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Economist Peter Navarro says U.S. manufacturing is suffering ‘Death by China’

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Economist Peter Navarro says U.S. manufacturing is suffering ‘Death by China’

Olivera Perkins | September 7, 2012 | The Plain Dealer

CLEVELAND, Ohio — The shirt on your back. The flat-screen television in your family room. The bag of shrimp in your freezer.

Economist Peter Navarro says you don’t have to look too far to see why the United States is struggling with persistently high unemployment.

Clothing, appliances and even food at U.S. stores are increasingly imported from China.

In his book, “Death by China,” and the film by the same name opening today at the Cedar Lee Theatre in Cleveland Heights, Navarro said the trade deficit with China has shuttered more than 50,000 U.S. factories. He said Ohio was vulnerable because its historically diverse manufacturing base not only included major manufacturers, but small and mid-size companies that make up their supply chain.

“Ohio is Ground Zero in the undeclared trade war we’ve had with China since 2001,” said Navarro, a business professor at the University of California, Irvine, who will be in Cleveland this weekend.

“Ohio has been the biggest victim because it has been our strongest manufacturing state in many ways, and has not been able to withstand the onslaught,” he said.

In 2001, China joined the World Trade Organization, whose mission includes fostering formal trade agreements between countries.

“The movie is about how a Democratic president (Bill Clinton) and a Republican Congress allowed China to enter into the WTO, which was synonymous with giving China’s unlimited access to American markets,” he said. “Rather than play by the WTO rules, China began to cheat using what I refer to as Weapons of Job Destruction.”

These “weapons” include what Navarro deems are illegal subsidies from the Chinese government, including free land, subsidized energy and routine low and no-interest loans. Manufacturers also get subsidies for many exported items. Currency manipulation that allows China to undervalue the yuan is another weapon because it makes the country’s exports cheaper. He groups rampant counterfeiting, piracy and “theft” of American intellectual property as a weapon.

China’s lax enforcement of environmental and worker safety regulations give the country an unfair advantage. Lack of regulation not only harms the planet and people, but make Chinese goods cheaper because manufactures don’t have regulation compliance costs, Navarro said.

Don’t ask the WTO to do anything about these unfair advantages, he said. The body doesn’t have jurisdiction over environmental and safety enforcement. Other violations may be within the WTO’s purview, but its requirements make punishing rule breakers “really hard to enforce.”

Free trade advocates, like Bryan Riley, a senior policy analyst at the Heritage Foundation in Washington, D.C., disagree that China is to blame for the U.S. trade deficit.

“If you just look at the overall U.S. unemployment numbers after China joined the WTO, employment in the US had been growing, and continued to grow,” Riley said. “There was no sudden drop off in the U.S. because China joined.”

Navarro said unbalanced trade with China has costs 20 million U.S. jobs in a decade. He said between 1947 and 2000, U.S. Gross Domestic Product grew at an average annual rate of 3.5 percent. He said each percentage point of GDP growth produces about 1 million jobs. Since China joined the WTO, the annual growth rate has fallen to 1.6 percent, he said.

“That is about two million jobs a year not created over 10 years,” he said.

Riley said such an analysis is too simplistic, not taking such things as the impact of the global recession on manufacturing and job loss.

“I think that industries should prosper based on their ability to provide a good product at a good price, not because the government is protecting them from competition from China, Mexico or anywhere else,” he said.

Navarro said he isn’t simply blaming China for the trade deficit. He said politicians from both parties bear blame as well as “multi-national corporations that have taken our jobs off-shore.”

Harriet Applegate, who heads the North Shore AFL-CIO Federation of Labor, said unions are sponsoring Navarro’s presentation at the Cedar Lee because of concerns about off-shoring.

“The owners who moved their operations offshore are filthy rich, and the workers have lost their jobs and are working at much lower wages — if they have jobs at all,” she said.

Mary Brodzenski used to make $22.50 an hour assembling vacuum cleaners at the TTI Floor Care plant in North Canton until the plant closed in 2008, moving most jobs abroad, including China.

She transferred to another company facility making vacuum cleaner bags, but it is in the process of closing because those jobs are being shipped abroad. Brodzenski has been assigned a warehouse job with the company, making $13.40 an hour unloading vacuum cleaners made in China.

Brodzenski started at the old Hoover vacuum cleaner plant 32 years ago, expecting to work up to a decent wage and retire with an adequate pension. She said as a casualty of off-shoring, she now is only eligible for a $1,000 a month pension, which is about half of what she would have received if her job had stayed put. Brodzenski said since she’ll probably be forced to draw her pension early to make ends meet, she may end up getting less than $400 a month.

“Those corporate people are just greedy,” she said. “They look for the money. They don’t care whose lives they are destroying.”

