The following article by Mike Hall appeared on the “afl-cio now” blog here.

The U.S. government, American businesses and consumers all can play a role in combating China’s unfair trade policies that are weakening the nation’s economy, stealing jobs and giving China unparalleled economic advantages.

But the first steps must be taken by the government to declare China a currency manipulator—either through legislation or executive action—and then follow through with sanctions if China fails to respond, said a panel of trade and economic experts this morning at a special China trade policy forum in Washington, D.C.

The forum, sponsored by the Coalition for a Prosperous America (CPA), used the recent book Death by China: Confronting the Dragon—A Global Call to Action as the jumping off point for the discussion.

Authors Peter Navarro, professor of economics and public policy at the University of California-Irvine, and Greg Autry, an entrepreneur and educator, explore China’s trade policies, near nonexistent workers’ rights laws, environmental standards, product safety rules and its military and espionage actions. Death by China shows how those policies threaten the U.S. economy and jobs.

Immediate action must be taken on currency manipulation, said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities (CBPP) and former chief economist to Vice President Joe Biden.

Part one is currency manipulation. While it’s not the whole story it’s a big part of it….I could show you a graph that is a textbook example of currency manipulation and it would look exactly like China’s currency manipulation today.

The Chinese government keeps its currency low, which artificially reduces the prices of its exports, creates a huge trade deficit for the United States and costs millions of American jobs. Last year, the U.S. House passed legislation (388-79) that would give the government broader powers to enforce currency manipulation rules and impose sanctions. But the Senate has failed to act because of pressure from multinational corporations, said some panelists.

The Obama administration could act on its own and declare China a currency manipulator. “We need our own government to do its job,” said AFL-CIO Deputy Chief of Staff Thea Lee. Whatever action is taken, she said, “must include a credible threat of sanctions.”

Lee also noted that while most U.S. companies that do business in China have “corporate codes of conduct,” workers there suffer serious abuses, work in dangerous conditions for low wages and have no rights to join real unions. Not only do China’s practices lower even further production costs but they violate most so-called codes of conduct because in a “wink-wink” arrangement, China factory owners:

hire monitors to inspect their faculties to see if corporate code of conduct is being followed. They call up and say “We’ll be here next month, make sure everything’s cleaned up, that you’re not dumping poison in the river. We’ll see you the morning of March 22.” The market economy cannot function unless we have business rules of conduct.

Rob Dumont, a CPA director and president of the Tooling, Manufacturing and Technologies Association, said that while on paper products from China must meet U.S. safety, environmental and other standards, they often don’t, giving firms in China another big economic advantage.

He used the experience of an Alabama steelmaker as an example. The manufacturer was losing orders to much cheaper steel from China that was certified as meeting U.S. standards. But they sent a fact-finding team to China and discovered that not only did the plant have no environmental controls,

the lab that was supposed to certify the steel grade didn’t even have the equipment to properly conduct the tests. Back in the U.S., we sent a sample to a U.S. lab that confirmed the suspicion that the steel was inferior in quality and strength. This steel goes into critical applications like nuclear plants, and bridges and buildings. This happens day in and day out and one day we’ll pay the price with a catastrophic failure.

Along with enforcing current trade laws and developing new trade standards, Novarro and Autry offer several ways for consumers and business to combat the flood of cheap made in China products that steal American jobs. In Death by China, they write: “Cheap isn’t always the cheapest—Change our attitude.”

Besides the price you pay in the tag, you also have to factor in the risks of injury or death, the increased chances that you or someone you know will lose their job because the unfair trade practices involved in delivering that Chinese product to the market and the various regulatory and taxpayer costs that Chinese product failure entails.

Further, write Novarro and Autry, businesses must recognize the real corporate risk of offshoring in China.

Obvious risks include the loss of the company’s intellectual property, either through outright theft or via China’s policy of forced technology transfers and forced relocation of research and development to Chinese soil….Other risks range from endemic corruption to severe pollution, to the need to scale China’s Great Wall of Protectionism.

American executives offshoring to China must remove their rose-colored glasses and do a far more comprehensive risk assessment….Such a sober look at the real risks associated with offshoring to China should in turn power a new “reshoring” that brings jobs back to America.”

The following Reuters article appeared in the American Iron and Steel Institute‘s Daily Media Report.

WASHINGTON - Congressional Republicans on Monday urged the Obama administration to hold China’s feet to the fire over currency and industrial policies they said are hurting American companies.

“The U.S.-China relationship is critically important. But much work needs to be done to strengthen that relationship and improve U.S. market access into China,” Republican members of the House of Representatives Ways and Means Committee said.

