Tag Archive | "tariffs"

Real Conservatives Oppose NAFTA


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The following article by Daniel Sayani appeared in the New American here.

One of the most important, but widely unknown bills currently proposed in Congress is legislation that would end American participation in the North American Free Trade Agreement (NAFTA). The bill, H.R. 4759, calls for America’s withdrawal from the free trade agreement, and is sponsored by several Democrats and a small cadre of Republicans, including Rep. Ron Paul (R-Texas) and Rep. Walter B. Jones (R- N.C.).

Introduced back in February, the legislation seeks to immediately terminate American participation in NAFTA. Rep. Mike McIntyre (D-N.C., left), the bill’s chief sponsor, says that “NAFTA has done way too much damage, and we need to repeal it! NAFTA has cost too many jobs, eroded our industrial base, and decimated towns and communities. Enough is enough — we need to focus on creating jobs right here in the United States — not in foreign countries!” McIntyre also says that NAFTA and similar trade agreements have resulted in a 29-percent decline in U.S. manufacturing employment since 1993, discouraging investments in U.S. manufacturing facilities while accelerating the erosion of American industry, and he is supporting a “Make it in America” plan that will help bring back our manufacturing base and create jobs right here at home.

Opposition to free trade agreements, while a minority view in today’s internationalist-oriented Republican Party, is in all actuality a robust and important part of the history of the GOP. Robert Lighthizer, a trade representative in the Reagan administration, rightfully argues that free trade agreements were a long-standing policy of leftists, including Ted Kennedy, Bill Clinton (who led the push for America’s entry into NAFTA in 1993), and Barack Obama. Lighthizer also says that those considered to be America’s leading conservatives, including former Senator Jesse Helms (R-.N.C.), former Senator Robert Taft (R-Ohio), Alexander Hamilton (one of our nation’s Founding Fathers), and even former President Theodore Roosevelt, who wrote that “pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fiber.” In fact, the first vocal Republican in support of free trade was Dwight Eisenhower, who was vociferously opposed by conservatives, including supporters of Robert Taft and the then-nascent John Birch Society (Robert Welch‘s damning investigation, The Politician, discussed much of Eisenhower‘s leftist tendencies).

Lighthizer also rebukes those free-traders who choose to identify themselves as Reagan Republicans. While Reagan may have chosen to follow certain free-trade policies at times, his record reflects a far more nuanced position on the issue. He arranged for voluntary restraint agreements to limit imports of automobiles and steel. He provided temporary import relief for Harley-Davidson. He limited imports of sugar and textiles. His administration pushed for the “Plaza Accord” of 1985, an agreement that made Japanese imports more expensive by raising the value of the yen.

Yet, Reagan was certainly not the first Republican President to espouse “protectionist” sensibilities. Calvin Coolidge, who was one of the most constitutionalist Presidents in American history, clearly understood the need to defend American industry by blocking free trade policies. In his Second Annual Message of December 3, 1924, Coolidge famously declared that “the protective tariff enables our people to live according to a better standard and receive a better rate of compensation than any people, any time, anywhere on earth, ever enjoyed.” In a similar vein, the Smoot-Hawley Tariff Act of 1930 is yet another example of Republican integrity on the issue of free trade; the tariff sought to protect American agriculture and industry, and in spite of criticisms that it worsened the effects of the Great Depression, monetarists such as Milton Friedman argue that this Americanist economic measure actually helped mitigate the effects of the Depression.

In recent times, however, both Democrats and Republicans have worked to deliver more failed free trade agreements, with few exceptions (especially on the Republican side). While the last Bush administration negotiated several bilateral trade agreements, the Republican Congress notably blocked several free trade policies. In March 2002, for example, Bush proudly signed “temporary safeguards” that imposed tariffs of eight percent to 30 percent on most steel imports for three years. In May 2002, Bush also signed legislation increasing agricultural subsidies by as much as 80 percent, leading economists to label Bush an “anti-globalizer.” Bush also supported steel tariffs, as opposed to Clinton, who opposed steel and other protective tariffs. In mid-November 2006, 60 House Republicans also helped block a free trade deal with Vietnam, supplying the margin of defeat and embarrassing the President on the eve of a state visit. And, in the 2008 Republican presidential debates, in contrast to the internationalism of John McCain and Rudy Giuliani, Duncan Hunter and Tom Tancredo both expressed their strong opposition to NAFTA, CAFTA, and other free trade agreements, with Rep. Hunter correctly attributing to NAFTA the surge in illegal immigration from Mexico.

While the effort to repeal NAFTA clearly has strong historical and ideological precedent within the Republican Party (evident also in the fact that 43 House Republicans voted against NAFTA in 1993), it is unclear whether the current Republican Congress will support H.R. 4759, despite the fact that many Tea Partiers bemoan the consequences of free trade. In a recent poll put out by the Mellman Group and the Alliance for American Manufacturing, 74 percent of self-described Tea Party supporters would support a “national manufacturing strategy to make sure that economic, tax, labor, and trade policies in this country work together to help support manufacturing in the United States.” Likewise, 56 percent of self-described Tea Party supporters “favor a tariff on products imported from other countries that are cheaper because they came from a country that does not have to comply with any climate change regulations in the country where the products were made.” These sentiments are inspired by both the ill-effects of free trade on American manufacturing and the desire to preserve national sovereignty, which is a key reason to defeat NAFTA, since it is under the pretext of this free-trade agreement that plans for the North American Union and the NAFTA superhighway are secretly being moved forward.

