Tag Archive | "manufacturers"

Air Force Looks to China When American Manufacturing Falls Short

The following article by Dave Jamieson appeared here in The Huffington Post.

Michael Mandel, chief economic strategist at the Progressive Policy Institute, was recently doing some research for a textbook he’s revising when he stumbled upon a surprising entry in the Federal Registry. On March 21, the U.S. Air Force waived the “Buy American” provision of the American Recovery and Reinvestment Act of 2009 for a construction project at Eielson Air Force Base in Alaska. As workers tried to build a few stimulus-backed housing units, it became apparent that a number of simple domestic items couldn’t be procured from American manufacturers – namely, ceiling fans, shower rods, towel racks, toilet-paper holders, and all manner of screws and fixtures.

According to the registry entry, a contracting official

“has determined that the above items of manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. The domestic nonavailability determination for these products is based on extensive market research and thorough investigation of the domestic manufacturing landscape. This research identified that these products are manufactured almost exclusively in China.”

In fiscal year 2009, more than 44,000 waivers of federal “Buy American” provisions were granted, worth nearly $14 billion. On his blog, Mandel writes that the Air Force waiver in particular “certifies the weakness of domestic manufacturing in America,” though he also questions whether all the household items listed are actually unavailable in the U.S., given that, according to him, the American production of nuts and bolts has been climbing in recent years.

Similarly, the Alliance for American Manufacturing (AAM) wonders whether there isn’t a “single American manufacturer” producing the screws required for the Eielson project.

“There’s a great deal of evidence that many agencies, including the Department of Defense, don’t look very wide or deep for procurement,” AAM’s Executive Director, Scott Paul, told HuffPost. “Some agencies are much more aggressive about enforcing it than others.”

But in this case, it seems the collated screws in question are certifiably unavailable in the States. Jennifer Baker Reid of the Industrial Fasteners Institute, a trade group for nuts-and-bolts manufacturers, says such screws are “largely, if not entirely, imports” from China nowadays. The waiver, Reid says, “appears to have been issued appropriately based on market research.”

That’s not to say Reid’s group hasn’t had other bones to pick with federal agencies over the stimulus package’s “Buy American” stipulation. Her group complained to the Environmental Protection Agency over some 2009 waivers granted for fasteners for stimulus-funded wastewater treatment upgrades. In that case, Reid says her group had two U.S. manufacturers who could have supplied the necessary fasteners. “These waivers have come out fast and furious without checking to see if a U.S. supplier is available,” she says.

In the case of the Eielson project, it may be more troubling that the Air Force did its due diligence and still couldn’t find a supplier. “It’s not like China has a competitive advantage in making screws,” says Paul. “Shame on us if we can’t make them.”

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Companies in Missouri join effort to limit Chinese ‘dumping’

The following article by Bill Lambrecht appeared on the stltoday.com site here.

WASHINGTON • Officials at Mid Continent Nail Corp. of Poplar Bluff, Mo., rejoiced in 2008 when the U.S. International Trade Commission ruled that Chinese companies were harming American businesses by dumping cheaply made nails, breaking laws that guard against unfair trade.

The Commerce Department followed up by ordering tariffs that in some cases would double the cost of the Chinese nails and discourage their importing. Mid Continent expected a boon to its business of distributing nails for home and industrial use.

But those Chinese nails kept coming. So, after spending more than $1 million to win the case, Mid Continent, a family-owned business employing 300 people, invested another $75,000 to hire private detectives to find out what was happening.

The detectives discovered that Chinese manufacturers were sending their nails to Korea and Taiwan, where they were reboxed and shipped on to the United States. In some cases, manufacturers in China merely packaged the nails in boxes marked “Made in Taiwan” before shipping to the United States.

A lawyer in Washington for Mid Continent showed the Post-Dispatch “Made in Taiwan” nail boxes that investigators brought back from China — evidence the company turned over to U.S. Customs and Border Protection.

Yet nothing has changed, says Mid Continent president David Libla.

Customs officials “basically turn their heads. They say they don’t have the resources or they don’t have the time. They say they can’t do this, can’t do that,” he said. “We spend all that money to win the case and then assemble the truth, and our government lets the Chinese get by.”


Libla’s experience has become familiar to American companies: After winning trade cases that cost them dearly, Customs fails to collect the duties and give them the protection that the law requires. Customs officials say the task is almost impossible, and they are doing the best they can.