They put their message in a letter to U.S. Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton, who hosted Chinese officials beginning on Monday two days of high-level talks on economic and geopolitical concerns.

The annual U.S.-China Strategic and Economic Dialogue follows Chinese President Hu Jintao’s visit in January to the United States and another high-level forum in December known as the U.S.-China Joint Commission on Commerce and Trade.

During both the Hu visit and the JCCT meeting, “China made encouraging commitments. However, those commitments can be deemed meaningful only if they result in improved market access for U.S. companies, as measured by sales, jobs and exports,” the Republican lawmakers wrote.

They urged President Barack Obama’s administration to push China to follow through on Hu’s promise to ‘de-link’ government procurement and indigenous innovation policies that could shut foreign firms out of China’s huge public sector.

“Now is time to provide more clarity how they are going to implement that very high-profile pledge with a timeline for doing so,” said John Frisbie, president of the U.S.-China Business Council, in a separate interview.

“That’s something we should expect at this meeting and I would hate to think that we wouldn’t see that,” Frisbie said.

The lawmakers also complained that China’s “currency misalignment continues to be a serious problem,” driven in large part by China’s refusal to open its capital market.

“China must let the RMB (renminbi) appreciate and move toward allowing market supply and demand to determine the value of its currency,” they said.

The Republicans, who won control of the House in last November’s election, steered clear of threatening legislation to force China to revalue its yuan, or renminbi, currency.

But in the Democrat-controlled Senate, Senator Sherrod Brown said he believed legislation was needed to stop “China’s unfair currency manipulation.”

“The Chinese government has taken small steps to allow the yuan to appreciate, but it is not enough,” the Ohio Democrat said, echoing the view last week of Senator Charles Schumer, the Senate’s third-ranking Democrat.

House Republicans also pressed for faster results on China’s promise to fight software piracy by increasing the use of legitimate software by government agencies.

“We are concerned that U.S. companies have not yet seen a meaningful increase in sales” of legal software in the Chinese market, they said.

The lawmakers criticized China’s use of “WTO-inconsistent subsidies” and regulatory practices that they said give Chinese companies an unfair advantage over foreign firms.

They also accused Beijing of misusing its anti-dumping laws “to retaliate against U.S. companies,” and of throwing up food safety barriers to keep out U.S. farm exports.

The Republicans took aim at Chinese restrictions on rare earth exports and called on Beijing to do more to help bring world trade talks to a successful conclusion.

The following article appeared in the Daily Media Report of the American Iron and Steel Institute.

Washington, D.C. – American Iron and Steel Institute (AISI) President and CEO Thomas J. Gibson issued the following statement following the conclusion of the third U.S.-China Strategic and Economic Dialogue.

“As the third U.S.-China Strategic and Economic Dialogue concludes, the U.S. steel industry strongly supports the Administration’s call to China to open up its markets to U.S. exports and put an end to its industrial policies that discriminate against U.S. and other countries’ products both in China and in third country markets.  Our government approved China’s entry into the World Trade Organization based on promises China made to open its domestic market. Instead, what we have seen in recent years has been a pushback against reform, a growing role for state-owned and state-supported enterprises, and continued Chinese government manipulation of its currency to promote Chinese exports.  It’s time for China to comply fully with its WTO obligations.  We urge the Administration to continue to press China to abandon its protectionist policies that disadvantage U.S. manufacturing companies, employees and communities.

To achieve open and free trade, China should end its import barriers on industrial goods, export restrictions on raw materials, limits on foreign investment, state subsidies to its manufacturing industries and undervaluation of its currency.  The U.S. Government must also ensure that U.S. companies have the ability to obtain relief from the injurious effects of Chinese trade and industrial policies.  We therefore urge the Congress to pass legislation to ensure that U.S. customs officials will act to stop efforts by unscrupulous traders to evade U.S. trade law orders through customs fraud, transshipment and other forms of illegal evasion.  In addition, Congress should enact currency reform legislation to give U.S. manufacturers a remedy against the injurious effects of Chinese currency manipulation.”

AISI’s member companies represent approximately 80 percent of both U.S. and North American steel capacity.  For more news about steel and its applications, view AISI’s Web site at www.steel.org.

The following article was written by Peter Morici, a professor at the Smith School of Business, University of Maryland School.

Press Advisory: Wednesday’s Trade Deficit Report

Tuesday, analysts expect the Commerce Department to report the deficit on international trade in goods and services was $47.7 billion in March, up from $45.8 billion in February.

This trade deficit subtracts from demand for U.S.-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising deficit slows economic recovery and jobs creation and limits how much Congress and the President may cut the deficit without sinking the economic recovery.

Rising oil prices and imports from China are driving the trade deficit up, and these are major barriers to creating enough jobs to pull unemployment down to acceptable levels over the next several years.