NAFTA also severely compromises America’s national defense capabilities. Opponents of NAFTA, including former Rep. Gene Taylor (D-Miss.) say that when the Defense Department needed to rapidly procure Mine Resistant Ambush Protected (MRAP) vehicles in Iraq in 2007, the Pentagon was forced to purchase 17,700 of them, and because of diminished manufacturing capacity, it took nine different contractors working together to build all those vehicles. “The decline in our manufacturing base left the contractors without a trained workforce to build these vehicles. This led to delays and choke points in production and overall delivery of the MRAPs,” he said. “This was a logistical nightmare.”

He continued, “Without a sufficient industrial base capable of mass production, we were forced to spend more tax dollars because each contractor had to train workers and re-invent the parts for production. In some cases, we were dependent on foreign countries.”

The GOP would be wise to return to its roots as an anti-free trade agreement, economically-nationalistic party that upholds national sovereignty, prosperity, national defense capabilities, and enhanced opportunity for the American middle class, and with a burgeoning protectionist stream within the Tea Party movement and an out-of-control immigration problem rallying the conservative base, now is the time to repeal NAFTA.

 

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China Appeals Against WTO Ruling On Tire Exports To US


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The following article appeared in the Daily Media Report of the American Iron and Steel Institute on May 25, 2011.

GENEVA — China has appealed against the World Trade Organization’s rejection of its complaint over punitive US tariffs on Chinese tire imports, the trade body said Tuesday.

“On 24 May 2011, China notified the Dispute Settlement Body of its decision to appeal the panel report in dispute case DS399, ‘US — Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tires from China’,” the WTO said on its website.

Beijing lost its case against Washington in December, when the WTO cleared the United States for invoking a safeguard clause in 2009 in the Asian giant’s WTO accession agreement to impose punitive duties on Chinese tires over three years.

WTO arbitrators ruled that China “failed to establish prima facie that the tires measure exceeds the period of time necessary to prevent or remedy the market disruption.”

The tire dispute ignited the first trade spat of US President Barack Obama’s presidency with the Asian giant, with warnings that a rise in Chinese-made tires had cost more than 5,000 US jobs.

The United States can file a counter-appeal within 10 days.

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From China, an end run around U.S. tariffs


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The following article by Andrew Higgins appeared in the Washington Post here.

DONGGUAN, China — China’s export juggernaut is not unstoppable: Just ask Lawrence Yen, president of Woodworth Wooden Industries. His factory here in southern China used to ship 400 containers of bedroom furniture to the United States each month. It now sends 60.

That is just what Yen’s struggling American competitors were hoping would happen when, back in January 2005, the Commerce Department slapped import tariffs on Chinese-made beds, nightstands and related wares.

What happened next, though, was not part of the plan: Yen opened a factory in Vietnam and began exporting to the United States from there. Others did the same. He is now building a big plant in Indonesia and hopes to sell even more to the United States.

America’s own furniture industry, said Yen, “can never compete with Asia.”

The result: Imports now account for about 70 percent of the U.S. market for beds and similar items, up from 58 percent before Washington intervened to try and protect domestic manufacturers from Chinese “dumping,” or the export of goods at unfairly low prices.

The United States and China have exchanged accusations of dumping for years and imposed tit-for-tat duties. All along, though, China has generally come out on top: Its trade surplus with the United States rose to $273 billion in 2010, according to U.S. Census Bureau figures, more than three times the level of a decade earlier.

The trade concerns have led to growing calls for tougher action from Washington to stem the tide and protect U.S. jobs. But do tariffs work? In the case of bedroom furniture, they’ve clearly helped slow China’s export machine. In 2004, before tariffs went into force, China exported $1.2 billion worth of beds and such to the United States. The figure last year was just $691 million.

Over the same period, however, imports of the same goods from Vietnam — where wages and other costs are even lower than in China — have surged, rising from $151 million to $931 million. The loss of jobs in America, meanwhile, only accelerated. The number of Americans now employed making bedroom furniture is less than half what it was when the tariffs began.

Furniture workers in Dongguan, a throbbing industrial city near Hong Kong, earn about $170 a month, compared with less than $80 in Vietnam. Their American counterparts make about $12 an hour.
“This whole saga is a perfect example of good intentions gone completely haywire,” said Keith Koenig, president of City Furniture, a big Florida-based retailer and critic of the tariffs. Like many retailers, he relies on imported goods, which are cheaper than those made in America.

The only Americans getting more work as a result of the tariffs are Washington lawyers, who have been hired by both U.S. and Chinese companies. Their work includes haggling each year over private “settlement” payments that Chinese manufacturers denounce as a “protection racket.”

Fearful of having their tariff rates jacked up, many Chinese furniture makers pay cash to their American competitors, who have the right to ask the Commerce Department to review the duties of individual companies. Those who cough up get dropped from the review list.

David Cai, manager of the Dongguan Huada Furniture Co., likens the process to a shakedown: “It is like the mafia: You buy protection.” He, too, has slashed bedroom furniture exports to the United States.