Missouri is at the center of a growing coalition of companies such as Mid Continent that are pressing President Barack Obama’s administration and Congress to get tough on the Chinese. An alliance that sprang up in 2009 has grown to 12 industries from around the country — from nails and bed springs to shrimp and honey.

American companies have many vexing trade issues with China, where inexpensive labor, government subsidies and predatory pricing can prove lethal to competitors. Companies like Mid Continent turn to the government’s International Trade Commission when they see evidence of “dumping” — exporting products at artificially low prices in hopes of killing the competition. If companies prove allegations of dumping or unfair subsidies, the Commerce Department orders duties to bring prices on imported goods in line with the cost of U.S.-made goods.

But Chinese manufacturers routinely evade the duties by shipping through third countries in schemes that Customs officials often are slow to unravel. That translates to Chinese products flowing illegally into U.S. markets, American jobs lost and hundreds of millions of dollars in uncollected duties.

From mid-2008 through December, Customs and Border Protection — part of the Homeland Security Department — received some 300 complaints about evasion of duties, according to congressional sources. But a relatively modest $13 million was assessed in fraud penalties last year, with just $117,000 collected so far.


The Government Accountability Office reported in 2008 that more than $600 million in duties — 90 percent related to Chinese goods — remained uncollected over six years. The GAO study added that the likelihood of collecting all that money was slim because companies under investigation often disappear.

M&B Metal Products, a manufacturer in Alabama of wire coat hangers, joined the Missouri companies in the fight for enforcement. Milton Magnus, president of the company, estimates that uncollected duties on Chinese hangers alone last year exceeded $50 million.

His company won its trade case in 2008 while competition from Chinese companies was devastating the American hanger industry. Two hanger plants were shuttered in western Missouri and another, in the hard-pressed Southern Illinois town of Metropolis, closed its doors in 2006.

Magnus said his company is working at 60 percent of capacity and trade figures show why: More than 1.3 billion hangers reached the United States last year from Malaysia, Taiwan, Vietnam and South Korea, Magnus said. He estimates that 800 million of them were manufactured in China and shipped through other countries.

He produced e-mails from Chinese manufacturers to American distributors offering ways to avoid the duties by shipping through other countries. He has given those e-mails and other evidence obtained by investigators to Customs officials and was told they are looking into the matter.

Collecting the duties, Magnus said “would put a lot of people to work” in the United States.

At Leggett & Platt Inc., a maker of innersprings for beds since 1883, collecting duties would translate to enough additional sales to add 60 full-time jobs, company officials say.

After Leggett & Platt, based in Carthage, Mo., filed its trade case in 2007, investigators received false information and little cooperation from Chinese manufacturers, their reports show. In 2008, the six-member commission voted unanimously that the domestic industry had been injured and the government imposed duties that in some cases would triple the imports’ cost.


At first, sales of Leggett’s bedsprings — for everything from baby cribs to king-sized mattresses — increased. It looked as though the system had worked. But the Missouri company soon noticed bedsprings arriving from Hong Kong, where none had come from before, and later from Malaysia.

In Hong Kong, private investigators hired by the company found an empty building and a tiny factory with two nonworking assembly machines — supposedly the sources of tens of thousands of bedsprings arriving in the United States.

Leggett & Platt estimates that $50 million in duties went uncollected last year on some 900,000 Chinese-made imports.

The company has turned over investigative reports, shipping documents and videos to Customs. Last month, company officials traveled to Washington with fresh evidence of illegal shipments, along with names of people willing to testify to having witnessed fraud.

“We have a live fish on the line,” remarked Wendy Watson, Leggett & Platt’s associate general counsel.

The company hasn’t heard back.

“It gets worse all the time,” Watson said. “From a cheater’s perspective, success breeds success.”

In interviews, Customs officials insisted they are working diligently to collect duties — but described challenges akin to chasing ships in the fog.

“It’s very easy to find someone willing to trans-ship for you,” said Brian Lewandowski, director of the commercial targeting division in the Customs trade office.

Investigators, he said, often run into trouble getting cooperation from foreign governments. Then, he added, both the foreign company and the U.S. importer can disappear “even before we have a chance to look at them. And depending on the commodity, they can re-emerge under new names.”

Chinese companies are increasingly open about their willingness to evade U.S. Customs law.

One of them, Hanhen Shipping, based in the Chinese port city of Shenzhen, advertises “triangular” shipping — routing products through a third country.