Jobs Creation

The economy added 244,000 jobs in April; however, 360,000 jobs must be added per month to bring unemployment down to 6 percent over the next 36 months. With federal and state governments trimming civil servants, private sector jobs growth must exceed 360,000 per month to accomplish this goal.

Americans have returned to the malls and new car showrooms but too many dollars go abroad to purchase Middle East oil and Chinese consumer goods that do not return to buy U.S. exports. This leaves too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

Simply, policies regarding energy and trade with China are not creating conditions for 5 percent GDP growth that is needed and easily could be achieved to bring unemployment down to acceptable levels.

In April, the private sector has added 268,000 jobs per month, but many were in government subsidized health care and social services. Netting those out, core private sector jobs have increased only 229,000 in April—that comes to 73 non-government subsidized jobs per county for more than 5000 job seekers per county.

Early in a recovery, temporary jobs appear first, but 22 months into the expansion, permanent, non-government subsidized jobs creation should be much stronger.

Economic Growth

Since the recovery began in mid 2009, GDP growth has averaged 2.8 percent, disappointing Administration economists who have consistently assumed 4 percent growth in budget projections and forecasts for the job creating effects of stimulus spending.

Consumer spending, business technology and auto sales have added strongly to demand and growth, and exports have done quite well. However, soaring oil prices and the continued push of subsidized Chinese manufactures in U.S. markets have offset those positive trends.

Administration imposed regulatory limits on conventional oil and gas development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, Administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40 percent. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among U.S. multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports—about 35 percent. That would neutralize China’s currency subsidies that steal U.S. factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense.

The following blog post by Justin Elliott appeared at Salon.com here.

Donald Trump has emerged in recent years as the nation’s foremost China basher, going after the Asian superpower for undervaluing its currency and for taking American manufacturing and jobs. So it’s at least ironic — and at most an example of gross hypocrisy — that Trump’s own line of men’s wear, the Donald J. Trump Signature Collection, is manufactured in China.

I discovered this after walking from Salon’s offices to the large Macy’s in midtown Manhattan, where an entire section is devoted to the Donald J. Trump Signature Collection of suits and ties. This particular corner of the store is decorated with an oversize portrait of Trump; the line promises to provide “the pinnacle of style and sophistication” and “the necessities to be boardroom ready all of the time.”

Here is the tag on one of the Trump shirts:

Yes, that says “MADE IN CHINA.” (That pink dress shirt retails, by the way, for $69.50.) Other pieces were made in Mexico and in Bangladesh.

Now, Trump has long complained about Chinese currency “manipulation” and has called for a large tariff on imports of products from China in order to bolster U.S. manufacturing. But he has also gone further, urging Americans to buy fewer products from China, claiming that Chinese goods are shoddy and maintaining that, in his own business dealings, he favors American manufacturing over Chinese manufacturing.

All of which makes it a little strange that Trump’s own brand of clothing is made in China.

The phone number listed on Trump’s website for the Signature Collection goes to the “licensing coordinator” at the Trump Organization, Amy Steinfeldt. She did not immediately return a call. But it appears that the shirts and ties are made by the Phillips-Van Heusen Corp., which owns a license on the Trump brand.

Here’s a typical Trump exchange on China from a year ago on Fox with Neil Cavuto (via Nexis):

TRUMP: And you know, again, the problem with our country is we don’t manufacture anything anymore, I mean, very little. China is doing — I just bid furniture out on a major project I’m doing, and I have six bids. Every bit of furniture is being made from China. The one from America is more expensive because of all the other problems that have been caused by us. So you know, if…

CAVUTO: Well, why wouldn’t you give — even though it’s expensive, why wouldn’t you give the American company the job?

TRUMP: I did.

CAVUTO: You did?

TRUMP: I have to tell you, I did, because you know what? They actually make a much better product. I mean, the product is 100 percent better. The product, the stuff that’s been sent over from China is — it falls apart after a year and a half. It’s crap.

In the case of his clothing line, of course, a Chinese factory was given the job.

Here’s another telling exchange between Trump and Fox’s Neil Cavuto in January:

CAVUTO: We start — I would imagine a President Trump would then start urging Americans to buy less from China.

TRUMP: Absolutely.

CAVUTO: Trade war ensues.

TRUMP: Well, I would urge that anyway.

Trump also told CNN last year: “When it comes to manufacturing, China is making all of these products. And they could be made in North Carolina, they could be made in Alabama, they could be made in lots of our places. And right now they’re not. Personally, I’d tax China very, very heavily. ”

A spokesman for Trump did not immediately respond to a request for comment. I’ll update this post if Trump’s people get back to me.

