Growing trade deficit with China cost the U.S. economy $37.0 billion in lost wages in 2011

Posted on 30 September 2013 by Ellen Croibier.

Reposted from the Economic Policy InstituteUS China trade gap

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The trade deficit with China cost the U.S. economy $37.0 billion in lost wages in 2011, a new Economic Policy Institute report finds. Annual wage losses will increase if the U.S. trade deficit with China increases, as it did in 2012. In Trading Away the Manufacturing Advantage: China Trade Drives Down U.S. Wages and Benefits and Eliminates Good Jobs for U.S. Workers, EPI Director of Trade and Manufacturing Policy Research Robert E. Scott shows that even when reemployed in non-trade industries, the 2.7 million workers displaced by the U.S. trade deficit with China lost $13,505 per worker in 2011, for a wage loss total of $37.0 billion.

Minorities, in particular, suffered large trade-related wage losses, with net wage losses totaling $10.1 billion.“The displacement of manufacturing and trade-related jobs has been extremely costly for the economy, hitting America’s working families especially hard,” said Scott. “Allowing the U.S.-China trade deficit to continue growing would eliminate many more jobs in manufacturing—a bedrock of the U.S. economy—and further erode the wages of U.S. workers.”Minority workers were particularly hard hit, suffering trade-related wage losses of $10,485 per worker in 2011. For all 958,800 minority workers displaced by growing China trade deficits, net wage losses totaled $10.1 billion per year.Average wages in manufacturing are 16.1 percent higher than average wages in the economy, and 18.4 percent higher than average wages in all other industries. The displacement of these jobs has been particularly hard on workers with a high school degree or less education. Nearly half (47.7 percent) of manufacturing workers have a high school degree or less education.

Access to employer-sponsored health insurance has also declined. More than two-thirds of manufacturing workers (67.8 percent) have employer-sponsored health insurance,15.5 percentage points more than the average “strongly attached” private-sector worker in the total workforce (only 52.3 percent of such workers have employer-sponsored health benefits).

In addition, the U.S.-China trade deficit displaced nearly 1.1 million jobs in computer and electronic equipment between 2001 and 2011, including a large number of high-wage jobs for college educated workers. 52.5 percent of workers in computer and electronics had a bachelor’s degree or more education (compared with 33.8 percent of workers in non-traded goods industries), and nearly three-fourths (74.3 percent) of the workers in this industry earned wages in the top half of the income distribution. Some of the best minority job opportunities in the country were displaced by growing trade deficits with China in the computers and electronic equipment industry between 2001 and 2011. The loss of more than 1 million jobs in computers and electronic equipment between 2001 and 2011 eliminated a net 369,000 good minority jobs (34.7 percent of the jobs displaced in this industry). This was 2.5 percentage points more than the minority share of total U.S. employment (32.2%).

Scott said, “At a time when we are still digging our way out of the recession and good jobs with fair wages are hard to find, policymakers should eliminate China’s currency manipulation and other unfair trade practices, which will greatly reduce the trade deficit and will support creation of millions of good {or: U.S.} jobs in the United States.”

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Treasury: China Isn’t Currency Manipulator Under US Law

China isn’t a currency manipulator under U.S. law, though the yuan “remains significantly undervalued” and needs to rise further, the Treasury Department said.

China “has substantially reduced the level of official intervention in exchange markets since the third quarter of 2011,” the Treasury said in a statement accompanying its semi- annual currency report to Congress yesterday. The yuan has gained 9.3 percent in nominal terms and 12.6 percent in real terms against the dollar since June 2010, the Treasury said.

“It appears that the strategy of the last two administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results,” William Reinsch, president of the National Foreign Trade Council, a Washington-based business group, said in an e-mail after the report. “There is clearly room for further appreciation, however.”

In declining to brand China a manipulator, the Treasury cited the reduced intervention and “steps to liberalize controls on capital movements, as part of a broader plan to move to a more flexible exchange-rate regime.” The U.S. hasn’t designated another nation since 1994, when it named China.

Critics of China’s exchange-rate policies, including former Republican presidential candidate Mitt Romney, say the nation deliberately suppresses the value of its currency, making its goods cheaper in overseas markets and costing jobs in the U.S.

Same Rules

“This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly,” U.S. Senator Charles Schumer, a New York Democrat, said in a statement. “The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the Band-Aid, and force China to play by the same rules as all other countries.”

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FDA Says Brazil’s Orange Juice Is Safe, But Still Illegal

 

Antonio Scorza/AFP/Getty Images Oranges for sale at a market in Rio de Janeiro.

Antonio Scorza/AFP/Getty Images Oranges for sale at a market in Rio de Janeiro.