How much gets paid in “settlements” each year depends on negotiations with Washington lawyer Joseph Dorn, who represents American furniture makers who first petitioned for the anti-dumping tariffs. Dorn said, “It is wrong for Chinese companies to criticize” the practice, as they “came up with the idea” and “voluntarily agreed” to pay.

The ruin caused to U.S. furniture manufacturing by a tsunami of Chinese goods is beyond dispute. Since the 1990s, hundreds of factories in North Carolina, Virginia and other furniture centers have closed as production moved offshore, often to Dongguan. In 1992, U.S. furniture imports from China totaled $129 million, according to Census Bureau data. By 2003, they had ballooned to $5.28 billion — an increase of nearly 4,000 percent. That was when a small group of American manufacturers banded together to try and stop at least some of the rot.

They formed the American Furniture Manufacturers Committee for Legal Trade and, warning of dire consequences to “our way of life, our culture and the competitiveness of American in the world,” begged Washington to throw them a lifeline. Along with labor unions, they filed a petition that accused their Chinese rivals of “dumping” bedroom furniture on the U.S. market.

After lengthy debate, the Commerce Department ruled that China had sold beds and related items “at less than fair value” and “materially injured” American producers. To level the playing field, it imposed duties on Chinese exporters, a modest 7 percent for most but much higher for a few companies.

In Dongguan, furniture makers held a meeting in a hotel to decide how to respond. Most were from Taiwan and, unlike local Chinese businessmen, didn’t have close ties to the Chinese state. Furious at being accused of benefiting unfairly from China’s Communist Party-dominated system, they set up a fund to support lobbying efforts in Washington and started hiring lawyers.

Yen had another idea. “I told them I would set up a factory in Vietnam,” he said.

That, he explained, would shield his business not only from U.S. tariffs but also from the rising costs of manufacturing in China, where wages, electricity and other costs have all gone up steadily.

Today, Yen still makes furniture not covered by tariffs in Dongguan but has moved nearly all his bedroom production out of China. His Dongguan factory has cut its workforce from 3,000 to about 1,200. His factory outside Ho Chi Minh City, formerly Saigon, which didn’t exist when the Commerce Department imposed duties, now employs 2,800 Vietnamese.

Supporters of the tariffs — extended in December for a further five years — acknowledged at hearings by the U.S. International Trade Commission last fall that jobs haven’t returned to America but argued that the domestic furniture industry would be worse off without the anti-dumping campaign.

“There would be nobody here today if we had not done this,” said John Bassett, chairman of Vaughan-Bassett, a Virginia company that has been in the vanguard of the drive to slow imports from China. “We turned a stampede. No, we didn’t bring it to a screeching halt, but we turned it, and we slowed it down.”

The stampede from Vietnam, meanwhile, has only gathered pace. Thanks largely to transplants from Dongguan and elsewhere, Vietnam has now replaced China as the biggest source of wooden bedroom furniture sold in America.

Travis Belle, an American buyer who moved from Virginia to Dongguan at the height of China’s now fading furniture export boom, scoffed at claims that the anti-dumping cause has helped America’s own industry. “The only thing that has changed is where you have your dinner at night,” he said. “Before it was Dongguan, but now it is Ho Chi Minh City.”

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When Factories Vanish, So Can Innovators


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The following is an article by Louis Uchitelle that appeared in the New York Times here.

SPOONS and forks, the metal flatware that everyone uses, are no longer made in the United States. The last factory in an industry stretching back to colonial times closed eight months ago in Sherrill, N.Y., a small community in the foothills of the Adirondacks, and 80 employees lost their jobs.

No one paid much attention beyond the people in the town itself, even though the closing represented the demise of an industry that had flourished in this country for generations. Paul Revere, in fact, was a flatware craftsman.

Sherrill Manufacturing, which owned the factory, said in a statement that production had succumbed to less expensive Chinese imports. Robert A. Comis, the Sherrill city manager, said, “It is too common a situation.”

Losing an industry or ceasing to manufacture a particular product, in this case stainless steel flatware, has indeed become a fairly frequent event. Just in the last few years, the last sardine cannery, in Maine, closed its doors. Stainless steel rebars, the sturdy rods that reinforce concrete in all kinds of construction, are now no longer made in America. Neither are vending machines or incandescent light bulbs or cellphones or laptop computers.

Less noticeably, American manufacturers are importing more of the components that go into their products. The imported portion has risen to more than 25 percent from 17 percent in 1997, according to Susan Houseman, a senior economist at the W.E. Upjohn Institute in Kalamazoo, Mich. The Boeing Company, to consider one striking example, once bought all of its components from American suppliers, or made them in its factories here. Now the wings of several of its airliners are manufactured by Japanese subcontractors and shipped across the Pacific in giant cargo planes.

Foreign-made parts might also be infiltrating the sleek business jets that the Gulfstream Aerospace Corporation makes at its United States factories. Joseph T. Lombardo, Gulfstream’s president, says he isn’t sure, although Gulfstream buys components exclusively from American suppliers. “What I don’t know,” he says, “is how many of the parts in those components were imported by our American suppliers.”

It is certainly more than we measure, Ms. Houseman says. An accurate count would reduce manufacturing’s share of the gross domestic product, or total national output, to less than the 11.2 percent that the Bureau of Economic Analysis has reported through 2009, the latest figure available.

