards.  The Korean government will be held to the same level of accountability for meeting labor commitments as it is for meeting other commitments in the agreement.  Under the agreement, the Korean government – which has already demonstrated a significant commitment to environmental protections – will be held to the same level of accountability for meeting environmental commitments as it is for meeting other commitments in the agreement.

This all sounds great, but the “devil is in the details.”  In the February 18, 2011 issue, Richard McCormack, publisher of the Manufacturing & Technology News, wrote, “If American are interested in determining on their own if the Korea Free Trade Agreement will benefit he U. S. economy (and their own job prospects) good luck!   He quoted a few paragraphs from the six-page addendum released by U. S. Trade Representative Ron Kirk on February 10, 2011 as an example of how incomprehensibly worded this agreement is written.  Check it out for yourself at http:www.ustr.gov/webtm_send/2557.

According to research by the Economic Policy Institute, KORUS  “will increase the U. S. trade deficit by about $16.7 billion and displace about 159,000 American jobs within the first seven after it takes effect.”  Robert E. Scott noted, “The USIT has a history of vastly underestimating the negative impacts that free trade agreements have on the U. S. economy.  In 1999, it estimated that China’s entry into the World Trade Organization would increase the U. S. trade deficit with Chin by only $1.0 billion, and have no significant impact on U. S. employment.  In fact, the U. S. trade deficit with China increased by $185 billion between 2001 (when China entered the WTO) and 2008, and 2.4 million U. S. jobs have been displaced or lost.”

The following list details the reasons why the publisher and staff writers of the Economy in Crisis website opine that this trade agreement would be disastrous for America:

  • It will dramatically export more American jobs and increase our trade deficit.
  • Korea will gain unhindered liberties to change U.S. laws; even prevailing wage laws can be challenged.
  • The U.S. government will lose the ability to regulate the American banking industry as the agreement was negotiated before the financial collapse of 2008.
  • The Korean FTA will allow foreign monopolies to take over U.S. industries, making any laws ore regulations that would stop companies from becoming monopolies illegal. This will make preventing foreign takeovers impossible.
  • Korea will be able to insource low-wage jobs to the U.S., but American companies will NOT get the same access to South Korea.
  • American textile industry will be rendered uncompetitive.
  • The U.S. beef industry will continue to diminish as Korea will not accept our beef, but will have unrestricted access to ship their beef to us.
  • More unchecked contaminated food will legally enter the U.S. – and we won’t be able to stop it.  Korus will put limits on our ability to check food imports.
  • ”Buy American” food support will become illegal. .
  • South Korea will still use barriers that the U.S. does not, continuing their Value-added Tax of 10 percent that will act as a tariff.
  • Korean companies will have right to sue the United States for lost profits, but U. S. companies will not have their right.
  • There is nothing in the Korean FTA to stop South Korea’s currency manipulating practices, which are presently prevalent.

The Coalition for a Prosperous America concurs with the above reasons and outlines a few more reasons for opposing KORUS:

1.      Currency:  South Korea has a history as a currency manipulator.  The trade deal does nothing to prevent a return to massive undervaluation of the “won” which taxes our exports and subsidizes their imports.

2.      Trans-shipping from China/35% Rule of Origin:  Korus requires only 35% of a product to be made in South Korea to be allowed into the U. S. with lower tariffs.  China is Korea’s biggest trading partner.  We will see tremendous volumes of Chinese goods shipped through Korea to the U.S. with nearly two-thirds made in China.

3.      Eroding U.S. Trade Laws:  The KORUS FTA slows the Korean government several avenues to weaken U. S. trade law enforcement when domestic industries seek a remedy for foreign unfair trade practices, including countervailing duties and anti-dumping duties.

