For fully two decades, the American people have been fed the canard that the offshoring of literally millions of American manufacturing jobs is an acceptable price to pay for lower cost imported consumer goods. Yet indisputably, we now know from work done by the non-partisan Center for Economic and Policy Research and others, especially including Lori Wallach and Michael Mandel, that for the vast majority of Americans, the gains in lower prices from trade are being outweighed by wage losses - meaning net losses for most American workers.
We also know from ongoing work by Mandel that shifting production overseas has inflicted far worse damage on the U.S. economy than the numbers show. Because of persistent flaws in the data fed us by the Bureau of Labor Statistics, the growth of domestic manufacturing is substantially overstated which means that productivity gains and overall economic growth have been overstated as well. Offshoring to low-cost countries is in fact creating reported gains in GDP that don't correspond to any actual domestic production. This "phantom GDP" helps explain why U.S. workers aren't benefiting more as their companies grow ever more efficient.
All of this seems esoteric until you reflect on the fact that we are tearing the core out of our economy and, in my opinion, the very heart and soul out of society as those in big business and their supporters in Congress try to justify and perpetuate a form of globalization that has:
The insidiousness of offshoring is three-fold. Yet the recent pronouncements from the administration about revitalizing American manufacturing fail to address them.
First, from its high point in the summer of 1979, employment in manufacturing has fallen from 19.7 million jobs to only 11.6 million today, with 6-plus million of this decline coming just since 1997, when China's trade with the U.S. first exploded. Less than 9% of Americans now work in this sector.
And as a percent of GDP, manufacturing is now just 11.2% of the total; it would be closer to 10.5% if the BLS properly counted the 25% imported component portion of American production as 'domestically made'. Today's meager GDP figure is down dramatically from 14.2% just a decade ago and a consistent 25-30% during the first twenty-five years after WW II.
No economy as large and complex as ours can prosper with less than 20-25% of its workers being in manufacturing and without the sector contributing a like percentage of GDP. Yet there has been no commitment to driving the sector back to these higher levels of employment and economic contribution.
And without such targets in place, the U.S. Chamber of Commerce and the Business Roundtable -- Mr. Obama's new "BFFs" -- and others take the position that because the number of manufacturing workers in the U.S. is rising again (albeit only modestly and probably only temporarily), then anything more than modest palliatives would be an over-correction. After all, we've seen General Electric bring back to the U.S. from China all of 400 jobs (USA Today, 8-06-10), and "rising industrial production and capital investments are signs that manufacturing will remain a significant part of the U.S. economy at least in the near term" (Wall Street Journal, 1-19-11). Surely, there is no need for anything as dramatic as having our own National Manufacturing & Industrial Policy to match the mercantilist practices of China and our other major trading partners.
Second, offshoring is always described by its proponents as nothing more than moving jobs to 'lower-cost' countries, in our case most obviously to China. What is not discussed is that fully 90% of these lower costs are not labor-based, but rather they are the unfair combination of environmental degradation, illegal subsidies, currency manipulation and intellectual property theft, with which no American company or worker can ever compete - nor should they. Yet, the administration has to date specifically excluded trade reform from its 'boosting manufacturing' initiatives.
Third, we have finally come to appreciate that American corporations committed to offshoring have almost universally been providing their foreign suppliers and overseas subsidiaries with massive amounts of business knowledge, management practices, training and other intangible exports. Almost none of this activity is picked up in the BLS's shoddy and, I would argue, irresponsible data gathering, but it is the proverbial second shoe to drop. And a very big shoe it is. This massive transfer of intellectual property is what will ultimately be the biggest drain on our economy.
As Peter Cohan of Daily Finance has written, General Electric "believes that China will be a $400 billion market for its aircraft products over the next two decades", with the preponderance of such sales being products manufactured in GE facilities relocated from the U.S. and using American-conceived technologies. Cohan goes on to note that "if China follows Taiwan's footsteps [in semiconductors], its aircraft industry should surpass the US's in a much shorter time".
President Obama, according to the New York Times (1-21-11), has started making the case that the United States has moved past economic crisis mode and is entering "a new phase of our recovery," which demands an emphasis on job creation. "The past two years were about pulling our economy back from the brink," he says, and "the next two years, our job now is putting our economy into overdrive." He is finally talking about revitalizing manufacturing as an important part of his jobs creation initiative, although this should absolutely have been an immediate post-Inauguration imperative rather than a February 2011 'now it's time' undertaking.