That 11.2 percent would be closer to 10.5 percent, if all of the imported components were counted as imported instead of domestically made. Even the 11.2 percent figure is down sharply from the 14.2 percent share of just a decade earlier, and the nearly 30 percent of the heyday 1950s, when almost every product bought by Americans was also made here.

Concern is increasing that this decline has gone too far. “I think there is a growing recognition that a diminished manufacturing sector will undermine our economy,” says Mark Zandi, chief economist for Moody’s Analytics.

How did the nation get into this situation? It gambled, in effect, that by importing more from foreign suppliers and from American companies that had set up shop abroad, consumer prices for manufactured products would fall, without any sacrifice in product quality. Low-wage workers abroad would make that happen.

American manufacturers, on the other hand, would be the world’s best innovators, developing sophisticated new products here at home and producing them, at least initially, in their domestic factories.

The first part of the arrangement worked very well. Consumer prices did fall as imports flooded in — from foreign manufacturers, of course, but also from factories newly opened abroad by American multinationals. The flood was so great that President Ronald Reagan in the 1980s placed temporary quotas on Japanese autos and motorcycles, and tariffs on selected electronic devices.

The second part of the arrangement, however, has been more problematic. As it turns out, the United States is not the only path-breaker. The Toyota Prius, the first hybrid, shines as an example of Japanese ingenuity, and more than a decade after that car was developed it is still being exported from Japanese factories, marrying innovation to production and jobs.

The iPad and the iPhone, developed by Apple in the United States, are spectacular technologies. But the devices themselves are made in Asia, not America. And as time passes, the people who make the iPad and the iPhone day after day — the engineers and factory workers in Asia — may produce the next innovations. Or so many experts are coming to believe, including Ms. Houseman.

“The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff that we innovate,” she says. “I think not; the two can’t be separated.”

THE loss of manufacturing capacity, measured in lost workers, is startling. From the high point in the summer of 1979, through last month, employment in manufacturing has fallen by 8.1 million, to 11.6 million, with most of the drop in just the last decade. While consumers have benefited from lower prices, made possible by unrestricted imports, on the other side of the ledger are tens of billion of dollars in lost manufacturing wages.

Something else is gone, too. “We had a storehouse of knowledge and skill built up in these workers and we can’t use it now,” says James Jordan, president of the Interstate Maglev Project, promoting a high-speed rail technology that uses special magnets to levitate and propel trains. Maglev was invented in the United States, but equipment based on that technology is manufactured and used today in Japan.

Mr. Jordan argues that as manufacturing’s presence — and status — shrinks in America, the odds of a Henry Ford or a Thomas Edison or a Steve Jobs appearing in the next generation are reduced. Certainly people like Mark Zuckerberg of Facebook are inventors, though not of physical products.

“Young people stop thinking about making things,” Mr. Jordan says. “It is no longer in their heads. They have a different mental orientation.”

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The founders were not free traders


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The following piece by Adam Sparks appeared at the WorldNetDaily here. Mr. Sparks, the GOP congressional against Nancy Pelosi in 2010, is a San Francisco writer.

Democrats want to punish businesses for moving overseas while the Republicans want to give those same businesses a red carpet for their trip there. Neither plan will help revive our ailing economy.

Most economists say we’ll never have an economy like we did 20 or 30 years ago. The horses have already left the barn. Those jobs are gone and are not coming back. The promise of high tech and green tech are chimeras. Ipods are made in China, and green tech companies, even those that are heavily subsidized by our taxes, are not creating jobs here. The heartland is slowly dying.

After our manufacturers left over the past three decades, we had the promise of service jobs. Those jobs left, and we then had the promise of information jobs; they’re gone, too. And there is no solution from either party as to just how to revive the economy. Tax breaks, while laudable, just won’t work to get our ailing economy off life support. Green jobs? Even with the billions in tax subsidies are still failing. We have no new industries creating jobs here, and tax breaks can not prevent the stampede of the few remaining jobs from getting outsourced. Americans instinctively know that free trade hurts jobs. A recent poll shows 69 percent of Americans oppose free trade agreements.

Are soaring trade deficits inevitable for the United States? Find out how to reverse the trend in “Trading Away Our Future: How to fix our Government-driven Trade Deficit and Faulty Tax System Before it’s too Late”

Last year author Ian Fletcher (“Free Trade Doesn’t Work”) began a new debate in conservative circles. Fletcher offers a stunning critique of free trade. Free trade has been a mantra for conservatives and to a lesser extent every president since FDR. Fletcher painstakingly analyzes and discusses, from every angle and argument, the debilitating effects of free trade on our growing trade debt, deficits, job losses and economic malaise. He traces our modern free-trade policies to an unlikely source, Franklin Roosevelt’s secretary of state, Cordell Hull. These policies have continued with every successive president.

Fletcher successfully and persuasively connects the dots to show the side effects of free trade, asserting it is the culprit responsible for our economic decline as the world’s economic powerhouse. He makes an intellectually eloquent case for targeted tariffs. Free traders have argued that of course we will lose manufacturing to overseas cheap-labor nations, but we will grow in the intellectual professions. Fletcher counters, “According to the Bureau of Labor Statistics the U.S. lost over 54,000 engineer and architect jobs between 2000 and 2008.” Those jobs are getting outsourced, too. Shall we do nothing in response?