“The nine members of the House Trade Working Group released a statement condemning the South Korea Free Trade Agreement (KORUS), in opposition to Republican and presidential support for the disastrous deal.  Rep. Mike Michaud (D-ME) called the proposed deal a “fundamentally flawed trade agreement that will cost us jobs in the United States.”  “The war on the middle class continues. Its greatest battle of 2011 will be the Korea free trade agreement,” said Rep. Brad Sherman (D-CA).  Sens. Susan Collins and Olympia Snowe, both Republicans from Maine, have also refused to sign on to a letter demanding the USTR present Congress with a treaty to vote upon, citing various concerns.”

As bipartisan opposition begins to coalesce against this failed trade deal, other Senate Republicans have threatened to block the nomination of a new Commerce Secretary until KORUS is approved.  Members of the House Working Trade Group have pledged to begin an education campaign to sway their colleagues, but this alone may not be enough.

Staff writer Sam Williford, wrote “We need fair trade agreements that correct America’s trade imbalance as well as protecting the rights of workers and the environment. This agreement is clearly unfair, especially with respect to automobiles.  The U.S. would be allowed to export up to 75,000 a year to South Korea compared to the more than half a million South Korea exports here.  By way of comparison, in 2007, the U.S. sold 7,000 American vehicles in South Korea, or less than one percent of the entire market.  South Korean automakers, on the other hand, sold 615,000 vehicles in the U.S. that same year.  Korea has only 48 million people – the U.S. has over 300 million.  It would not be possible to have anything but a massive trade imbalance with this country.  In addition, KORUS does nothing about South Korea’s value-added tax, or government policy to audit anyone who buys an American vehicle.”

Free trade agreements that increase exports for certain industries and increase imports far more for other industries are not the answer.  Instead of another trade agreement that makes no sense for America, we need a national trade and economy strategy.

In his book, Free Trade Doesn’t Work, What Should Replace It and Why, Ian Fletcher stated, “It has been estimated that every billion dollars of trade deficit costs American about 9,000 jobs.  After losing 5.5 million manufacturing jobs since the year 2000, we can’t afford to lose that many more through another bad trade agreement.

Take action against the U. S.- Korea Free Trade Agreement today!  Our elected representatives need to be held accountable for how they vote. Contact your representative in Congress and let them know they can’t count on your vote if they continue to approve job-killing “free” trade deals!

Posted in Trade Policy | No Comments »

ABCs ‘Made in America’ Series

Tuesday, March 8th, 2011

On Monday, February 28th, ABC began a series on the World News with Diane Sawyer called “Made in America.” John and Ana Ursy of Dallas, Texas agreed to accept the challenge of working with the ABC team of David Muir and Sharyn Alfonsi to furnish three rooms of their home exclusively with products that are made in America.  When the team examined everything that existed in these three rooms and removed all foreign-made products, the result was a virtually empty house – no beds, no tables, no chairs, no couches, no lamps.  Only the kitchen sink, a vase, a candle, and some pottery remained.

The questions posed by the team were:  Is buying American-made more expensive?  What staples are no longer manufactured in the U.S.?  And what difference would it make if everyone promised to buy more American-made products?

The results were somewhat surprising.  The kitchen was the most difficult because there are only a couple of companies still making major appliances in America:  Viking Products provided the stove, and Sub-Zero and Wolf provided the refrigerator, microwave, and oven.  They couldn’t find any coffee makers made in the U.S.; Bun-a-Matic assembled a coffee maker out of parts made offshore.  There are no TVs made in America and no light bulbs.  General Electric closed the last plant making incandescent light bulbs in the U. S. in July 2010.  The team was able to furnish the bedroom with all American-made furniture, lamps, and bedding for less money:  $1,699 compared to $1,758.   All in all, the team found more than 100 manufacturers still making various consumer goods in America, and viewers submitted names of many more.  You can view the companies on an interactive map of the USA.