“According to traders’ demands in commercial interests and import tariff reduction, we provide BL (bills of lading) switch for triangular trade, etc. in order to protect the interests of traders and save tariff expenses,” Hahnen’s Internet ad reads.


The flouting of U.S. law has received far less attention in Congress than other trade issues with China. So in November, at the urging of Missouri companies, Sen. Ron Wyden, D-Ore., who heads a Senate subcommittee on trade, set out to find “trade cheats.”

Wyden’s staff members, portraying themselves as the fictitious company AvisOne Traders Inc., received 47 responses when they contacted companies stating the desire to avoid paying the trade duties. Of those, ten Chinese companies provided written confirmation of their willingness to help AvisOne evade duties on several products — including nails and bedsprings.

Wyden said in an interview that he intends to hold a congressional hearing on the problem shortly and introduce legislation to force the U.S. government to act more swiftly on allegations of fraud.

“There are two key agencies dealing with this issue. One of them, Customs, in my view treats allegations of evasion of duties like junk mail. The other, ICE (Immigration and Customs Enforcement) is more interested in stopping illegal downloads of music than taking steps to protect tens of thousands of manufacturing jobs,” he said.

Despite the complaints, Customs’ international trade office has scored successes. Earlier this month, a California man pleaded guilty after being indicted on federal charges of trying to circumvent trade duties imposed on Chinese-made hangers. An associate pleaded guilty earlier.

Chinese honey has drawn the most attention from authorities. Last month, a Chinese agent for several companies was arrested on federal charges filed in Chicago that she allegedly avoiding $534,000 in duties on Chinese honey from South Korea, Taiwan and Thailand. The woman had worked with another Chinese national sentenced to 30 months in prison in November for avoiding $5 million in duties.

The U.S. Attorney’s office in Chicago thus far has charged 20 people or companies in the honey fraud importation ring.

“We’ve seen CBP really step up to the plate,” said Jill Clark, of Dutch Gold Honey Inc., an industry leader in Pennsylvania and a partner with the Missouri companies.

Others in the coalition say that successes are few. One of their lawyers asserted that Customs is intent on long-term investigations leading to “perp walks” rather than focusing on the constant flow of fraudulent goods.

Don Yando, executive director for commercial targeting and enforcement in Customs’ trade office, described the complexity both in the rooting out the fraud and in communicating with victims. During investigations, he said, the government is prohibited from talking to companies about what actions are being taken.

“I can understand that industry may perceive that we’re not doing anything,” he said.

But with those Chinese nails still flooding American markets, Mid Continent’s David Libla said he wants action, not understanding.

“His understanding isn’t going to help our hourly employees and our pocketbooks,” he said. “It’s incomprehensible to me that our government is so weak-kneed that they’re letting China run over us like this.”

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CPA’s Zach Mottl on CBS with Katie Couric

CPA member, Zach Mottl, will appear on CBS News tonight (January 14, 2011) with Katie Couric to discuss the 66% state income tax increase for Illinois. With three tax-cutting Governors in proximity, this could be a disaster for Illinois manufacturers.

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

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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More Nonsense from the New York Times on Japan’s “Lost Decades”

The following article by Eamonn Fingleton can be found on the site,  “Unsustainable.org,  A Website on the U.S. Trade Policy Disaster”,  here.

The Times says Japan is “disheartened.” It hasn’t looked at Japan’s trade figures — or America’s.

The New York Times yesterday carried a major article  headlined “Japan Goes from Dynamic to Disheartened.” Rarely has the truth of the Japanese economy been so completely misrepresented.  This article is a highly selective pastiche of isolated hard-luck stories plus quotes from propagandistic sources (the Japanese establishment has, of course, long exaggerated Japan’s weaknesses and understated its strengths to stay out of Washington’s sights on trade). Worse, key “facts” are indisputably wrong.

Take the only significant statistic cited: Japan’s GDP in 2009  was supposedly  the same as in 1991 — $5.7 trillion in both cases, allegedly.  In reality, as a check of the World Bank website will immediately confirm, the correct number for 1991 was a mere $3.45 trillion — and the figure announced at the time by the Tokyo authorities was actually even lower. The Times seems to have overlooked the fact that the yen was worth a lot less in 1991 than it is now . It is actually up 65 percent against the dollar since 1991 and fully 69 percent since  1989.

