Manufacturing and Trade
Why activism is essential
The Manufacturing Sector
• By itself – the 5th largest “economy
globally
• Employs 14.3 million directly, millions
more indirectly. (Impacts 44 million jobs)
• Consumes over 60% of R&D in U.S.
• Is the country’s engine of growth and
wealth
• And, the sector is in big trouble
The Problem Statement
Manufacturing in this country is subject to
massive regulation, pays for social issues
handled by governments elsewhere, is
under attack by well orchestrated offshore
opponents. Only recently is appropriate
attention being paid to this sector of the
economy. The problems have been
studied to death and the time for action is
now. We are running out of time.
The Evidence
• Studies point to several critical issues
– Department of Commerce Study
– National Association of Manufacturers Study
• They partially address massive job loss
issues in U.S. manufacturing
U.S. Manufacturers Have
Suffered Massive Job Losses
In Millions of U.S. Manufacturing Jobs
18
17
16
15
Source: Bureau of Labor Statistics, Series CES3000000001.
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
14
Department of Commerce Study
• Developed via “field” hearings and academic
•
input – parallels NAM findings but puts
government spin on solutions
Highlighted recommendations – Economic
environment
–
–
–
–
Make tax cuts permanent
Reduce tax complexity and compliance costs
Permanent tax credit for R&D
Expand access to low cost capital
DOC Study
• “Investing in innovation”
–
–
–
–
–
Strengthen patent system
Review federal R&D emphasis
MEP enhancement (manufacturing extension partnership)
Promote technology transfer
Cooperative research programs
–
–
–
–
Regulatory review
Health care costs
Legal reform
Energy legislation
• Lowering Costs Proposals
DOC Study
• Education, Retraining, Economic
Diversification
– Training partnership initiative
– Analyze adequacy of existing training
– Personal re-employment accounts (to finance
retraining)
– Economic adjustment programs for
communities in transition
– “Transform” workforce development programs
DOC Study
• Promote open markets/level playing field
– “Encourage” economic growth, open trade,
capital market access
– “Negotiate” trade agreements that benefit US
manufacturers
– “Enforce” trade agreements/combat unfair
trade
– “Reinforce promotion” of American goods
globally
The DOC Study
• “Enhancing” Government’s Focus on
Manufacturing Competitiveness
– Establish manufacturing council
– New office of Industry Analysis and Trade Compliance
– Foster government coordination
But – something BIG is all but missing.
What Did the DOC Report Really
Say?
• The Critic’s View
– Emphasis on retraining, re-education, re-adjustment
for communities impacted by closure, educational
partnerships
– Words like explore, study, support, promote and
leverage are used throughout recommendations
– Requires legislative changes on health care, tort
reform, establishing new czars and oversight groups
– Opponents don’t want to address the nasty currency
issue and it is also a difficult issue to address given
geo-politics – but to do nothing courts disaster
NAM Study (National Association of
Manufacturers)
• High Corporate Tax Rates
• Cost of Health Benefits
– Health Care
– Private Pensions
• Cost of Litigation
• Cost of Regulatory Compliance
• Energy Costs
• Something BIG is missing
Quantified Findings - NAM
• US manufacturing is “penalized” for being here to the
•
•
•
•
tune of a 22.4% cost disadvantage versus major
competing countries
The trade playing field is not level whether related to
subsidy/dumping or export incentives
Continued lack of correction is creating a serious talent
drain from manufacturing
The damage to manufacturing will impact the industries
that depend on manufacturing as a customer
NAM has numerous recommendations and steps to
address the issues
The Understated Issue
• Currency manipulation and intervention
overwhelms other self imposed cost
disadvantages
• Currency manipulation and intervention
corrupts any concept of comparative
advantage (technology, efficiency,
location, cost)
The Understated Element
Currency Intervention and Manipulation
What is it and what does it do?
• Pic of China
© 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
U.S. Trade Balance with China
1992
0
-20
Billions of $
-40
-60
-80
-100
-120
-140
Source: U.S. Census Bureau.
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
© 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
© 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
© 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
© 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
Currency Manipulation
• Market fundamentals have historically
not set the value of the Asian currencies.
Governments have!