NPR      by DAN CHARLES  February 22, 2012

If you happen to notice sometime later this year that you’re suddenly paying a lot more for orange juice, you can blame America’s food safety authorities. The U.S. Food and Drug Administration, after several weeks of deliberation, has blocked imports of frozen, concentrated orange juice from Brazil, probably for the next 18 months or so, even though the agency says the juice is perfectly safe.

The FDA’s explanation is that its hands are legally tied. Its tests show that practically all concentrated juice from Brazil currently contains traces of the fungicide carbendazim, first detected in December by Coca-Cola, maker of Minute Maid juices. The amounts are small — so small that the U.S. Environmental Protection Agency says no consumers should be concerned.

The problem is, carbendazim has not been used on oranges in the U.S. in recent years, and the legal permission to use it on that crop has lapsed. As a result, there’s not a legal “tolerance” for residues of this pesticide in orange products. Read more of this post

How to Save U.S. Manufacturing Jobs

By Howard Wial @CNNMoney February 23, 2012: 5:34 AM ET

Howard Wial is a fellow for the Brookings Institution Metropolitan Policy Program.

At first glance, manufacturing jobs would appear to be a dying breed.

The United States lost 6 million manufacturing jobs between early 2001 and late 2009. And despite small gains during the last two years, the trend in manufacturing employment for the last 30 years has been downward.

That has led some to argue that long-term job loss in the industry is inevitable. But our research shows otherwise.

There are two common versions of the “inevitability” argument. One holds that U.S. manufacturing wages are too high to be internationally competitive. The other maintains that manufacturing job losses are the result of productivity growth. Both arguments are wrong. Read more of this post

This Column Was 100% Made in America

A Hyundai ad that ran during Super Bowl coverage showed workers from the company's plant in Montgomery, Ala.

A Hyundai ad that ran during Super Bowl coverage showed workers from the company's plant in Montgomery, Ala.

By   Published: February 15, 2012

BLUE-COLLAR workers in fields like manufacturing — particularly when they make products on American soil — are again becoming a favorite subject for white-collar workers on Madison Avenue.

The trend was born of the economic worries that followed the financial crisis in 2008. Recently, it is gaining steam — appropriate, since the ads often use blasts of steam to signal something is being built — with proposals in Washington to offer incentives to encourage the location or relocation of factories in the United States.

“We continue to see very heavy emotional response to anything that would leverage against the bad economy,” said Robert Passikoff, president at Brand Keys, a brand and customer-loyalty consulting company in New York. Read more of this post

Obama Takes Fresh Aim at China, Touts “Insourcing”

 

ReutersBy Laura MacInnis | Reuters

MILWAUKEE (Reuters) – President Barack Obama kept up his attack on Chinese trade practices during a campaign-style visit on Wednesday to a Midwest factory, where his call to bring jobs back home was intended to resonate with voters in an election year.

The day after meeting China’s leader-in-waiting, Vice President Xi Jinping, at the White House, Obama cited America’s chief rival a number of times in a speech to promote the potential of “insourcing” jobs back to America from overseas.

“I will not stand by when our competitors don’t play by the rules,” he told workers at Master Lock, a company he lauded in his State of the Union address last month for having moved back about 100 union jobs from China since mid-2010.

“That’s why I directed my administration to create a Trade Enforcement Unit with one job: investigating unfair trade practices in countries like China,” he said in prepared remarks.

Obama took a firm line over trade on Tuesday during his Oval Office meeting with Xi, who is in line to assume the Chinese presidency in March 2013.

This tough stance should appeal to voters in election battleground states like Wisconsin, where Beijing is often blamed for killing American jobs.

Republican presidential hopeful Mitt Romney, a former private equity executive, accuses Obama of being too soft on China and lacking the executive or other leadership experience to steer the U.S. economy toward lasting recovery.

Master Lock, a unit of Fortune Brands Home & Security, is the world’s largest manufacturer of padlocks and related products to secure homes, cars and bicycles. Its story is a positive one for Obama, who must tout his economic leadership to secure another White House term.

The firm says its Milwaukee plant is running at full capacity for the first time in 15 years – an example the White House is eager to replicate as the November 6 election nears.

“They’re deciding that if the cost of doing business here is no longer much different than the cost of doing business in countries like China, they’d rather place their bets on America,” said Obama.

It was his first stop in a three day campaign-style swing when the Democrat will raise funds in California and stop at aircraft manufacturer Boeing in Washington state.

How to cope with a rising China – and compete against cheap Chinese exports – is one of the toughest challenges for Obama to navigate as the election approaches, particularly as opinion polls showing rising U.S. voter frustration with the Asian economic powerhouse.