In its only reference to Japan’s trade performance, the Times states: “Its [Japan's] once voracious manufacturers now seem prepared to surrender industry after industry to hungry South Korean and Chinese rivals.” The truth is that Japan multiplied its current account surplus more than three-fold between 1989 (the last year of the Japanese stock market
boom) and 2008 (the last year before the present global slump). In the same period the US current account _deficit_ ballooned sixfold! With per-capita income nearly ten times China’s, Japan is almost alone among major nations in running  a surplus on its huge trade with China;  by comparison America’s bilateral deficit with China was $166 billion last year (see the China page of the CIA Factbook).

Why does China buy so much from Japan? Because it has no alternative:  although this is not obvious to the world’s consumers (nor, evidently, to the editors of the New York Times), Japan monopolizes the supply of many of the world’s  producers’ goods — specifically  the most advanced materials, components and production machines powering the world’s factories, not least China’s. A classic example is semiconductor-grade silicon: although this is often presented as merely sand, in its most advanced manifestations it is actually a highly,
highly purified (“not an atom out of place”) material available only from a few Japanese suppliers such as ShinEtsu and Sumco. America’s Monsanto and Germany’s Wacker used to make it but could not keep pace with Japanese quality and dropped out about 20 years and 15 years ago respectively.

An important omission is the significance of diverging population trends between Japan and the United States.  In common with most of the richest nations in Europe, Japan has experienced remarkably low population growth in the last two decades — a cumulative rise of just 3 percent compared to 23 percent for the United States. The differing population experience is a fundamental factor in Japan’s apparently “disappointing” GDP performance.  In reality, as Mark Skousen has pointed out, when Japanese GDP statistics
are stated on a per-capita basis as opposed to as national aggregates, Japan has kept pace with US growth. And that is taking US growth at face value. As some of us have long argued, much US growth — e.g. in financial services — has been completely bogus.

Even within the space of a single sentence  the Times  often manages to pile misstatement upon misstatement. Take, for instance, this: “Japanese consumers, who once flew by the planeload on flashy shopping trips to Manhattan and Paris, stay home more often now, saving their money for an uncertain future or setting new trends in frugality with discount brands like Uniqlo.” The fact is that far from declining since the 1980s, Japanese overseas travel has risen strongly. Even in the recession year of 2009, total international travel by Japanese citizens was up fully 49 percent over  the peak bubble-era year of 1989 (and was up three times on the 1980s average). Moreover Japanese cities today are full of super pricey luxury goods stores that were unheard of in the 1980s. In my immediate vicinity we have had three huge developments of luxury stores at Tokyo Midtown, Roppongi Hills, and
Marunouchi Naka-dori. As revealed in a survey a few years ago, Japan accounted for 36 percent of the Burberry brand’s worldwide sales, 35 percent of Baccarat’s, and 30 percent of Louis Vuitton’s. Not bad for a nation with only 2 percent of the world’s population. As for “saving their money for an uncertain future,” the truth is that the Japanese savings rate has not risen since the 1980s but has actually fallen quite drastically, implying that Japan is far more of a consumer society now than previously.

Of the dozens of other similarly important points I could make, I will add just one. Whereas the yen is clearly reasonably valued vis-à-vis the yuan and other East Asian currencies, the same cannot be said of the dollar. The question the editors of the New York Times should be asking is this: how low will the dollar have to fall against the East Asian currencies for the United States to balance its trade again? A devaluation of less than 20 percent against the yen did it for Nixon in the early 1970s. Even a 60 percent devaluation today wouldn’t do it (because the US has virtually no advanced manufacturing industries left  — even Boeing is a hollowed out hulk which depends on Japan for the 787′s wings and other state-of-the-art
structures and components).

Quote from the Times: “In 1991, economists were predicting that Japan would overtake the United States as the world’s largest economy by 2010. In fact, Japan’s economy remains the same size it was then: a gross domestic product of $5.7 trillion at current exchange rates.
During the same period, the United States economy doubled in size to $14.7 trillion, and this year China overtook Japan to become the world’s No. 2 economy.”

For the correct figure for Japan in 1991 paste this address into your browser window:


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Here’s proof import tariffs save and create American jobs

The following article by Roger Simmermaker appeared at WorldNetDaily here. Mr. Simmermaker is the author of “How Americans Can Buy American: The Power of Consumer Patriotism.” He also writes “Buy American Mention of the Week” articles for his website, and is a member of the Machinists Union and National Writers Union.