When one of the ABC reporters, Sharyn Alfonsi, examined the toy box of her own child, she didn’t find any American-made toys in it, so the interactive website provides the names of some U. S. toy makers, such as Green Toys in San Francisco that makes toys from recycled milk bottles. There are six other California companies shown on the interactive map:  Pure-Rest Organics, making organic bedding in San Diego, Harveys Handbags in Santa Ana, Maglite Flashlights in Ontario, Danmer Custom Shutters in Los Angeles, Glass Darma, making handmade drinking straws in Ft. Bragg, and Sergio Lub Jewelry in Martinez.

Why does it matter if we buy American-made products?   First, our addiction to imports has helped create our high trade deficit, especially with China, where most of the consumer goods we import are manufactured.  In 1960, imported foreign goods made up just 8 percent of Americans’ purchases.  Today, nearly 60 percent of everything we buy is made overseas.  In 2010, our overall trade deficit was $97.8 billion, up from $374.9 billion in 2009 but nearly 30 percent below our highest deficit in 2008 of $698.8 billion.  Our trade deficit with China has grown from $ $83.8 billion in 2000 when China was granted Most Favored Nation status to a record high of $273 billion in 2010.

Second, American-made products create American jobs.  Each time you choose to buy an American-made product, you help save or create an American job.  There is a ripple effect in that every manufacturing job creates three to four other jobs while service jobs create only one to two other jobs.  We’ve lost 5.5 million manufacturing jobs since the year 2000, and the number of manufacturing jobs dropped below 12 million in 2010, down from a high of nearly 20 million in 1979.

You may be thinking, would what I do make a difference? American activist and author, Sonia Johnson said, “We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.”   Eleanor Roosevelt echoed this sentiment saying, “Never doubt that a small group of thoughtful, committed citizens can change world; indeed, it’s the only thing that ever has.”  Remember that our country was founded by a small group of people that did indeed change the world by forming the United States of America.

Here are suggestions of what each one of us can do:  First, look at the country of origin labels of goods when you go shopping.  Most imported goods are required to have these labels.  Many manufacturers have tried to get the Federal Trade Commission (FTC) to relax the rules determining what’s “Made in USA.”  After two years of public hearings, studies, and reports, in December 1997, the FTC reaffirmed:  A product will be considered Made in U.S.A. if “all or virtually all made in the Unites States” only where “all significant parts and processing that go into the product are of U. S. origin.”

Buy the “Made in U.S.A.” even if it costs more than the imported product.  It is a small sacrifice to make to insure the well being of your fellow Americans.  The price difference you pay for “Made in USA” products keeps other Americans working.  If the product you are looking for is no longer made in America, then avoid countries such as China that has the goal of becoming the world’s “super power” in the 21st Century by winning either an economic war or a military war with the U. S.  When you take our trade deficits with China into consideration, it would not be an exaggeration to say that American consumers have paid for the bulk of China’s military buildup.  American service men and women could one day face weapons mostly paid for by American consumers. Instead, patronize impoverished countries such as Bangladesh or Nicaragua, which have no military ambitions.

In addition, you would be reducing your “carbon footprint” by buying a product made in America instead of a product that is made offshore that will use a great deal of fossil fuel just to ship it to the United States.

If you have a “Made in USA” appliance that needs repair and all the new ones are imported, try to get it repaired.  If it can’t be fixed, and it is a small appliance that you can live without, then don’t buy a new one.  We Americans buy many things that we really don’t need just because they are so cheap.  If a product that you are considering purchasing is an import, ask yourself, “Do I really need this?”  If you don’t need it, then don’t buy it.

If you are willing to step out of your comfort zone, ask to speak to the department or store manager of your favorite store.  Tell the person that you have been a regular customer for x amount of time, but if they want to keep you as a customer, they need to start carrying some (or more) “Made in USA.” products.  If you buy products on line or from catalogs, you could contact these companies via email with a similar message.   Your contacting a company does have an effect because there is a rule of thumb in sales and marketing that one reported customer complaint equals 100 unreported complaints.