The following blog post by Travis McArthur appeared on Eyes on Trade, Public Citizen’s blog on globalization and trade here.

Earlier this week, the USDA released a report attempting to estimate the effects of the Korea, Colombia, and Panama FTAs upon U.S. agricultural trade. It also examined possible effects of the ASEAN-China and ASEAN-Australia-New Zealand FTAs upon the U.S.

Unfortunately, the USDA estimated the effects through a computable general equilibrium (CGE) model, which has a shoddy track record, to say the least. A 1999 U.S. International Trade Commission (USITC) study on the likely effects of China’s tariff offer for WTO accession used a CGE model to estimate that the U.S. trade deficit with China would increase by only $1 billion dollars due to China’s accession. In reality, the trade deficit with China skyrocketed by $167 billion between 2001 and 2008.

Similar studies on NAFTA were also way off the mark. An economist at the Federal Reserve concluded that a CGE-based study of NAFTA underestimated NAFTA’s impact upon U.S. imports by ten times the actual effect of NAFTA. He concluded his study with a recommendation: “If a modeling approach is not capable of reproducing what has happened, we should discard it.”

Not accounting for currency manipulation is a chief problem of CGE models, as Rob Scott at the Economic Policy Institute has demonstrated. The USDA’s report even acknowledges the devastating effect currency devaluation can have upon U.S. agricultural exports:

In 1997, U.S. apple exports to Southeast Asia peaked at 150,000 tons, just as the Asian financial crisis struck. The crisis led to sharp devaluations of Southeast Asian currencies that raised the prices of imported apples and income losses that further discouraged apple buying, triggering a dramatic decrease in U.S. apple exports to the region.

As we discuss in a factsheet, Korea is only one of three countries to have ever been placed on the Treasury Department’s list of currency manipulators, having repeatedly manipulated its currency in the past. The Korea FTA contains no prohibition against currency manipulation, so the Korean government could effectively negate the tariff cuts mandated under the FTA through currency manipulation. Despite the long history of Korea manipulating its currency, the USDA’s estimates do not attempt to account for the very real possibility of another devaluation, even though they could have done so through estimating alternative scenarios.

Given that fair trade opponents have touted beef as a major winner in the Korea FTA, a close examination of the USDA’s beef assumptions is warranted. The USDA assumes a very optimistic scenario for beef like the 2007 USITC study, although it is slightly less optimistic. (Who knows? Maybe the next study will have realistic expectations.) The 2007 USITC study assumed that U.S. beef exports would be unimpeded by current Korean regulations prohibiting the import of U.S. beef from cattle older than 30 months and it set the initial beef export level in the model at $1.1 billion, even though actual U.S. beef exports to Korea were tiny at the time the study was conducted. This USDA study assumes that the initial beef export level is $701 million. Actual 2010 U.S. beef exports to Korea amounted to about $350 million, far off the level of these optimistic scenarios. The initial level of exports is one of the primary determinants of the results of the CGE model, and higher initial exports result in greater predicted exports from tariff reductions. With the slightly lower initial beef export assumption, the USDA report projected increased beef exports to Korea of $563 million, compared to the USITC’s projection of $628-1,792 million greater beef exports. Realistic beef export data would result in even lower projected gains.

Finally, even though the report is some fifty pages, the USDA is highly stingy with its presentation of results. It presents the projections on the bilateral changes in trade flows with Korea and Colombia under the FTAs, but not how the FTAs will affect overall U.S. trade with the world. (The projected impact upon overall U.S. trade can be quite different from the bilateral results due to the trade diversion effects of bilateral trade pacts.) The decision to exclude the global results is especially puzzling given that the report focused on the effects of trade diversion in its assessment of the ASEAN-China and ASEAN-Australia-New Zealand FTAs.

It is likely that leaving the global results out of the report conceals the fact that the overall trade balance in several agricultural sectors is expected to worsen under the FTAs. The 2007 USITC report on the Korea FTA, which used the same model as the USDA study, did report both bilateral and global changes and found that several sectors expected to have improved bilateral trade balances would have worsening balances with the world, such as wheat, oilseeds, and miscellaneous crops. The global trade balance is what matters since it indicates the total effect of goods exiting and entering the U.S. upon farmers’ livelihoods. Thus, this USDA report does not contain sufficient information on projected imports and exports to evaluate the effect of the FTAs on U.S. farmers, even in terms of its own flawed CGE model.

In sum, at first glance this report projects significant gains for agriculture from the Korea, Colombia, and Panama FTAs, but a close examination reveals that methodological flaws render the report unreliable. Instead of these predicted gains, we could see a repeat of the NAFTA experience in which U.S. exports of beef and pork to Mexico in the first three years of NAFTA were 13 and 20 percent lower, respectively, than beef and pork exports in the three years before NAFTA was enacted, partly due to currency devaluation.