There’s been a long standing debate as to whether import tariffs are useful in either saving or creating American jobs. Over the last several years, I have settled this debate in my own mind believing it is mere logic that import tariffs do both.

Import tariffs raise the access fee, if you will, for foreign producers to be able to participate in the American market and grab their own share. I’ve found the best analogy to explain why this is necessary is the game of poker. In poker, everyone who sits at the table to share in the same pot has to ante-up the same amount. Americans don’t ante-up two dollars while Mexicans ante-up two pesos. That wouldn’t be fair. The Chinese shouldn’t be allowed to ante-up their own depressed currency pretending it’s monetarily equal to what Americans must ante-up.

The ‘pot’ in this case is the lucrative U.S. market. Everyone wants to sell to us. Still though, even fierce opponents of free trade sometimes disagree on the necessity of import tariffs. Some who advocate a more competitive America say that giving tax incentives to domestic producers is the answer. Others go so far to say that the tax rate for American manufacturers should be zero.

I have always believed, understanding that this complex issue cannot have only one ‘silver bullet’ answer, that the strongest solution is this: Instead of lowering taxes of American producers to make them more competitive with foreign companies (which pay fewer taxes to the U.S. Treasury), which is revenue-negative, we should be raising taxes on foreign producers, which is revenue-positive. In other words, do not lower our standards to theirs; raise their standards to ours.

Reducing taxes to zero sounds salivating, but that doesn’t help pay for the cost of government. Over 75 percent of all federal spending goes to pay for Social Security,

Medicare, defense, education, farm subsidies, highways, parks, and interest on the national debt. Polls show that most Americans are against “government spending” but still strongly back these programs. It’s difficult to explain how one can rally against taxes and yet support the benefits those same taxes would pay for.

Despite the popular rallying cry these days against government in general and calls to ‘starve the beast,’ there are such things as ‘good’ taxes. More taxes collected means more benefits reaped for better public schools, public libraries, and public hospitals. More taxes collected mean a stronger military and national defense, a healthier health care system, and a safer NASA space program. If we collect more taxes we will have cleaner public parks, better construction and maintenance of our roads and bridges, and well-equipped fire and police departments.

Ok, now here comes the proof.

I recently had the pleasure of talking to Harry Kazazian, CEO of Exxel Outdoors, whose company makes sleeping bags under the brand names Suisse Sport, American Trails, Disney, and Hello Kitty. Excel currently has a 30 percent share of the American market, has a 250,000 square foot facility in Haleyville, Alabama, and produces about 2 million family-style sleeping bags a year.

Exxel began their journey purchasing their facility from Brunswick in 2000, which was slated for closure at the time. The original plan was to take the customer list and ship equipment to their Mexico plant. But Exxel decided to take the long-term investment approach and found ways to produce sleeping bags for 3 percent cheaper than in China, where they had another factory.

Exxel’s ingenuity allowed them to create the most efficient sleeping bag factory in the world. They decided to re-open the Haleyville factory, close Mexico factory, bring more jobs back from China, and hire back most of their American workers. Exxel is a large employer in an Alabama region with 18 percent unemployment and wage rates that are on the upper end of Alabama standards. Exxel also provides affordable and accessible health care for employees and families.

In 2008, they added 20 percent more American jobs as they began closing down operations in China with plans to add even more American jobs in 2010 and 2011. They had come quite a long way. In 2005, Exxel made 30 percent of their sleeping bags in American and 70 percent in China. Fast-forwarding to 2010, 80 percent of their sleeping bags are now made in American and just 20 percent are made in China.

But in October 2009 things changed when Exxel discovered there was 5,000 percent surge in sleeping bags coming into America from Bangladesh, which unlike China, enjoyed duty free access to the U.S. market. Bangladesh was getting their raw materials from China – also duty free.

Under the U.S. Generalized System of Preferences (GSP) Program, all textiles are exempt from GSP duty free treatment - except sleeping bags – since there is a loophole in the GSP that says sleeping bags are not textiles.

In November 2009, Exxel met with U.S. Trade Representative (USTR) and the Department of Commerce and ultimately filed a petition with the USTR in January 2010. In June 2010 the petition was denied under the thinking that Bangladesh only held a one percent share of the U.S. market at the time. Now, Bangladesh holds a seven percent share, which is sure to grow if nothing is done and relief is not granted.