Conservatives are originalists when it comes to their understanding of the Constitution, carefully trying to understand the intent of the founders. However, and for whatever reason, no such scrutiny exists when it comes to the founders and the economy. Fletcher shows how the Founding Fathers were not free traders. He recounts how the second bill signed by President George Washington upon our founding was a bill establishing tariffs. Moreover, he describes that Alexander Hamilton, our first treasury secretary, was a fierce defender of “duties,” tariffs on imports. The nation’s primary source of revenue for 150 years since its founding was tariffs. Why have cheap imports compete with American companies, the founders reasoned. After all, they understood that we had the natural resources, the technology, the labor force and one of the largest consumer markets. Those basic conditions are essentially unchanged today.

We are shipping our natural resources overseas. We ship our lumber and buy it back as paper and furniture. According to Fletcher, we are becoming an economically dependent 19th-century colony to those industrial nations that have been both producing and buying our debt.

Conservatives advocate for a strong immigration policy that enforces existing laws and closes our borders to illegal aliens who both usurp our jobs and cost us dearly through their use of our social services. Fletcher argues that our trade imbalance is a far greater and serious economic cancer and that it is more insidious as it grows unnoticed, never even discussed. To Fletcher, our increasing foreign debt is a ticking time bomb. When will the creditors stop taking our IOUs? Then what? This is what our nation should be debating. Both sides of the aisle need to start thinking outside the box, and Fletcher’s work is a rallying cry for our nation to reconsider the original and successful economic policies of its founders.

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China Expresses `Concern’ About WTO Ruling On U.S. Tire Tariffs


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The following appeared in Bloomberg on December 14, 2o1o.

China said it’s “concerned about negative impact” from a World Trade Organization decision to uphold U.S. tariffs on Chinese tire imports.

China may appeal the decision “at a proper time”, the Ministry of Commerce said in a statement on its website. The charges are “protectionist measures aimed to transfer domestic political pressure, and violate WTO rules,” the ministry said.

WTO judges yesterday rejected China’s complaints that U.S. tariffs on Chinese car and light-truck tires violate global trade rules. U.S. President Barack Obama announced the three- year duties on $1.8 billion of tires from China in September 2009, aiming to protect U.S. producers and workers.

Trade complaints against China have surged since Obama became president, as have retaliatory steps by the Chinese government. China calls U.S. complaints against its exporters signs of protectionism, while the U.S. says it’s enforcing trade rules.

Giti Tire Corp., the largest Chinese tiremaker, rose 1.2 percent to close at 9.91 yuan at 3 p.m. in Shanghai. Giti said last year that the U.S. ruling would affect sales at its Fujian unit.

Giti Vice Chairman Enki Tan didn’t return calls seeking comment to his Shanghai office. Sun Yong, head of legal consulting at Double Coin Holdings Inc., said the company isn’t linked to the case as it makes tires only used in heavy trucks. Double Coin rose 1.3 percent. Calls to Aeolus Tyre Co.’s office in Henan province weren’t answered.

Deng Yali, secretary general at China Rubber Industry Association, declined to comment when reached by phone.

Two-Way Trade

The two countries, the world’s largest and second-largest economies with $366 billion in annual two-way trade in 2009, have clashed over access to each others’ markets for products including steel pipes, auto parts, poultry, movies and music. China ran up a $201 billion trade surplus with the U.S. in the first nine months of this year, more than the U.S. deficit with the next seven-largest trading partners combined, according to Commerce Department data.

That gap, together with the drop in U.S. manufacturing employment and the U.S. contention that the yuan, which has gained 2.4 percent since a two-year peg to the dollar ended on June 19, is undervalued, has made China a target for Congress and voter anger.

The complaints filed to Obama by the United Steelworkers union, which represents 15,000 employees at 13 tire plants in the U.S, was the largest so-called safeguard petition to protect U.S. producers from increased imports from China.

The union said Chinese tire exports to the U.S. tripled from 2001 to 2004 to 41 million and called for a cap on annual imports of 21 million.

China said it’s “concerned about negative impact” from a World Trade Organization decision to uphold U.S. tariffs on Chinese tire imports.

China may appeal the decision “at a proper time”, the Ministry of Commerce said in a statement on its website. The charges are “protectionist measures aimed to transfer domestic political pressure, and violate WTO rules,” the ministry said.

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The following article by Sewell Chan appeared in the New York Times here.

WASHINGTON — The World Trade Organization on Monday upheld the Obama administration’s decision last year to impose tariffs of up to 35 percent on tires from China, rejecting a complaint by Beijing that the punitive duties violated international agreements.

Reuters reported Tuesday that the Chinese Ministry of Commerce planned to appeal the W.T.O. ruling. The ministry said in a statement on its Web site that it was ‘‘deeply concerned’’ about negative consequences from the Monday ruling.      ‘‘The U.S. safeguard measures adopted toward Chinese tires are trade protectionism intended to shift domestic political pressure,’’ the statement said, according to Reuters. ‘‘They are not in line with W.T.O. rules and have been widely criticized.’’

Monday’s decision, which the United States trade representative called “a major victory,” came on the same day that differences on trade and currency between the world’s two largest economies were highlighted on two other fronts.