The usual suspects are racing to debunk Donald Trump’s foray into the most serious protectionism—a 25% tariff on China—proposed by a major presidential candidate since Patrick Buchanan ran in 1992.

They know this is big.  Our long-delayed national trade debate has begun.

I have expressed reservations about getting obsessed with just China before.  But broadly speaking, Trump is right on the money here. Nothing less than an actual tariff or the equivalent is ever going to get Beijing to stop gaming the international trading system to America’s disadvantage.

This matters, big-time.  Because until we sort out America’s trade mess—which must start by zeroing out, or close to it, our $600 billion-a-year trade deficit—our economy will never truly be healthy again.

Jobs are the aspect of this everyone understands.  But what a lot of people miss is that the current budget fight, and the angst over our mounting national debt, are also intimately connected to trade.

So Trump is onto something even bigger than people realize.

The budget fight ultimately comes down to the fact that we don’t have an economy large enough to generate tax revenue commensurate with the spending we have voted for. But why isn’t our economy big enough? Start with the fact that, as economist William Bahr has estimated, America’s accumulated trade deficits since 1991 alone have caused our economy to be 13 percent smaller than it otherwise would be.  The trade deficit costs us about one percent in GDP growth every year, and that compounds over time.

As for our national debt, or, more properly, our bloating public and private indebtedness? As I explained at length in another article, borrowing money (and selling off existing wealth, which has the same net effect) is a mathematically inevitable result of running trade deficits. The only way this can not happen is if a) the aforementioned $600 billion isn’t real money, or b) America is trading with Santa’s elves.

So, Mr. Trump… How do we rebalance America’s trade, starting with China?

Forget about doing it by playing nice. China will only give up one-way free trade (free for America, protectionist for them) when they are coerced into doing so. They are making far too much money to ever give up this sweet racket voluntarily.

We are constantly warned that imposing a tariff on China would trigger a trade war. But the curious thing about the concept of trade war is that, unlike actual shooting war, it has no actual historical precedent. In fact, the reality is that there has never been a significant trade war.

Anyone who knows otherwise, please name one.

The usual example free traders give is America’s Smoot-Hawley tariff of 1930, which supposedly either caused the Great Depression or caused it to spread around the world. But this canard does not survive serious examination, and has actually been denied by almost every economist who has actually researched the question in depth—including many free traders and ranging from Paul Krugman on the left to Milton Friedman on the right. (I debunked this myth at length in this article.)

There is, in fact, a basic unresolved paradox at the bottom of the very concept of trade war. If, as free traders insist, free trade is beneficial whether or not one’s trading partners reciprocate, then why would any rational nation start one, no matter how provoked? Wouldn’t they just keep lapping up the benefits of one-way free trade, if it’s so good for them?

Furthermore, if the moneymen in Beijing, Tokyo, Berlin, and the other nations currently running trade surpluses against the U.S. start to ponder exaggerated retaliation against the U.S., they will soon discover the advantage is with us, not them. Because they are the ones with the trade surpluses to lose, not us.  What exactly does the U.S. have to lose in a trade war? The only way a deficit nation can “lose” a trade war is by having its trade balance get even worse. Given that the U.S. trade balance is already outlandish, it is hard to see how this could happen.

Supposedly, China could suddenly stop buying our Treasury Debt.

Indeed they could, but this would immediately reduce the value of the $1.15 trillion or so they already hold.  Furthermore, this would depress the value of the dollar—exactly the opposite of their currency manipulation strategy.

Then there is the awkward problem of what China would do with all the money it would get by selling off its dollars. There just aren’t that many good alternatives for parking that much money. Japan doesn’t want its currency used as an international reserve currency, and the Euro has huge problems. Assets like gold and minor currencies are volatile or in limited supply. Others, like real estate or corporate stocks, are still denominated in those pesky dollars and euros.

We are still a nuclear power, so at the end of the day, China cannot force us to do anything that we don’t want to. We could—a grossly irresponsible but not impossible hypothetical—repudiate our debt to them (or stop paying the interest) as the ultimate countermove.

More plausibly, we might simply restore the tax on the interest on foreign-held bonds that was repealed in 1984 thanks to Treasury Secretary Donald Regan.  We have lots of little cards like that up our sleeve.

So an understanding will, most likely, be reached.  A deal (one of Mr. Trump’s favorite words!) will be struck. I think Mr. Trump understands this better than anyone else.  That’s one of the things I like about him.