Buying American has been made even easier by a new guide to buying American – “How Americans Can Buy American:  The Power of Consumer Patriotism” first released in March 2008 and updated in 2010.  Author Roger Simmermaker says, “Supporting American companies leads to a more independent America.  Ownership equals control, and control equals independence.  We cannot claim to be an independent country or control our own destiny if our manufacturing base is under foreign ownership or foreign control.  A nation that cannot supply its own needs is not an independent nation.  If we are to claim independence from the rest of the world and truly be a sovereign nation, we must begin supplying our own needs once again.”

According to Simmermaker, “buying American” is not just about buying “Made in USA.”  “Buying American, in the purest sense of the term, means we would buy an American-made product, made by an American-owned company, with as high a domestic parts content within that product as possible…’American-made’ is good. ‘Buying American’ is much better!”

One of our greatest statesmen, Thomas Jefferson, stated, “I have come to a resolution myself, as I hope every good citizen will, never again to purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may” (pg. 9 of Simmermaker’s book).

Simmermaker has made it easy by listing companies and their nation of ownership and view his list of American owned companies at his website: www.howtobuyamerican.com.    In addition here are some other websites.

www.buyamericanmart.com

www.madeinusa.org

www.americansworking.com

www.shopunionmade.org

www.MadeInUSAForever.com

As American consumers, you now have more American choices so you can live safely and have more peace of mind.  It’s high time to stop sending China our American dollars while they send us all of their tainted, hazardous, and disposable products.  If 200 million Americans refused to buy just $20 each of Chinese goods, that’s would be a four billion dollar trade imbalance resolved in our favor – fast!  In the ABC World News program, Diane Sawyer said, “if every American spent an extra $3.33 on U. S. -made goods, it would create almost 10,000 new jobs in this country.”   The ABC World News series “Made in America” continues with a look at the garment industry the week of March 7th.

Manufacturing jobs are the foundation of our middle class, and we are losing our middle class in state after state.  From December 2000 to December 2010, 22 states have lost a third or more of their manufacturing jobs.  Massachusetts, New York, and Ohio have lost 38 percent of their manufacturing jobs, New Jersey 39 percent, North Carolina 42 percent, Rhode Island 44 percent, and Michigan 48 percent.

We cannot afford to export our wealth by buying imports from China and finance our more than 10 years of deficits by borrowing an average of $1.553 billion every day.  We cannot lose our manufacturing base and be able to remain the world’s “superpower.”  In fact, we may not be able to maintain our freedom as a country because it takes considerable wealth to protect our freedom.

Remember, the company you save or the job you save by your actions may be your own.  More importantly, you can play a role as an individual in saving our country’s sovereignty by following the suggestions in this article.

Posted in Outsourcing, Reshoring, Trade Policy | 3 Comments »

National Export Initiative – Part Three – Success Stories

Tuesday, January 18th, 2011

Before the National Export Initiative is fully implemented, it is worthwhile to examine the stories of companies that have already been successful at exporting their products, even to China.

SnowPure is a leader in high-technology Electrodeionization (EDI) with it ElectropureTM brand.   The original company was founded in 1979 by Harry O’Hare as HOH Water Technology, went “public” in 1987 and was renamed Electropure in Inc. in 1996, also public.)  After a management buyout in 2005, it became SnowPure LLC, a privately held company, with Michael Snow, Ph.D. as President.  The company broadened its water technologies to include ZapwaterTM, EDI, ExcelllionTM ion-exchange membranes, DC power supplies, flow switches, and instrumentation for high purity systems, and innovative ultraviolet (UV) products.  SnowPure does not sell systems and does not sell to end-users.  SnowPure’s mission is to provide water purification technology components to system integrators.

SnowPure opened its first sales office in China in 2006, and formed SnowPure International in Hong Kong in 2008.  SnowPure released its new Electropure EXC EDI at the Aquatech China show in January 2009.  SnowPure’s percentage of sales that are exported is close to 85 percent.  Their percentage of exports increased in 2010 compared to 2008 and 2009 because their total revenue increased even though their USA sales decreased.