House Resolution HR 5940 and Senate Bill SB 3823 were recently introduced in congress to remove sleeping bags from the GSP. There are 12 cosponsors to the House bill to date with seven republicans and five democrats.

Let’s move these bills forward before Bangladesh increases their market share more than seven percent. Allowing Bangladesh to take a sizeable and potentially death-dealing market share from a promising and innovative American producer is like waiting for enough crash victims to die at an intersection before installing traffic lights.

If the Bangladesh market share goes to 10 percent, then 25 percent, then 50 percent or more, we’re looking at trying to bring back the dead, and it will be ‘game over’ for yet another American industry.

Here’s the proof of my point. With a modest 9 percent tariff on Chinese sleeping bags which afforded some level of protection, Exxel was able to go for a long term investment strategy that enabled it to actually produce less expensively than their Chinese competition. The absence of duty-free treatment for China gave America “most favored nation” status, and if any nation should be given such a status, it should be us.

Once America was open to zero tariffs applied Bangladesh production, a promising and growing American industry began to decline. And make no mistake; this isn’t an industry that was resting on its laurels, fulfilling some fat-and-happy protectionist scenario which is often the view of angry free traders who regard protectionism as a system that creates inefficient, lazy, American producers.

Let’s get enough legislators on board with HR 5940 and SB 3823 to save a company and an industry that is saving jobs, creating jobs, and doing their part to reduce unemployment in America. And then, let’s take with us the knowledge once and for all that import tariffs have their place is putting Americans, who are the only workers that pay taxes to America, back to work.

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Obama Says China Has Not Done Enough On Yuan

The following article first appeared in Reuters on September 20, 2010.

WASHINGTON - President Barack Obama said on Monday that China has not done enough to raise the value of the yuan, keeping up tough American rhetoric on Chinese policy as U.S. lawmakers weigh new legislation to punish Beijing.

A bipartisan group of former cabinet officials warned Congress, however, that action against China for not letting its currency rise faster could backfire on the United States.

And U.S. Trade Representative Ron Kirk said it was not clear whether various bills in Congress to pressure China on the currency issue were legal according to World Trade Organization rules.

The yuan “is valued lower than market conditions would say it should be,” Obama said, giving China an advantage in trade because it makes Chinese goods less expensive in the United States and U.S. goods more expensive in China.

“What we’ve said to them is you need to let your currency rise in accordance to the fact that your economy’s rising, you’re getting wealthier, you’re exporting a lot, there should be an adjustment there based on market conditions,” Obama said at a town-hall style meeting hosted by CNBC television.

“They have said yes in theory, but in fact they have not done everything that needs to be done,” Obama said.

Calling for a fairer trade relationship with Beijing, Obama said Washington was bringing more actions against China before the WTO. “We are going to enforce our trade laws much more effectively than we have in the past,” he said.

With the currency issue tensing relations, Obama will meet with Chinese Premier Wen Jiabao when the two attend the U.N. General Assembly in New York later this week.

U.S. Treasury Secretary Timothy Geithner said last week he will rally other world powers to push China for trade and currency reforms.

In New York, U.S. Secretary of State Hillary Clinton and Chinese Foreign Minister Yang Jiechi discussed currency issues at length during a meeting on the sidelines of the annual gathering of the U.N. General Assembly in New York.

“It was a significant part of the discussion,” State Department spokesman P.J. Crowley told reporters.

“Obviously it is an important aspect of our bilateral relationship,” he said. “We both understand that this is something that both substantively and politically is a vitally important element of the relationship.”


Senate Banking Committee Chairman Chris Dodd said Congress would not pass a bill this year. But he said it might be possible for the White House and lawmakers to agree on the basic outlines of legislation before Obama goes to the Group of 20 nations summit in Seoul in November.

“That might help, that would not be a bad arrow to have in your quiver going into Seoul,” Dodd said in an interview at the Reuters Washington Summit.

But supporters of currency legislation still hold out hope the House of Representatives will act and create pressure for the Senate to also pass a bill in the short time left before the Nov. 2 congressional elections.

China’s central bank said in June it would let the yuan fluctuate more freely. Since then it has risen 1.53 percent, but many economists say it is undervalued by up to 40 percent, making it an easy target for politicians eager to appear to be addressing high U.S. unemployment in an election year.

Impatient with diplomacy, many members of Congress are pushing for a vote on legislation to force China to act. Businessmen who compete with China, such as the steel sector, agree on the need for legislation.