The reality is that the United States is already in a trade war with China. Kowtowing to China today is economic appeasement, with the same result as political appeasement in the 1930s: a few more years of relative quiet with a bigger explosion at the end.

At some point, America’s ability to run gigantic deficits must end, due to a prolonged slide or sudden crash in the value of the dollar.  The longer we wait, the greater the likelihood that it will come as a sudden and destabilizing shock, rather than a managed, more gradual adjustment.

This issue is bigger than China alone. How America deals with China will set the precedent, and establish or destroy America’s credibility, for dealing with a long list of other nations.

Believe me, they’re watching Trump now in Tokyo, Berlin, and Brussels.

The following article by Josh Harkinson appeared on the Mother Jones site here. Campbell Fittings, Penn United and Kason Industries are all members of the Coalition for a Prosperous America.

Campbell Fittings, a maker of precision screws and couplings used by petrochemical, mining, and construction companies, is nothing if not efficient. A typical employee in its factory in Boyertown, Pennsylvania, supervises two machines that each stamp out a new screw every 12 seconds. Yet its Chinese competitors sell nearly identical screws in the US for at least 40 percent less—well below what Campbell pays for raw materials. It’s no secret why: For years, the Chinese government has kept the yuan trading at 40 percent below its true market value, making its exports that much cheaper. “I can fight companies,” says Joe McGlynn, Campbell Fittings’ vice president. “I can’t fight countries.”

The company’s 75 workers aren’t the only ones getting (ahem) screwed over by what is effectively a huge subsidy for China’s manufacturing sector. “Chinese currency manipulation is the single biggest reason why so many Americans are still jobless,” says Peter Morici, a University of Maryland business professor and former chief economist with the US International Trade Commission. Eliminating the practice, economists estimate, would boost American exports by $125 billion a year and create 900,000 US jobs. “The Chinese have figured out that this advantages them even though it’s unfair,” Morici says. “And they are not going to change it until we take action.”

But attempts to address the problem have hit a Great Wall here at home. Senior House Republicans are putting the brakes on the Currency Reform for Fair Trade Act of 2011, a bill that would make China’s currency practices punishable under US law. They oppose it, says an inside source familiar with the negotiations, because “US multinationals with operations in China really don’t like it.” These mega-companies fear that China will retaliate by crimping access to its markets—not to mention that their manufacturing operations in China will make less money selling goods back to American consumers without the subsidy.

“I think it is fair to say that Wall Street firms seeking financial business in China, and multinationals like Caterpillar with big manufacturing activities in China, have lobbied both Republican and Democratic administrations against action,” Morici says. “Goldman Sachs’ and Caterpillar’s interests are more aligned with China than with the US economy.”

Nowhere is China’s political stranglehold more evident than within the ranks of the 11,000-member National Association of Manufacturers, America’s most powerful trade group for factory owners. On the surface, NAM acts as though currency manipulation is one of its top concerns. Its website claims that NAM has “long pressed for China to allow the yuan to appreciate.” The high value of the dollar relative to currencies such as the yuan “simply prices US exports out of the market,” reads a 2010 NAM white paper. “NAM members, especially smaller manufacturers, have made it clear that the number-one factor affecting their exports is the value of the dollar.”

Yet well-placed members say the trade group has been unwilling to take action. It refuses, for example, to endorse the above-mentioned bill, a version of which passed the House last year with strong bipartisan support, but was derailed by Senate Republicans. NAM’s professed concern about currency manipulation “is just lip service,” says McGlynn, an active member. “They are doing it for appeasement.” (NAM did not return repeated calls for this story.)

Supporters of the currency bill, sponsored by Rep. Sander Levin (D-Mich.), say it’s far from draconian. It simply affirms the ability of the Department of Commerce to consider unfair currency manipulation as a factor in trade complaints—a power it already has but has so far declined to use. Far from being a shock to the global economy, the bill would let regulators gradually ratchet up duties against unfairly subsidized Chinese goods. If NAM threw its full weight behind the bill, says my inside source, “It would pass in a heartbeat.”

Not too many years ago, before it became standard practice for American businesses to outsource manufacturing to China, NAM very nearly went to bat on the currency issue. In 2003, its staff assembled several dozen NAM members into a group known as the Coalition for a Sound Dollar (later renamed the Fair Currency Alliance) and drew up a currency-manipulation complaint that it planned to file, in conjunction with the AFL-CIO, at the Office of the US Trade Representative. The effort had the backing of NAM’s then-president Jerry Jasinowski, but in 2004, before the complaint was finalized, Jasinowski was replaced by John Engler, the former Republican governor of Michigan. The trade group backpedaled on its support, so the currency alliance split with NAM and filed the complaint on its own. The Bush administration immediately rejected it, arguing that it “would hamper, rather than advance, Administration efforts to address Chinese currency valuation policies.” (Translation: It didn’t want to piss off China.)