A federal agency found on Monday that ineffective enforcement by the Chinese authorities had contributed to widespread trademark, copyright and patent infringement in China.

Also on Monday, two senators, Sherrod Brown, Democrat of Ohio, and Olympia J. Snowe, Republican of Maine, proposed amending the tax bill in the Senate to include a measure that would let theUnited States impose higher duties on some Chinese imports in retaliation what most economists agree is an undervalued currency.

The developments came on the eve of two days of talks here between Wang Qishan, China’s vice premier for economic affairs, and the United States commerce secretary, Gary Locke, and the trade representative, Ron Kirk. Those talks are expected to include enforcement of intellectual property rights but not currency valuations, which in the United States is the purview of the Treasury Department.

Mr. Kirk applauded the ruling in the tire case, saying it “demonstrates that the Obama administration is strongly committed to using and defending our trade remedy laws to address harm to our workers and industries.”

The tariffs were a significant victory for the United Steelworkers, which had requested the tariffs, contending that a surge in imports had threatened domestic manufacturing.

“Since the tariffs have been in effect, U.S. domestic tire production has increased, tire producers have made new capital investments, and new jobs have been created for American tire workers,” the union’s president, Leo W. Gerard, said in a statement after the W.T.O. ruling was issued in Geneva.

The imposition of the tariffs was the first time that the United States invoked a special safeguard provision that was part of its agreement to support China’s entry into the W.T.O. in 2001.

Under that provision, United States companies or workers harmed by imports from China can ask the government for protection simply by demonstrating that American producers have suffered a “market disruption” or have experienced a surge in imports from China. In more traditional antidumping cases, the government would have to determine that a trading partner was competing unfairly or selling its products at less than their true cost.

The United States International Trade Commission, a quasi-judicial independent agency, had recommended that the Obama administration impose the tariffs for three years.

According to the steelworkers’ union, a surge in imports from China resulted in sharp declines in capacity, production, shipments and employment by American tire producers between 2004 and 2008.

Domestic tire capacity declined to 186.4 million tires, from 226.8 million, during that period, while production dropped to 160.3 million tires, from 218.4 million.

The United States already had a 4 percent tariff on Chinese tires. The new duties involved an additional tariff of 35 percent for one year, reduced to 30 percent in the second year and 25 percent in the third.

Three days after the administration announced its decision, the Chinese government brought a complaint to the W.T.O., calling the duties “a serious case of trade protectionism, which China resolutely opposes.”

A three-member W.T.O. panel found that the United States “did not fail to comply with its obligations” under world trade agreements. China can appeal the panel’s findings to the W.T.O.’s appellate body within 60 days.

The Obama administration said the tariffs had helped domestic producers increase production, preserve jobs and consider new investments. But the Tire Industry Association, a trade group that seeks to end the tariffs, has questioned the tariff’s effectiveness and called for it to be lifted.

On the matter of intellectual property, the trade commission released a report Monday finding that violations of intellectual property rights “remains a central concern in the U.S.-China bilateral trade relationship.”

The report noted that the federal Customs and Border Protection agency seized $204.7 million worth of counterfeit and pirated goods that originated in China in the 2009 fiscal year. Footwear made up nearly half of that amount, followed by handbags, wallets and backpacks; consumer electronics; and apparel.

The report also covered a move by China to promote “indigenous innovation” through policies and regulations that United States companies view as potentially discriminatory.

Senator Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee, which oversees trade, urged China to address the report’s findings during the bilateral talks scheduled for Tuesday and Wednesday here, part of a forum known as the United States-China Joint Commission on Commerce and Trade.

A second report, due in May, will try to quantify the impact of intellectual property violations and “indigenous innovation” policies on American jobs and workers.

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12.08.10: Fair Currency Coalition Fact of the Week


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Fair Currency Coalition FACT OF THE WEEK, December 8, 2010

Loophole in Korean FTA Underscores Urgent Need for Currency Legislation

The Obama administration has finally reached agreement with the Korean government on revisions to the U.S.-Korean Free Trade Agreement (KORUS).  Some will welcome this for foreign policy reasons.  Some, particularly in the auto industry, will celebrate improved – but still drastically limited – access to the Korean market.  Others, including Senate Finance Committee Chairman Max Baucus, are reportedly “furious” that the deal fails to deliver for American cattlemen.

Whatever the merits, the KORUS agreement falls well short of genuine “free trade,” and not just because the cattlemen got hornswoggled.  More fundamentally, even the best of our “free trade” agreements are seriously flawed because none of them closes a huge loophole:  currency misalignment.

In the case of Korea, tariffs on imports of American manufactured goods average 6.6 percent (more than double the US duties on a trade-weighted basis).  At the same time, Korea’s currency, the won, is trading at 1135 to the dollar.  The Peterson Institute of International Economics calculated the fundamental equilibrium rate for the won at 1066/$ in May, its latest analysis of the rate for each major currency if all of them were in equilibrium.  The difference (1135 – 1066 = 69, or almost 6.5 percent) is a measure of the undervaluation of the won.  Thus, although the undervalued won is as big an obstacle to American exports as Korea’s tariffs are today, the KORUS deals with only customs duties and ignores currency issues entirely.