But many in the broader U.S. business community are worried China could retaliate if Congress passes a popular bill to punish Beijing with punitive duties on some of its exports to the United States.

“Yes, China’s exchange rate needs to reflect market influences and it needs to do so sooner rather than later,” the group of eight former officials in the Clinton and Bush administrations said in a letter to congressional leaders.

“But congressional currency mandates are not the answer and may, in fact, exacerbate challenges our nation already faces in our trade relations with China and in creating economic growth and jobs here at home,” the group said.

They included Susan Schwab and Carlos Gutierrez, who were U.S. Trade Representative (USTR) and Commerce Secretary under Republican President George W. Bush, and Charlene Barshefky and Mickey Kantor, who held the trade and Commerce Department slots under Democrat President Bill Clinton.

The former Cabinet officials, in their letter, said there was little doubt China would challenge such a bill at the WTO, exposing U.S. exports to possible trade retaliation if the United States lost the case.

The Obama administration has walked a fine line on the issue, agreeing China’s yuan is undervalued but saying it could only support a bill that is consistent with WTO rules.

At an event in Baltimore, USTR’s Ron Kirk said it was “not a clear call” whether the bills on China were consistent with WTO rules.

Even without authority to act specifically against China’s “undervalued” currency, the U.S. Commerce Department in recent years has slapped duties on wide a wide range of industrial products from China it has determined are either government subsidized or unfairly priced or both. On Tuesday, it will announce final anti-dumping and countervailing duties in a case brought by U.S. paper manufacturers against magazine-quality paper from China.

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Foreigners Doing Business In China Feel Boxed Out: Report

The following report appeared in the Christian Science Monitor on June 29, 2010.

Beijing — Foreign firms are being cut out of business opportunities by official discrimination in favor of Chinese companies, and there is no sign of the playing field being leveled in the near future, a major European business group complained on Tuesday.

The report on business confidence by the European Union Chamber of Commerce adds weight to a growing chorus of complaints by foreign businesspeople in recent months that the Chinese authorities are increasingly setting rules and standards designed to favor local manufacturers over international competitors.

Though the Chamber’s members almost all expect strong growth in the Chinese economy, only one-third of them expect their profits to be good.

That pessimism stems largely from the fact that “nearly 40 percent of our members say the situation in two years will be even less fair than today,” said Chamber President Jacques de Boisséson.

“Optimism in the overall economic climate has been dampened dramatically by concerns about regulatory interference and unpredictability in the market,” the report said.

“China should not take the presence of European companies and their commitment to China for granted,” Mr. de Boisseson said, voicing members’ frustration. “They tell us that if things turn sour, China is not necessarily a must for them.”

Unwelcoming signs

In March, the American Chamber of Commerce in China also reported growing unease about doing business here, with 38 percent of US firms saying they felt unwelcome, up from 26 percent in 2009.

An international uproar last December forced the government back to the drawing board with its Indigenous Innovation Product Accreditation Program, seen as a bid to cut foreign companies out of the official procurement market. But the plan is still in the works “and we will have to see in practice how it works,” says one European diplomat warily.

Recent experience in such promising sectors as renewable energy is not encouraging. Foreign wind-turbine manufacturers in China have not won a single tender to build a wind farm here since 2005. They are handicapped, EU Chamber officials say, by requirements such as one demanding that bidders on projects have a minimum production capacity 30 percent higher than the largest currently operating foreign-owned maker of turbines. That condition makes a winning bid virtually impossible.

“There is nothing official to keep foreigners out of the market, but you just have to look at the results of the tenders to know what the policy is,” says the diplomat.

Promoting home-grown technology

China’s ambition to replace key foreign technology with home-grown or home-adapted versions within a decade has led it to place a host of restrictions on foreign firms, executives complain, ranging from mandatory technology transfers to local content requirements. And government efforts to boost local entrepreneurs over foreign competitors include uneven application of the law, they say.

EU firms surveyed complained, for example, that they have to comply with environmental regulations that their Chinese counterparts ignore with impunity. Forty-seven percent said they experience “strong” enforcement of such regulations; only 7 percent felt that Chinese firms were subjected to that level of implementation.

De Boisséson said he took heart from recent reassurances by Prime Minister Wen Jiabao, at a meeting with top European businessmen, that their investments were welcome and would be treated the same as Chinese companies.

“We look forward to the premier’s words being translated into deeds,” he said.

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