The specific vehicle that Mr. Obama has chosen to advance his jobs agenda is a new Council on Jobs and Competitiveness, to replace the Economic Recovery Advisory Board chaired by Paul Volcker. The chair of the new Council is Jeffrey Immelt of GE. All of this is consistent with the President's expressed 'transition' from economic recovery to job creation.
The challenges for the new Council will be three.
First, its mandate has to unequivocally include trade reform, because job creation and trade reform -- especially our trade with China -- are inextricably linked. In this regard, Mr. Obama has made a curious choice to be chair of this new Council, as few multinational corporations have benefited more from our current flawed definition of globalization -- or from China's unfair trade practices -- than has Mr. Immelt's company, GE.
(The Obama administration's track record on avoiding conflicts of interest in economic policy areas already has been called into question by the President's choice of James McNerney of the Boeing Company to head his Export Council. Boeing, like GE, is completely joined at China's economic hip, while planning every day to ship ever more U.S. machinist jobs to Mexico and throughout the company's global web of suppliers and component part manufacturers.)
Second, if the Council gets a trade reform agenda, it must be a fair trade reform agenda -- and that must mean no Free Trade Agreements (or FTAs) based on discredited NAFTA and Bush administration principles. Yet in his January 21st guest column in the Washington Post Mr. Immelt made clear his support of the recently concluded South Korea FTA, an FTA which indisputably failed to put the interests of American workers ahead of the interests of large global corporations, which has to be the primary standard for any FTA.
Third, the Council on Jobs and Competiveness must, as its name implies, take the strongest possible exception to further unwarranted offshoring of American jobs. Yet GE's own history on this issue is checkered at best, especially in its dealings with China. Also, its ongoing significant financial support of the U.S. Chamber of Commerce -- the 'big dog' when it comes to supporting offshoring -- is certainly not an encouraging sign of resoluteness in the future. As Alan Beattie wrote recently in the Financial Times, "many U.S. multinationals are far more interested in investing in China than exporting there." Historically, GE has been one of those multinationals..
Because the President has made job creation the focus of the next two years, let me close with some observations on what happens if as a nation we fail in this task.
In an article written last Friday (2-11-11) by Matt Bai of the New York Times, he concluded that Mitt Romney's speech that day to the Conservative Political Action Conference which called today's job fairs and unemployment lines "President Obama's Hoovervilles" was misplaced. Specifically, said Bai, "It would be hard to construct a compelling case, based on any fair reading of political and economic history, for linking Mr. Obama's term thus far to that of the most maligned president of the last century."
However, as Rick Sloan, who is the Machinists Union's communications director, has noted, while Romney's analogy may not be exactly spot on, the results of the November 2 elections offer us a preview of the 2012 campaign if real unemployment in America is not down dramatically from today's dismal levels of 18.1% and 28.9 million. Thirty percent of the turnout last November came from jobless households, and nationally this vote split only 50 to 46 for Democrats, which, Mr. Bai, is not exactly an FDR-style landslide a la 1934.
The world of hurt that the millions of jobless in America have endured will not be easily forgotten, especially if the most recent solution put forward on their behalf -- i.e., the Council on Jobs and Competitiveness -- is flawed at the onset in its formation and thereafter in its execution.
Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.
Follow Leo Hindery, Jr. on Twitter: www.twitter.com/leohindery
Its tribunals can overrule U.S. laws and regulations...
http://www.globalexchange.org/campaigns/wto/
World Trade Organization
"The World Trade Organization is the most powerful legislative and judicial body in the world. By promoting the "free trade" agenda of multinational corporations above the interests of local communities, working families, and the environment, the WTO has systematically undermined democracy around the world.
In the ten years of its existence, WTO panels composed of corporate attorneys have ruled that: the US law protecting sea turtles was a barrier to "free trade"; that US clean air standards and laws protecting dolphins are too; that the European Union law banning hormone-treated beef is illegal. According to the WTO, our democratically elected public officials no longer have the rights to protect the environment and public health.
Unlike United Nations treaties, the International Labor Organization conventions, or multilateral environmental agreements, WTO rules can be enforced through sanctions. This gives the WTO more power than any other international body. The WTO's authority even eclipses national governments..."