In the ensuing months, the schism within NAM widened. A group of about 50 small and mid-size NAM members known as the Domestic Manufacturing Group began lobbying Congress to pass the Chinese Currency Act of 2005, an anti-manipulation bill then under consideration. When Engler learned of the DMG’s lobbying, he told the group it could not use NAM’s offices or claim any public affiliation with the trade association.

The DMG members kept agitating. Many joined NAM’s International Economic Policy Committee, which in 2006 voted to recommend that the trade group support the Chinese Currency Act. But their victory was short lived. A few months later, in a move that has never been widely reported, NAM’s executive committee, a body stacked with board members representing multinational corporations, took the unusual step of overruling the recommendation.

“A lot of the people who are powerful leaders within NAM are benefiting from the currency subsidy in China,” says DMG founder Dave Frengel, director of government affairs for the Pennsylvania-based tooling company Penn United. “They manufacture there cheaper with all the subsidies and then keep our trade-enforcement laws at bay so that they can import those unfairly cheap manufactured goods back into the US market.”

McGlynn, who is also a DMG member, goes so far as to say that NAM “is being run like it’s the International Association of Manufacturers.” Indeed, 19 of the 29 members of its board’s executive committee (about 65 percent) represent companies with large overseas production capacities—at least 13 have more employees abroad than in the United States. (Pfizer, which has a seat on the committee, won’t disclose where its employees are based.) Since only sitting board members get to elect new board members, it’s little surprise that NAM’s leadership doesn’t reflect its membership—reportedly two-thirds small and mid-size domestic manufacturers.

“A lot of people have different hot-button issues, and NAM is trying to address all of them at the same time,” says Drew Greenblatt, a Baltimore-based manufacturer of steel goods who sits on the executive committee. “It’s a challenge.” Greenblatt adds that he strongly supports federal action against Chinese currency manipulation, but says NAM has focused instead on opposing health care reform, higher taxes, and card check legislation, “things where there’s broad-based support.”

Fed up with NAM’s doublespeak on the currency issue, some small manufacturers have quit the group in favor of more sympathetic organizations such as the Fair Currency Coalition; the Alliance for American Manufacturing; the Tooling, Manufacturing, and Technologies Association; and the 2,000-member US Business and Industry Council. “By me being a NAM member, I was basically preaching against myself,” says Burl Finkelstein, owner of Georgia-based Kason Industries, a 250-employee maker of kitchen supplies that left NAM in 2006 because of its currency stance. While it’s hard to say how many NAM members have dropped out for that reason, the group is clearly shrinking. In 2004, press reports pegged its membership at 13,000, which is 2,000 more than it claims today. In 2009, NAM froze salaries and eliminated 17 staff positions.

In any case, it’s a bit of a mystery why more manufacturers aren’t calling on Congress to deal with the currency disparity. “We’re all too busy trying to run our businesses,” offers McGlynn of Campbell Fittings. “And that’s why we join organizations like NAM: We hope that they represent our interests. But when you scratch away at the surface, you find that it’s not what it appears to be.”

The following was written by Peter Morici, a professor at the Smith School of Business, University of Maryland School.

Thursday, analysts expect the Commerce Department to report the deficit on international trade in goods and services was $41.0 billion in January, up from $40.6 billion in December and $27 billion in mid 2009, when the recovery began.

This rising deficit subtracts from demand for U.S. goods and services, just as stimulus spending and additional temporary tax cuts add to it. Consequently, a rising deficit slows economic recovery and jobs creation, and the Obama Administration and Republican leadership in Congress have offered little to address it.

Rising oil prices and imports from China are driving the trade deficit, and these are major barriers to creating enough jobs to pull unemployment down to 6 percent over the next several years.

Jobs Creation

The economy added 192,000 jobs in February, and that was encouraging, after it gained only 63,000 in January; however, that is hardly enough. The economy must add 360,000 jobs per month over the next 36 months to bring unemployment down to 6 percent.

Americans have returned to the malls and new car showrooms but too many dollars go abroad to purchase imports and do not return to buy U.S. exports. This leaves too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

Simply, current policies are not creating conditions for 5 percent GDP growth that could be achieved to bring unemployment down to acceptable levels.

Over the last three months, the private sector has added 152,000 jobs per month, but many of those have been in government subsidized health care and social services, and temporary business services. Netting those out, core private sector jobs have increased only 110,000 per month-that comes to 25 permanent, non-government subsidized jobs per county for more than 5000 job seekers per county.