When asked how SnowPure achieved this success in exporting, Michael Snow said, “It was by being in the right place at the right time with a product that was needed by industry.  Companies trust U. S. technology, service, and support.  It was done with zero advocacy and zero export financing (not without trying though).  The U. S. Department of Commerce has been very

forthcoming with introductions, though little business has come from these.  One thing that USDOC and the Secretary of Commerce promote is the Export Import Bank.  The ExIm receivables insurance is good so far and is administered privately, but we haven’t had any claims, so I don’t know if it works.  They also promote ExIm as export financing but this is a not true for small businesses.  It must go through the banks and is so onerous in the administration and reporting that Wells Fargo and California Bank & Trust, for example, have very high minimums for participation; I need $200-300k for working capital for exports, so there is no program for us.”

Michael added that he hasn’t experienced any trade barriers for his products, and they have found exporting easy.   He said, “Having export receivables insurance has helped us with allowing credit without the cost and hassle and risk of letters of credit.  We do this through ExIm Bank, and it costs about 0.36%.

Paulson Manufacturing has been providing protective equipment for various industries worldwide since 1947.  Specializing in face protection, the family owned and operated business delivers quality products and innovation for industrial, fire and rescue, and tactical and ballistic verification testing applications.  All of their products are manufactured in America at a five-acre facility in Temecula, California.

Roy Paulson, President, said, “Paulson Manufacturing has seen sales increase up to 25% due to international exports. Not only are we able to capitalize on the export market, we are able to facilitate stronger sales for our OEM customers because of our exclusively designed products, which allow them a stronger international market share as well. With increasing sales, we are able to hire more employees, both temporary and permanent.”

Mr. Paulson added, “As the recession hit worldwide, our sales fell roughly 10% in 2008.   We had worked diligently with our international distributors in successfully obtaining orders from military and police agencies; however, these assets were frozen and the orders lay dormant. In these instances, it has been a waiting game; since then, we have seen our export sales increase at about 4% a year.

Paulson added, “In some instances, our experience has proven in order to stay competitive and creative in the overseas market, custom products must be engineered to suit the customers need.  Each country has its own standards and specifications.  In order to pull our market share, we needed to provide a product that would meet these requirements.  One example would be our body shields, used by police and military and our ArcShields, used in electrical safety.

Greece is a great example of a body shield modification. We redesigned our body shield to meet the Greece police specifications, sent the shield for testing, and received our European Certifications that were required. We won the tender with the help of our distributor who worked diligently with the authorities. This hard work from both sides has led to a great success of reoccurring orders.

The Paulson Arc Shield is a safety product used by electricians as required by the NFPA-70E Standard. This unique item did not have an export market because there were no standards in the foreign countries that required the use of our item.  With this product, we approached the market from two directions:

1. We initiated and helped to fund a study in Europe that defined the use and application of the ArcShield. This study was the combined effort of a respected University and other agencies vested in worker safety. We continued our efforts by working with the proper committees to define the need and awareness of the electrical safety standards in the United States and to develop new rules in Europe regarding safety rules and Personal Protective Equipment (PPE). This has now resulted in language, standards and test methods that will open the European market to many products from the United States, including our own.

2. The second method was to sell the electrical safety equipment where the individual companies could understand that these products would reduce risk and save money over the long term. One example that can be used is China where there are no rules or safety standards that require the use of our product; however, with sales and education efforts we have developed good repeat business in the Chinese market.”

When asked what changes in trade policies or export regulations would help increase their exports, Paulson said, “The rules and regulations and export control rules were a very big challenge for us. We ran into all of the difficulties with the export control rules that primarily affect products that have dual use application for military or for police.  I made a relatively early determination that I wanted to work on changing those rules because the rules are too difficult for American business.”