There is nothing in the KORUS agreement to prevent Seoul from deciding to nudge its currency farther downward to compensate for the progressive elimination of tariffs under the KORUS agreement. It would take only another 70 or so won per dollar to nullify the impact of the eventual elimination of tariffs on manufactured goods.  Such an adjustment would move the won to about 1200 to the dollar.  It’s been a lot weaker than that; in fact as recently as March 2009, the rate was 1500/$.

In addition to the analysis from the Peterson Institute, even more compelling evidence exists that Korea would meet the tests for a fundamentally misaligned currency.  Korea’s reserves currently amount to $293 billion, seventh largest in the world.  Compared to China’s $2.9 trillion, that sounds small.  On a per capita basis, however, China has less than $2,500 in official reserves while Korea’s 48 million inhabitants are backed by more than $6,000 each.

Finally, it’s worth noting that the Ford Motor Co., the beneficiary of the last-minute wrangling over improved access to the Korean auto market, recognizes the connection.  In a question and answer session with the National Governors Association on February 22, 2010, Ford CEO Alan Mulally said, “This currency manipulation is just a killer. I mean, we all know exactly what … countries around the world are doing. They’re targeting manufacturing. They undervalue their currency so they can make things, and we can’t. Right?”  He then ended with a plea for free trade agreements that give American producers real access “with no distortion on the currency.”

At best, Mr. Mulally is getting only half his wish.  Next year, the Congress is likely to consider the KORUS agreement.  But the White House has yet to take any meaningful action on currency misalignment.  Instead, the Department of Commerce surrendered its one legitimate policy tool – the application of countervailing duties to counteract injurious currency subsidies – in a series of decisions over the past four years.

It’s high time for Congress to reassert its constitutional authority over foreign commerce and to reverse Commerce’s reckless unilateral disarmament.  By passing effective currency legislation, Congress can prevent our “free trade” partners from taking back with one hand what they negotiate away with the other.

Currency misalignment is the arch-enemy of free trade.  If the Senate truly supports free trade, it should act and pass H.R. 2378, the Currency Reform for Fair Trade Act, now.

Media Inquiries: Lloyd Wood: 202.452.0866: press@faircurrency.org

Other inquiries: Charles Blum: 202.904.2475: execdir@faircurrency.org

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Few New Jobs Expected Soon From Free-Trade Agreement With South Korea


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The following article by Sewell Chan appeared in the New York Times here.

WASHINGTON — The revised free-trade agreement with South Korea announced on Friday by the Obama administration has gotten acclaim from corporate leaders and Congressional Republicans.

But the pact is likely to result in little if any net job creation in the short run, according to the government’s own analysis.

Praising the deal reached by his trade negotiators, President Obama said on Monday that the accord would “boost our annual exports to South Korea by $11 billion” and “support at least 70,000 American jobs.”

The Obama administration has been careful to use the verb “support,” not “create.”

In fact, the effect of the agreement on aggregate output and employment in the United States “would likely be negligible,” according to a federal study, largely because the United States economy is so much larger than that of South Korea. Indeed, the study found, the country’s overall trade deficit with the rest of the world is likely to grow slightly as a result of the agreement.

But the deal is likely to be beneficial to particular industries, including the Detroit automakers and manufacturers of industrial and electronic equipment and high-technology products like pharmaceuticals and medical devices, according to that study.

American manufacturers of textiles and clothing could be hurt, however, as relatively high American tariffs on those products are reduced.

The study was conducted in 2007 by the United States International Trade Commission, an independent agency that analyzed the effect of imports on the American economy, after the Bush administration negotiated the original agreement with South Korea.

That agreement languished in Congress, where approval by both houses is required for a free-trade agreement to take effect. In June, President Obama agreed to reopen negotiations on reviving the stalled accord.

After a round of talks in Seoul failed to produce a deal last month, the United States trade representative, Ron Kirk, and his Korean counterpart, Kim Jong-hoon, met last week for an intense round of negotiations.

According to White House officials, the main sticking point concerned Korean barriers to American auto imports. Support for automakers has been a central motif of the Obama administration, which bailed out General Motors and Chrysler last year.

The White House consulted with the Ford Motor Company, the United Automobile Workers, and two House members from Michigan who will play a pivotal role in getting the agreement through Congress: Representative Sander M. Levin, the Democratic chairman of the House Ways and Means Committee, and Representative Dave Camp, the senior Republican on the panel, who will become chairman next month.

Alan R. Mulally, chief executive of Ford, met with Timothy F. Geithner, the Treasury secretary, and Lawrence H. Summers, the director of the National Economic Council. Mr. Mulally abandoned his opposition to the accord after the Koreans agreed to give the Americans more time to phase out their 2.5 percent tariff on imports of Korean cars.

The focus on autos came with a price: the United States did not make headway on lifting South Korea’s ban on imports of American beef from cattle older than 30 months, a ban that was the result of an outbreak of mad-cow disease in 2003.

The Americans also agreed to a small concession on pork. The 2007 agreement called for eliminating Korean tariffs on most imports of pork products effective 2014; that has now been pushed back to 2016.

“To get a final agreement, we needed to give a little, we needed to take one for the team,” said Sam Carney, president of the National Pork Producers Council. “This is still a good deal for us.”