Early in a recovery, temporary jobs appear first, but 20 months into the expansion, permanent, non-government subsidized jobs creation should be much stronger.

Economic Growth

Commerce Department preliminary estimates indicate GDP growth was only 2.8 percent, significantly disappointing Wall Street economists.

Consumer spending, business technology and auto sales all added strongly to demand and growth, and exports actually outpaced imports for the first time in a year. Pessimism, inspired by rising gasoline prices, health care reforms that drive up insurance costs, and import competition, caused businesses to run down inventories rather than add new capacity and employees.

Fourth quarter exports got a boost from a weaker dollar against the euro earlier in 2010-the export effect of a weaker dollar occurs with a lag of several months. In 2011, this situation is likely to reverse, owing in particular to Europe’s continuing sovereign debt woes and instability in North Africa and the Middle East. The trade deficit will grow, as oil import costs and consumer goods from China overwhelm further progress in U.S. export growth.

Policies limiting development of conventional oil and gas are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, limits on conventional energy development and excessive optimism about alternative energy technologies are making the United States even more dependent on imported oil and more indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40 percent. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among U.S. multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports-about 35 percent. That would neutralize China’s currency subsidies that steal U.S. factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense.

The following article appeared in the Inside US-China Trade publication on March 9, 2011.

The Coalition for a Prosperous America, which represents import-sensitive U.S. manufacturers, agriculture and labor, is hosting a fly-in of its members this week to press members of Congress to sponsor the House currency bill introduced last month by Ways and Means Ranking Member Sander Levin (D-MI), among other goals.

According to CPA Chief Executive Officer Michael Stumo, coalition members on March 9-10 will visit “about 25 percent” of House and Senate offices.

“Our message is that we have to produce more of what we consume, we have to neutralize the State-managed capitalism that we are being forced to unfairly compete with, and we have to balance trade in order to economically recover, because the trade deficit is a drag on GDP growth, wealth creation and job creation,” Stumo said in a March 8 interview.

U.S. trade policy “needs to acknowledge and neutralize state-managed capitalism” because the current “free trade regime does not match well and is unsuccessful” in competing against it, he added. As such, the coalition message to House and Senate members will be that “one of the first things we need to do is neutralize currency manipulation” being
engaged in by China, Korea, Japan and Singapore, among others.

Other CPA sources said new House members will be particularly targeted in the outreach. “We think the new Republicans, with their pro-America stance, should be receptive to a message of a national trade and economic strategy that’s based on being able to grow net exports,” Stumo said.

CPA will make the case to House members to support Levin’s H.R. 639, the Currency Reform for Fair Trade Act,which now has 107 House sponsors from both sides of the aisle. It is basically the same bill that encourages the Commerce Dept. to offset undervalued currencies as countervailable subsidies in trade remedy cases.

House Ways and Means Committee Chairman Dave Camp (R-MI) has said that China currency legislation is not a priority for him in this Congress, so supporters are focused on increasing the number of cosponsors of Levin’s bill to such an extent that it becomes politically difficult to avoid a vote.

In the Senate, Democratic leaders have made legislation targeting China’s undervalued currency part of their 2011 agenda of economic initiatives meant to generate jobs and keep the U.S. competitive. But Finance Committee Chairman Max Baucus (D-MT) seems to favor focusing on a range of Chinese trade barriers instead of largely on currency manipulation, according to informed sources.

He is expected to hold a number of hearings on China trade problems such as indigenous innovation, intellectual property rights violations and other market access problems, they said.

Another CPA source said members would be flying in from eight to ten states, including New York, Pennsylvania, Ohio, Illinois, Michigan and Colorado. But Stumo said members would represent an even broader array of states, “from coast to coast and North to South.”
Among those on the Coalition’s board are manufacturing co-chair Brian O’Shaughnessy of New York-based Revere Copper Products; agriculture co-chair Joe Logan of the Ohio Farmers Union; and labor co-chair Bob Baugh of the AFLCIO Industrial Union Council. Baugh and fellow board member Charles Bloom are also part of the leadership of the Fair
Currency Coalition, whose principal goal is passage of currency legislation.

CPA advisory board members include economist and author Pat Choate; ex-IBM executive Ralph Gomory, now president of the Sloan Foundation; and U.S.-China Economic and Security Review Commissioner Patrick Mulloy, among others.

Separately, U.S. textile companies are also visiting Washington this week and will hold a lobby day on the Hill on March 9 — but their focus will be on opposing passage of the U.S. trade pact with Korea. While visiting about 50 House offices, said an industry source, one point they will stress is that the Korea pact as negotiated will facilitate the transhipment
of Chinese-origin textile and apparel into the U.S. via Korea.