SPX Global LLC is a leading company in providing solar powered water systems throughout the globe.  SPX mobile systems provide a rapidly deployed, fully independent solution to support the basic needs of rural villages, developing communities, and disaster relief operations throughout the globe.

SPX solar powered water filtration systems operate independent of electrical infrastructure and provide an easy to operate and cost effective solution to deliver potable water to those people who do not have clean water or a reliable water infrastructure.  SPX ultrafiltration UF) reverse osmosis (RO) and Agriculture water delivery AG) systems are enabling delivery of clean water throughout the globe.  In 2009, SPX successfully delivered 325 Solar Powered Ultra Filtration Water systems to Iraq.

Cory Cunningham, President, Sustainable Industries, ran all the operations for the SPX Global LLC in 2010.  Sustainable Industries (SI) was formed to sell directly to DoD/federal/state entities under the Service Disabled Veteran rating and export contracts for SPX are a joint effort of SPX/SI.   Cunningham said, “Direct procured exports to Iraq were about $250,000 in 2010, and he managed the production and export of approximately $19.8 million in 2010.”    This was a significant increase over 2009, when they produced and exported about $15 million.  He said that they were able to achieve this success in exporting through his personal relationships developed with Iraqi companies and government officials.  The key was that Iraq values first-world (U. S.) manufacturing.

In answer to the question about what changes in trade policies or export regulations would help increase exports, Cunningham listed:  “Small business loans that are easier to obtain; Subsidized manufacturing for small business, i.e. helping with rent and payroll to reduce risks for small businesses; Stronger government support of all sized businesses; Focus on clean technology that actually provides sustainable solutions and real job growth; Tighter regulations on ARRA/Buy USA products requiring USA certificate of origin, which would create jobs for U. S. workers vs. in other countries with lower/subsidized labor costs.”

Since 1961, Gamma Scientific Inc. has offered the world’s most comprehensive selection of precision light measurement instruments, such as high-accuracy photometers and spectroradiometers to integrating spheres and NIST-traceable light source.  Gamma Scientific also uses its extensive light measurement expertise to manufacture custom light-measurement for unique customer applications such as production control, government testing, and avionics.

Gamma utilizes international sales agencies in Canada, China, Europe, and Japan.  Their sales to Asia increased by nine percent, and sales in Europe increased seven percent from 2008 through 2010, which helped to mitigate the decrease in sales in North America during the same period.  Their overall sales have increased 500 percent in the last ten years since starting an aggressive plan to expand exports.

Richard Austin, President, said, “We focused on Korea as a country starting in 1998, and it has paid off.   We started marketing to China ten years ago, and I have made many personal trips to China to support our Chinese sales agency’s efforts.  Our major competitors are in Germany, and they have greater market share.  We had to go through a qualification process with customers in China, and we had to give up margins to compete against German products.  The strength of the Euro compared to the dollar has helped us be more competitive and increase market share in the last two years.”

Austin was the only one of the presidents interviewed that thought the Korea Free Trade Agreement would be beneficial.  Austin said, “Korea has high tariffs on our type of products, and the tariffs would drop with the Korea FTA and help increase our exporting to Korea.”

There are some common factors that played a key roll in these four examples of companies that are successfully exporting their products, even to Asia.  They are:

  • A specific marketing plan to export their products
  • Technology of products that meet needs in other countries
  • Personal commitment and involvement by president of company
  • Use of sales agencies and distributors
  • Taking advantage of connections

These examples show that the most important ways the National Export Initiative plan could help is through enhancing connections through the trade promotion component of trade missions and reverse trade missions and increasing export credit and financing.  If the NEI plan fulfills all of the priorities that are identified in it, exports should increase.  Only time will tell whether or not the goal of doubling exports in five years can be achieved.  We can only hope this goal will be achieved to help American manufacturers succeed and grow.

Posted in Trade Policy | No Comments »

National Export Initiative – Part Two “Will it Work”

Tuesday, January 11th, 2011

The National Export Initiative goal of doubling exports in five years is laudable, but the question is whether the plan to achieve the goal will work.