(Reporting By Laura MacInnis; Editing by Peter Cooney and Cynthia Osterman)

Can Manufacturing Jobs Come Back? What We Should Learn From Apple and Foxconn

business
The Huffington Post

David Paul – President, Fiscal Strategies Group  –  Posted: 02/13/2012 8:30 am

Apple aficionados suffered a blow a couple of weeks ago. All of those beautiful products, it turns out, are the product of an industrial complex that is nothing if not one step removed from slave labor.

But of course there is nothing new here. Walmart has long prospered as a company that found ways to drive down the cost of stuff that Americans want. And China has long been the place where companies to go to drive down cost.

For several decades, dating back to the post World War II years, relatively unfettered access to the American consumer has been the means for pulling Asian workers out of deep poverty. Japan emerged as an industrial colossus under the tutelage of Edward Deming. The Asian tigers came next. Vietnam and Sri Lanka have nibbled around the edges, while China embraced the export-led economic development model under Deng Xiaoping.

While Apple users have been beating their breasts over the revelations of labor conditions and suicides that sullied their glass screens, the truth is that Foxconn is just the most recent incarnation of outsourced manufacturing plants — textiles and Nike shoes come to mind — where working conditions are below American standards. Read more of this post

Dumping China for American Job Shops

More U.S. small businesses are steering their orders to American factories, such as Tennessee-based Bristol Custom Solutions, as costs go up in China.

More U.S. small businesses are steering their orders to American factories, such as Tennessee-based Bristol Custom Solutions, as costs go up in China.

By Parija Kavilanz @CNNMoney  February 13, 2012: 11:51 AM ET

NEW YORK (CNNMoney) — U.S. small businesses that initially rushed to Chinese factories to get their products made are now dumping them for American manufacturers.

And the shift is gaining traction, said industry experts who match U.S. small companies with domestic firms.

Mitch Free, the founder and CEO of Atlanta-based MFG.com, said his company has seen a 15% uptick in inquiries since 2009 from U.S. firms looking for American factories to replace their Chinese suppliers.

MFG.com is one of the largest online directories used by businesses to find domestic manufacturers.

One reason behind the trend is that “Chinese manufacturing has become expensive,” Free explained.

Another is that the U.S. economy is still uncertain. Most small businesses are forced to order large quantities to justify costs when dealing with companies overseas, he said. And that’s a risky move if American consumers are not splurging yet.

Manufacturers closer to home allow small businesses to order smaller batches, which means less of their money is tied up if their inventory is unsold, he said.

Revive Made in USA? Easier said than done

WindStream Technologies opened a new manufacturing facility in North Vernon, Ind., last September to produce small wind turbines for home use.

WindStream Technologies opened a new manufacturing facility in North Vernon, Ind., last September to produce small wind turbines for home use.

WindStream Technologies knows well the value of manufacturing in the United States.

In December 2010, the startup selected a Chinese factory to make 35 prototypes of its wind turbines, because they wanted them “quickly and cheaply,” said David Dingman, Windstream’s lead mechanical engineer.

It was a disaster. “The prototypes that the Chinese manufacturer sent back to us were junk,” said Dingman. “There were parts that were put upside down. Other parts were poor quality. Some even fell off.”

WindStream decided not to have the final products made in China.

The company was able to snag U.S. manufacturers with the help of MFG.com.

And last month, it started mass producing its small wind turbines for home use at its new 45,000-square-foot manufacturing facility in North Vernon, Ind. The company employs 30 workers and is hoping to ramp up to 100, if it lands a deal to sell the turbines at a mass retailer, said Dingman.

WindStream now has its turbine covers made in Chicago, while some metal parts are produced in Ohio.

Some of the turbines parts are still made in China, simply because the raw materials to make them don’t exist in the United States, said Dingham. But “the Midwest proved to be terrific for us,” he said.

Indeed. WindStream produces its turbines at a 10% lower cost per unit compared to what the company would have paid in China, thanks to its American suppliers that provide competitive prices and the elimination of overseas shipping and travel costs.

Del Mar, Calif., entrepreneur and inventor Julie Zizka actually liked the way her tote bags looked after a Chinese manufacturer produced 5,000 of them for her in 2008.

But she still was not a fan of having her manufacturing done overseas. She had concerns about production delays and fretted about how the extensive amount of transportation used was hurting the environment. What’s more, she noticed that her customers were preferring products that were made in the United States.

By 2011, she was looking for a U.S. manufacturer to produce her “Tote Buddy,” a colorful tote for storing reusable plastic bags.

She came across one after searching online and seeing ads for Bristol Custom Solutions, which heavily advertises on MacRAE’s Blue Book.