Trade agreements also cover financial services..
http://www.citizen.org/documents/FinanceReregulationFactSheetFINAL.pdf
To Rescue Main Street, We Need to Curb the WTO
"...The WTO rules require deregulation – and lock-in – of financial services that countries “liberalize” under these terms..."
http://www.airclim.org/policy/sub6_2.php
Air Pollution from ships - Air Pollution & Climate Secretariat
"Ships pour out large quantities of pollutants into the air, principally in the form of sulphur and nitrogen oxides.
The emissions from ships engaged in international trade in the seas surrounding Europe - the Baltic, the North Sea, the north-eastern part of the Atlantic, the Mediterranean and the Black Sea - were estimated to have been 2.3 million tonnes of sulphur dioxide and 3.3 million tonnes of nitrogen oxides a year in 2000.
In contrast to the progress in reducing emissions from land-based sources, shipping emissions of sulphur and nitrogen oxides are expected to continue increasing by as much as 40 per cent by 2020. As a result, by 2020 the emissions from international shipping around Europe is expected to equal or even surpass the total from all land-based sources in the 27 EU member states combined (see charts below).
[snip]
Significant health effects
According to results from continuing scientific research, premature deaths caused by air pollution from international shipping will total over 80,000 by 2012. Using cleaner marine fuel could prevent 40,000 to 50,000 premature deaths each year..."
As oil prices increase, the cheaper labor will be less attractive.
http://www.heritage.org/research/reports/2011/02/congress-should-allow-trade-adjustment-assistance-to-expire
Congress Should Allow Trade Adjustment Assistance to Expire | The Heritage Foundation
"Trade Adjustment Assistance (TAA) provides substantial government benefits to American workers who lose their jobs because of foreign trade. The 2009 stimulus bill expanded TAA coverage and increased TAA benefits. However, very few workers lose their jobs because of foreign trade, and the Department of Labor’s Dislocated Workers Program already provides basic services to laid-off workers.
Congress should allow TAA to expire. If Congress does reauthorize TAA, it should return the program to its pre-stimulus scope and couple reauthorization with the pending free trade agreements.
Original TAA Program
Free trade increases overall living standards. Economists estimate that the North American Free Trade Agreement saves the average American family of four between $1,300 and $2,000 a year.[1] However, trade can also cause severe losses for those who lose their jobs to foreign competitors..."
The Heritage Foundation is linked with the Koch brothers.
The typical mfg worker makes 50k a year. Loses job to outsourcing. Takes a service sector job at 40k.
Walmart advertises they save the typical family $2800/yr with their chinese imports.
so that is still a net loss of $7200 of buying power
http://www.opic.gov/
OPIC: Overseas Private Investment Corporation
It indemnifies corporations' overseas operations against confiscation, war, and terrorism.
http://www.fpif.org/reports/overseas_private_investment_organization
Foreign Policy In Focus | Overseas Private Investment Organization
"Key Problems
* OPIC provides "Aid for Dependent Corporations," while assistance for needy families is being cut.
* OPIC-financed and -insured foreign investments by U.S. companies shift U.S. jobs overseas and pollute host countries' environments.
* U.S. companies and individuals with political connections can reap personal gains from OPIC's programs.
[snip]
The agency also sells insurance against: (1) currency inconvertibility—the deterioration in an investor’s ability to convert profits, debt service, and other remittances from local currency into U.S. dollars and to transfer those dollars out of the host country; (2) the loss of an investment due to expropriation, nationalization, or confiscation by a foreign government; and (3) the loss of assets or income due to war, revolution, insurrection, or politically motivated civil strife, terrorism, or sabotage. As part of its efforts to promote foreign investment by U.S. companies, OPIC holds seminars and conferences to explain its services. It also escorts corporate executives on foreign investment missions to meet business leaders, government officials, and potential joint-venture partners..."
More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.
The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.
But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.
http://www.salon.com/news/great_recession/index.html?story=/news/feature/2010/12/28/us_overseas_hiring
I worked in a factor back in 1966. The boss (owner) always threatened to move the manufacturing process overseas. He met with the Cabinet and President of Japan and shared ways of manufacturing the product (which was rubber products -synthetic and natural).
When the workers in the union threatened to strike for higher wages or better working conditions, he would hire carpenters to board up the windows in anticipation of closing the shop. I was good freinds with his son. The boss told me that JFK reduced his taxes from 92% down to 75% - top marginal rates. He hated unions and communism. He was John Bircher/
I assume that his son inherited everything since he move to Hawaii and bought a pineapple farm. He died from drugs and alcohol.