In 2009, the U. S. exported $1.57 trillion worth of goods and services, while importing $1.95 trillion.  Imports of crude oil totaled $189 billion, which was equal to about half of the trade deficit.  Manufactured products only represented 31 percent of U. S. exports, while services represented 69 percent.  The overall annual trade deficit for 2010 is estimated at $502 billion, up 34 percent from the $374.9 billion for 2009.

The biggest problem is that the United States is no longer the manufacturing source for consumer and household goods and commodities that it once was.  American brands such as IBM, General Electric, and Maytag were known worldwide for their quality and innovation.  These types of products are now being made in Asia, mostly in China, and imported by the United States and other countries for their consumers to buy rather than being manufactured in the United States for export worldwide.

The last time the United States ran a trade surplus was in 1975 when President Gerald Ford was in the White House.  Most presidents since then have tried to increase exports and get us back to at least a trade balance, but they haven’t succeeded, and the trade deficit has gone from bad to worse, especially with China.  Can the U. S. get other countries to go along with our plan to double exports?

Roger Simmermaker, author of How Americans Can Buy American, doesn’t think so.  In his “Buy American Mention of the Week” of April 14, 2010, he said, “We cannot expect other countries to surrender their markets to us simply because we have stupidly surrendered our market to them…We’ve been giving foreign producers production-cost advantages over our own producers for at least 35 years now, and we can’t expect them to start ‘playing nice’ with us and let us invade their markets to the tune of doubling our exports.”

Ian Fletcher, author of Free Trade Doesn’t Work, What Should Replace it and Why, comments, “The fraudulence of the administration’s initiative is obvious from its proposal that America improve its trade position by signing yet more trade agreements.  America’s past trade agreements, from NAFTA on down, have produced larger deficits for the U. S. not smaller ones.  These agreements are really offshoring agreements designed to make it easier for American corporations to produce abroad for the American market.  As long as America persists in trying to play by free-trade rules (honored only on paper) while foreign nations play the 400-year old game of mercantilism, this will remain true.  The administration is setting itself up for a huge embarrassment when the results of this initiative become visible a few years from now.”

In my article of June 2010, “Do Trade Agreement Create Manufacturing Jobs?” I pointed out that we lost about a half a million manufacturing jobs between 1994 (when NAFTA was ratified) and 1999.  In addition, we lost another 5.5 million jobs since the year 2000 when China was granted Most Favored Nation status paving the way for China’s accession to the World Trade Organization in December 2000.  My conclusion in this article was that trade agreements create manufacturing jobs, but not necessarily in the United States.  They create higher-paying manufacturing jobs in the countries of our trading partners.

However, only one of the eight priorities of the National Export Initiative plan promotes free trade agreements.  I believe that the other seven priorities have merit and are worth pursuing.  Although I’m skeptical about the ability of the plan to double exports in five years when we are fighting against the predatory mercantilism of countries such as China, India, and Japan, it is well worth pursuing these other priorities to improve the ratio of exports to imports as much as possible.

The National Export Initiative report states that progress has been made in the first nine months towards the five-year goal.  “Exports in the first six months of this year were 18 percent higher than exports in the first six months of 2009 … exports have contributed more than one percentage point to GDP growth (at an annual rate) in each of the four quarters of recovery and have contributed over 1.5 percentage points to growth in the last year.”

Some examples of contributions to this progress are:

  • The Department of Commerce has coordinated and unprecedented advocacy on behalf of U. S. exporters by coordinating 20 trade missions I 25 countries with more than 250 companies participating.
  • Commerce recruited nearly 8,800 foreign buyers to visit major U. S. trade shows in the United States, facilitating over $660 million in export successes since January 2010.
  • The Small Business Administration has identified more than 2,000 potential exporters on the Central Contracting Registration to target for export promotion outreach.
  • The Export-Import Bank increased its loan approvals by nearly 20 percent in fiscal 2010, from $18.3 billion to $21.5 billion.