While the immediate job impact could be minimal, American corporations seeking to grow their export markets have been avid supporters of the agreement. Wal-Mart, AT&T, General Electric, Intel, Dow Corning, Boeing, JPMorgan Chase and Citigroup all lauded the new deal, as did associations representing sectors like consumer electronics, movies and entertainment, poultry and egg producers and life insurers.

The pact is the largest trade accord since the North American Free Trade Agreement, which the United States signed in 1993.

“It will contribute significantly to achieving my goal of doubling U.S. exports over the next five years,” Mr. Obama said on Saturday. “In fact, it’s estimated that today’s deal alone will increase American economic output by more than our last nine free trade agreements combined.”

The 2007 study, which was updated earlier this year, projected that American merchandise exports to Korea would increase by about $10.1 billion to $11.9 billion, while merchandise imports from Korea would rise by about $6.4 billion to $6.9 billion.

John Brinkley, a spokesman for the South Korean Embassy here, said, “The job creation potential is actually higher than 70,000” adding that the 2007 study did not account for potential growth in the agricultural and service sectors.

In general, Korean tariffs are higher than American ones. But most Koreans are supporting the agreement, in part because they do not wish to depend too heavily on China, now their largest trading partner, according to Troy Stangarone of the Korea Economic Institute, a policy organization in Washington.

Ultimately, the deal’s greatest significance may lie in the signal it sends that the Obama administration is finally willing to move forward on trade deals.

Edward Alden and Scott A. Snyder, senior fellows at the Council on Foreign Relations, said the new agreement was “certainly better for U.S. commercial interests” than the 2007 accord. However, they wrote in a report this week, “by waiting so long to re-engage with Korea on substantive negotiations, the Obama administration sent a signal to the rest of the world that advancing trade was not a high priority.”

Peter Baker contributed reporting.

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U.S. Trade Deficit With China Widens


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The following article by Christine Hauser appeared in The New York Times here.

The United States trade deficit widened in August, with the politically charged imbalance with China reaching its highest mark on record, according to government figures released Thursday.

The trade deficit grew to $46.3 billion, up from a revised $42.6 billion in July and exceeding forecasts for a gap of around $44 billion. The deficit with China accounted for $28 billion of the August shortfall, up from $25.9 billion the month before.

The widening gap with China comes amid rising concerns in Washington about China’s trade dominance and its effect on the global economic recovery. The Obama administration and some lawmakers are pressing China to allow its currency to appreciate more quickly, hoping it will temper Chinese exports by making them more expensive.

With a high unemployment rate in the United States, trade and currency issues with China have become a particularly delicate topic in the run-up to the midterm elections, with some members of Congress threatening to impose import tariffs on China. Beijing has defended its strategy, saying that it wants to allow its currency to fluctuate with market forces in its own time.

“The widening in the international trade deficit in August, and in particular the jump in the bilateral deficit with China to a record high, will only fuel growing speculation of a currency war,” economists from Capital Economics said in a research note.

But some economists cautioned against oversimplifying the solution to the imbalance, saying that there needed to be a change in consumer preferences in the United States along with any change in policy.

“The only way this works in reducing the U.S. trade deficit is if U.S. consumers shift their consumption of Chinese goods to U.S.-produced goods,” said Dan Greenhaus, the chief economic strategist for Miller Tabak & Company. “You need to increase the appeal of U.S.-based goods.”

Steven Ricchiuto, the chief economist for Mizuho Securities USA, said adjustments needed to be made throughout the American economy. He said companies would need to start investing some of their extensive cash holdings, improving the rate of return for local production and potentially ramping up employment and demand.

“It is not easy to improve a trade deficit just by adjusting currencies,” he said.

The overall deficit is now at an annual rate of $502.5 billion, up 34 percent from the $374.9 billion deficit for 2009.

The government reported that exports totaled $153.9 billion in August, while imports were $200.2 billion. The imports total reflected a rise in consumer goods, capital goods, automobiles, parts and engines. Petroleum accounted for about a third of the increase in the deficit, but a $1.5 billion decline in the volatile aircraft sector could be reversed in September, Yelena Shulyatyeva, a United States economist with BNP Paribas, noted in a statement.

The report suggested that trade would continue to be a drag on growth in the third quarter and a closely watched indicator as the United States continues to recover from the recession.

Recent slowdowns in job and output growth have weighed on economic forecasts for the remainder of 2010. On Thursday, first-time claims for unemployment insurance provided the latest sign of a weak labor market, reaching 462,000 in the week of Oct. 9, an increase of 13,000 from the previous week, the Labor Department said. Economists had expected the number to go down, by 4,000.

The figures followed Friday’s snapshot of the labor market, which that showed the economy lost 95,000 nonfarm jobs in September.

“The claims numbers show you the economy is moving at such a glacial pace that nothing is really improving there,” Mr. Ricchiuto said.

Inflation in terms of producer prices remained stable in September, rising by 0.4 percent, compared with a 0.4 percent gain in August, the Labor Department said. The core index, which excludes volatile food and energy prices, rose by a slight 0.1 percent last month, in line with expectations.

Joshua Shapiro, the chief United States economist for MFR, said the underlying price trend of the core finished goods index was benign.

“It remains our belief that copious global spare capacity will keep it that way at least in the near term,” he said in a research note.

David Barboza contributed reporting.

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