MacRAE’s has seen a pickup in inquiries — just like Zizka’s — from companies wanting to replace Chinese suppliers with American ones, said Lori Meloche, MacRAE’s vice president of marketing.

The directory — first published in the United States in 1893 as a “blue-colored book” — has since evolved into a website with more than 1.2 million North American industrial manufacturers, which averages 1.5 million users monthly.

What small firms want from Obama’s manufacturing plan

Zizka connected with Bristol, a 26-year-old, Tennessee-based manufacturer, best-known for making secure locking bags used by banks and the federal government to transport cash and other valuables.

“People have been contacting us all the time lately, telling us they don’t want to produce their products in China,” said Brandon Cantrell, Bristol’s general manager.

When Zizka sent Bristol a sample of the tote, the company redesigned it and brought down some of her costs, said Cantrell.

Today, Bristol is making 1,000 new Tote Buddy bags for sale this spring. For Zizka, the unit price for one of her Tote Buddy bags made in Cantrell’s factory is still 170% higher than for one made in the Chinese factory, said Cantrell.

But that doesn’t bother Zizka.

“My customers want my bag made in the U.S.,” she said, “I’m willing to absorb that cost if I can control the quality, get them to my customers faster and help the environment as well.”

Walmart ‘Great for You’ Healthy Labels: Nutrition Experts Say ‘Devil in the Details’

 

BY BRIAN JOHNSON AND ENJOLI FRANCIS  –  WASHINGTON, Feb. 7, 2012

As Walmart announced plans today to label certain foods with a new green “Great for You” label, some diet and nutrition experts told ABC News they applauded the move, while others questioned whether a company that sells food could set objective standards for what is healthy.

Dr. Darwin Deen, a family doctor and nutrition educator, told ABC News that “an independent opinion of a food’s healthfulness is a good idea but as always, the devil is in the details.”

Walmart, the largest food retailer in United States, will put the new label on select products that meet defined criteria.in its Great Value and Marketside lines. Customers will begin to see the new label on products starting in the spring.

The company said the “Great for You” products meet the rigorous nutrition criteria established by the U.S. Food and Drug Administration, the U.S. Department of Agriculture and the Institute of Medicine.

“Moms are telling us they want to make healthier choices for their families but need help deciphering all the claims and information already displayed on products,” said Andrea Thomas, senior vice president of sustainability at Walmart. Read more of this post

Paramount Sleep licenses bedding brands to Cannon Sleep Products

Paramount Sleep

Paramount Sleep

Tuesday, February 07, 2012 
By: Furniture World Magazine 
Paramount Sleep announced that Fresno, Calif., bedding manufacturer Cannon Sleep Products has licensed its bedding brands.

Cannon is licensed to manufacture and distribute the products in California, Oregon, Nevada and Arizona. Cannon also has signed a license with Paramount to manufacture and sell A.H. Beard, an Australian luxury line that Paramount holds exclusive rights to in the United States.

“In Cannon, we partnered with a family and a company with many shared values—integrity, hard work and a shared growth vision for the future,” said Jamie Diamonstein, president of Paramount Sleep.

Like Paramount, Cannon Sleep Products is a third-generation, family-owned mattress producer. Founded in 1959, the company manufactures high-quality mattresses, box springs, futon mattresses, and futon covers.

“For more than 50 years my family has proudly manufactured the highest quality bedding,” said Cannon Vice President Rion Morgenstern. “The more we work with the Diamonstein family and see the perseverance and innovation that has become the hallmark of Paramount Sleep, the more excited we become about our new alliance.”

Cannon will produce Paramount mattress lines including Nature’s Spa, Heavy Duty (HD), Back Performance, Sleep For Success, and Boutique Hotel, as well as A.H. Beard. Last April, Paramount entered into a strategic alliance with Omaha Bedding to manufacture, service and support the full line of Paramount’s mattresses.

About Paramount Sleep: Paramount Sleep is truly a company of bedding people, dedicated to carrying on its legacy of integrity, innovation and American made craftsmanship for more than 80 years. It is the only national mattress company to be Made in USA Certified®. The company’s mattress lines include: A.H. Beard, Back Performance, Boutique Hotel, GoodNiteKids, Heavy Duty, Nature’s Spa, Quilt O PEDIC, and Sleep for Success.

About Cannon Sleep Products: Cannon Sleep Products is the number one independent mattress manufacturer in northern California. Founded in 1959, it is a third-generation, family-owned company with a vision to be the leading bedding producer on the west coast. Cannon operates out of a 150,000-square-foot, state-of-the-art, purpose-built facility currently shipping nearly 200,000 units each year across the west coast.

Furniture World Magazine


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