Leila Aridi Afas, Director, Export Promotion, U. S. Trade and Development Agency, kindly provided me with some success stories from the U. S. Trade and Development Agency (USTDA) 2010 Annual Report.  I was given permission to reprint a couple of the stories in this article:

USTDA Brings Broadband Access to Africa

As a direct result of USTDA’s investment in the visit of a ministerial-level delegation to the United States and a regional ICT conference, over $400 million in U.S. equipment and services exports were utilized by African project managers to bring broadband communications to Africa. Without an undersea fiber-optic cable system, countries in the region relied on costly and scarce satellite links, which could not meet increasing demand for broadband communications services.

USTDA’s multi-year effort to support the development of an undersea fiber-optic cable linking East Africa with communication hubs around the world proved successful when a group of African ministers visited the United States, as part of a USTDA-funded program, and convinced potential financiers, including Sithe Global and the Overseas Private Investment Corporation, that fiber-optic cable connecting East Africa to the rest of the world could be commercially attractive.

In June 2009, SEACOM became operational offering 1.2 terabytes per second of capacity to enable high definition TV, peer-to-peer networks, IPTV, and high-speed internet access. The 13,700 km cable links South Africa, Mozambique, Tanzania, Kenya and Djibouti with India and Egypt. “The system, which was designed and installed using Tyco Telecommunications’ state-of-the-art technology, will undoubtedly provide businesses and citizens in South and East Africa alike with the capabilities they need to communicate with the rest of the world and participate in the global marketplace,” said Debbie Brask, Managing Director of Project Management for Tyco Telecommunications.

As described by SEACOM’s Chief Executive Officer Brian Herlihy, USTDA’s multi-year effort was critical to SEACOM’s launch. “The impetus for the cable project is directly attributable to Sithe Global’s participation at the half-day briefing sponsored by the USTDA visit.”

Reverse Trade Mission Connects U.S. Companies with Sales Opportunities in Brazil’s Rail Sector

USTDA played a pivotal role in the sale of 55 General Electric locomotives, which were manufactured in Grove City and Erie, PA, to MRS Logística, a Brazilian rail company.  By sponsoring a reverse trade mission for 10 delegates from the Brazilian rail sector to the United States, USTDA provided a forum for procurement decision makers to examine U.S. capabilities in the area of railroad rehabilitation and modernization.

The visit was prompted by the interest of Brazilian rail companies in making significant upgrades to their rolling stock, communications and signaling systems, track and other infrastructure. Based on these needs, the itinerary was structured to inform U.S. companies about export opportunities in the Brazilian rail sector and to facilitate direct contact with key decision makers.

During the reverse trade mission, the delegates traveled to Pennsylvania for site tours, including one to the GE Transportation diesel engine manufacturing plant in Grove City.  GE’s transportation business recognized the importance of this initial contact leading up to its sales activity to MRS Logística.  “The visit by the Brazilian rail officials helped us to establish the lasting contacts necessary to tap into an important emerging market.  We look forward to building on these relationships for many years to come,” said Robert Parisi, General Manager of International Locomotives and Modernizations at GE Transportation.

The USTDA report states, “This past year, the Agency identified over $2 billion in U. S. exports that were directly attributable to USTDA-funded activities.”  By following the priorities in the National Export Initiative, the successes of this Agency should be even greater in the next few years.

This topic will be continued in a Part Three article focusing on the stories of a few San Diego companies that export products and what could be done to help them be more successful.  In the meantime, manufacturers should look at the Department of Commerce website (www.export.gov) to locate an Export Assistance Center to assist them with entering the global marketplace by exporting or contact the World Trade Centers Association to locate the nearest World Trade Center at http://world.wtca.org.

Posted in General, Trade Policy | 1 Comment »

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.

Posted in General, Trade Policy | 1 Comment »

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