I witnessed some serious on-the-job injuries that were caused by a lack of updating equipment that was old and dangerous.
Tax laws encourage outsourcing and offshoring. A simple signature with a pen could eliminate the reasons for outsourcing - our tax laws.
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
Making us competitive would mean corporations would manufacture here thereby employing our citizens and increasing the revenues to the government.
You're welcome.
Do yourself a favor and get educated about why we lose manufacturing jobs. We tax corporations too much. Stop using lib talking points; it makes you look foolish like the rest of the libs.
You're welcome.
For far too long Progressives in this country have placed entirely too much emphasis on social issues in this country and have become distracted from the unravelling of our economic futures.
The American people need jobs and we must change tax and trade policy that will necessitate consumer goods being made in this country again. Everything from automobiles to computers from phones to sneakers,steel and tires, aircraft parts,solar panels and wind turbines must be manufactured in the United States.
American corporations bottom lines will be reduced but are those bottom lines more important than the overall economic and fiscal health of the nation?
We need leadership and voices from across the country to come together,to organize,energize and mobilize the American people to action.
Job creation in America is the most important issue of our time and yet we see very little in the way of substantive and effective action coming from Washington.
It is time for the American people to act, We must demonstrate,we must protest,and we must boycott to create change. Our future will be determined by what we are willing to do today.
But as far as I can tell, at least the plan your President originally proposed ("Green manufacturing") sounded worth trying. One can argue about the details, but the general idea was right IMO.
Same can be said about your health care system: One can argue about the details, but certainly even bureaucrats can't be as inefficient as a private sector which right now fleeces per capita twice as much out of you as any other nation and still produces worse results, not even to mention the lack of universal coverage.
Don't get me wrong: Your POTUS is no rock- star, as some of my fellow Europeans seemed to have believed. He, like every other POTUS would always look for the US first, not for ours. But that's fine with me, because similar action we expect from our politicians.
Back to the issue at hand: Even outside the US it is well known how politically divided you are. But when these ridiculous protests against him began on the street it seems that those who should have matched these protests with signs of support where rather sitting at home discussing the finer points of his proposals and thus left the agenda- setting to others.
As I said, he is no rock- star. And he acts like a politician, he seeks for majorities and approval..
Why should we care about manufacturing at all? Those are jobs for an economy that doesn't exist anymore. It's like people in England complaining about the lack of opportunity for shepherds at the dawn of the Industrial Revolution. Our corporations choose to offshore jobs because it's the most efficient thing to do, if we're going to continue with capitalism, we're going to have to allow market forces to influence the most efficient outcome. Oh, and capitalism is responsible for more innovation and genuine improvement in the human condition than any other economic system in the history of man because it's based on realistic human behavior. Trying to change that is doomed to failure, as the proponents of communism found out. We as a species simply always look out for #1, and channeling that rather than fighting it is the right way to go. You expect people to make personal sacrifices for the abstract/arguable benefit of their fellow countrymen? Good luck with that.
As a medical device manufacturer I will address point 1 & 2 simultaneously. My company operates on a 25% profit margin pre-2011. However due to the increase regulation, taxes and administrative costs associated with compliance with Obamacare my costs have risen 20% in 2011. Thus leaving me with a profit margin of 5%.
However, union demands and labor costs will account for an additional 7% increase in wages and manufacturing costs by the end of 2011.
Consequently, unless I move to offshore production the company will have a 2% net loss.
The math doesn't add up. Unless cooperate taxes are reduced, Obamacare is repealed and unions are brought under control jobs will continue to move offshore.
Obama doesn't get it because he's never had any executive experience and knows knows nothing about basic economics.
Your taxes are lower now than they have been since 1950.
Exactly what union demands are you speaking about?
Without that information your comments are no more than right wing talking points used as a means of justifying your lack of patriotism when you ship American jobs overseas.
union members and autoworkers in particular have made major concessions in wages and benefits
Not sure what unreasonable demands he is talking about?
I don't know about "truthand values" but I like air that is safe to breath and water thats safe to drink. 0ffshoring moves the worlds safest and cleanest factories to places where they don't care about that, problem with that is that pollution doesnt stop at borders.