Navarro will spend three weeks traveling Ohio as part of his “Death by China Swing State Tour.” He is trying to raise the trade deficit as a presidential campaign issue.

“The best jobs program is trade reform with China,” he said.

7 Responses to “Economist Peter Navarro says U.S. manufacturing is suffering ‘Death by China’”

  1. Frank Shannon says:

    Bryan Riley is an idiot. If America is protectionist, we sure aren’t very good at it. On the other hand, if the protectionism is by China, they have perfected it.

    Come on Bryan, get your head out of your arse.

  2. The Protectionist says:

    Pull the China curtain back and will find “Death by Flawed Economic Theory.” It’s time to resurrect Lincoln’s protectionist economics: rescuingeconomics.wordpress.com.

  3. Tom T. says:

    I really don’t know why people quote “policy analysts” like Brian Riley unless it is to make them look really stupid. Quotes like the ones he gives only denigrates groups like the Heritage Foundation. We are being gamed by the Chinese who capture the foreign currency earned in trade and we have “intellectuals” like Riley pilfering such nonsense.

    A quote like this:

    ““If you just look at the overall U.S. unemployment numbers after China joined the WTO, employment in the US had been growing, and continued to grow,” Riley said. “There was no sudden drop off in the U.S. because China joined.””

    shows just how intellectually challenged Riley is on so many levels. It is kind of like politicians quoting job numbers from when a president starts his presidency, not after his policies actually have an effect and taking in the conditions at the time. I have a feeling someone like Brian Riley would have had a hard time growing up in the family I grew up in. He would have suffered way too many pranks because his sense of cause and effect are so off.

    This he said she said type of reporting might be good to sell articles but it ends up allowing too much utter nonsense to go unchallenged.

    I would freely trade Brian Riley for the Communist Chinese intellectuals who are able to grow their economy at terrific rates while ours gets worse. It is making the corporations that substitute foreign labor for American labor wealthy as they cannibalize the economy. Good policy is not aligned with good incentives in the U.S. business model except, of course, if you happen to be one of the corporations seeking to profit by it.

    Tom T.

    • Bruce Bishop says:

      Tom,

      The Heritage Foundation is all over the map on this issue.

      James Sherk (a senior policy analyst for labor economics) at The Heritage Foundation has claimed that it was automation and robotics that took away our manufacturing jobs — not China.

      As someone who spent years looking for opportunities to employ automation and/or robotics, I can assure James Sherk that this is not what happened to the five million jobs.

      In the case of China, U.S. manufacturers found themselves dramatically underpriced by dirt-cheap labor and a total lack of government regulations. Also, U.S. manufacturers have had to tolerate a hostile climate in the U.S., made so by the steady drumbeat of negativity maintained by the leftist mainstream media, leftist academia, and the leftist popular culture.

      • Tom T. says:

        Bruce, automation can cause undesired economic results, especially if the benefits of such are not shared in the economic system. We supposedly have 40 hour work week and other human friendly labor rules because of efficiencies of automation (starting with the cotton gin) that came from industrialization. Dr. Bob advocates more of these, in part, because we have more “productivity” which means more can be produced with less. His simple solution is to spread those benefits around through the labor force instead of allowing all the benefits to be captured by the few who use it in the competition game. Using it weighted too much in the competition game either concentrates the benefits of labor saving technology to those who control the technology or in a lowering of prices (compression of the economy’s price).

        So it is true that “productivity” can lead the imbalance of economic power of the working class if the benefits are not passed on to the working class also.

        I think you are right, Bruce, that “productivity” or robotization is not as large a factor as predatory trade by China. In either case, the demand created by production (the benefits of a cash stream) are more concentrated than before to parts of the economy that do not create as much demand as when the benefits are shared more broadly. Our society is “magnitudes in order” different in sharing most of these benefits than a country like China where the government and party leaders capture and concentrate the wealth of production at a much higher rate.

        Tom T.

  4. Mo says:

    What these trade articles miss is how fiat money which is printing money out of thin air at will distorts international trade, encourages offshoring and creates poverty. For example when a government wastes money to fund malinvestments and military adventures inflation occurs. Input prices like oil then rise thus causing profit margins to squeeze. For instance, before the Iraqi war oil was about $30 and now it averages around $100. In the last 10 years over 50,000 factories were lost.

    As consumers pay higher prices for staple goods due to the rising input prices, they cut back on discretionary spending. This has the effect of generating unemployment in an inflationary environment.

    Because inflation is used to fund malinvestments like military adventures, it distorts the domestic capital structure and causes prices to rise. This has the effect of encouraging offshoring as domestic companies look to transfer capital to countries where they can produce the cheapest to remain competitive. So in today’s globalized world its hard to tell if an industry was lost due to competitive advantage, misaligned exchange rates or if inflation forced them to move.

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