• China’s growing trade surplus and huge
foreign investment inflows would suggest
one thing – a stronger yuan – reality is visa-vis the U.S. dollar there’s been no
change
Manipulated Currency Reserves
AWASH IN DOLLARS
Asia’s growing foreign reserves, in billions of dollars
Country
Year-End 2003
$673.5
Japan
$403.3
China
Taiwan
South Korea
Hong Kong
India
Singapore
Malaysia
Thailand
Indonesia
Phillipines
Source: Reuters
% Change From 2002
$206.6
$155.4
$118.4
$100.6
$96.3
$44.9
$42.1
$36.3
$16.7
43%
41%
28%
28%
6%
43%
17%
30%
6%
15%
5%
The United States’ Current Account
Deficit
$100
Dollars In Billions
$0
($100)
($200)
($300)
($400)
($500)
($600)
'82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03
The Effects of Intervention and
Manipulation
• On Manufacturing
• On Steel
– Imports
– Pricing
• On Other industries
The Dollar Goes Up
Manufacturing Profits Go Down
28
130
Broad Real Dollar Index
(right scale)
24
115
20
100
16
85
12
70
8
4
Profit Share of National Income
in Domestic Manufacturing
(left scale)
1995
1996
1997
1998
1999
55
2000
2001
2002
Sources: Federal Reserve Statistical Release H.10; U.S. Department of
Commerce, Bureau of Economic Analysis, National Income and Product Accounts
40
Overvalued Dollar Devastates U.S.
Manufacturing
Change in:
Stable Dollar (‘91-’96)
Strong Dollar (’97-’02)
Trade Deficit
- $176 billion
- $468 billion
Imports
$800 billion
One Trillion Dollars !
Exports
+ $204 billion
- $80 billion
“Six Years After” Coalition for a Sound Dollar March 2003
150
When the Dollar goes
up so do US Steel
Imports
140
35
30
Steel Import Share
(right scale)
130
25
120
20
110
15
100
10
Fed’s Broad
Real Dollar
(left scale)
90
80
1995
1996
1997
1998
1999
5
0
2000
2001
2002
Sources: Federal Reserve Statistical Release H.10; U.S. Department of
Commerce, Bureau of Economic Analysis, National Income and Product Accounts
Overvalued Dollar Hits U.S.
Agriculture
Change in:
Stable Dollar
(‘92-’96)
Strong Dollar
(‘97-’02)
Exports:
Up $20.9 billion
Down $2.6 billion
Imports:
Up $9.2 billion
Up another $7 billion
Trade
Surplus:
Rose to $27 billion
Fell to $11 billion
Overvalued Dollar Hits U.S. High
Tech
Change in:
Stable Dollar
(’92-‘96)
Overvalued Dollar
(’97-‘02)
Exports
+ $25 billion
- $31 billion*
Imports
+ $17 billion
+ $50 billion
Trade Deficit
+ $35 billion
(‘96)
-$17 billion
(‘02)
Projection for 2002 based on YTD 9/02 figures. *Since 2000 peak.
“Six Years After” Coalition for a Sound Dollar March 2003
U.S. Trade Balance in Advance Technology
30
20
Billions of $
10
2002
0
1999
-10
-20
-30
Source: U.S. Census Bureau.
2000
2001
2003
Investments Are
Down …
$37 Billion
Status Report on the Dollar Issue
• Administration negative on Fair Currency
Alliance 301 Petition
– Says they want to deal with issue in a
different manner
– Petition currently on hold, but will not be held
indefinitely
– Filing of 301 petition dependent on real
progress (can be filed at any time up to bout
60 days prior to election to be effective)
Status Report on the Dollar Issue
• Administration actions to date
– “Jawboning”
– Assigned special treasury representative to
China situation
– Has offered technical support to China to deal
with loan problems, banking infrastructure
problems, economic policy
– China is sending mixed messages
Status Report on the Dollar Issue
• Industry reactions generally skeptical
• FCA will file if no real progress made
• Mission is to keep the heat on the issue
Nucor Trade Position – Trade Laws
• Background
– Prior to 1997/98
– The Impact on Nucor of the Beam Case
• The “201” Case
– What is a 201
– Trade law abuse prior to 201
– Results of 201 (even though terminated early)
• Curtailed illegal trade
• Stabilized markets
• Fostered environment for consolidation
• Created mechanism for global subsidy negotiations
Trade Law Reform
• What are the weaknesses in current laws?
– Repeat dumping (country/product switching)
– Major offenders provided special consideration that
encourages repeat behavior
– The WTO “legislation” problem
• What are the solutions?
– H.R. 2092 and S. 136 (Berry/Lincoln)
– H.R. 3716 (English), S.2212 (Collins, Bayh)
– H.R. 2365 (English, Levin, Houghton, Cardin) and S.
1258 (Bayh) & S. 676 (Baucus) and H. Con. Res. 243
(Levin)
Other Trade Related Reforms
• Import Monitoring, Licensing and
Enforcement
• OECD Update
• The “Byrd Bill” (or CDSOA)
What Can YOU Do?
• Indiana can be a pivotal state in
November!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
A Survey of Indiana Voters
A summary review of the issues,
their importance to voters and
their potential influence on
candidates and races in 2004
Crawfordsville
Profile of the survey sample
• 100% are registered and likely voters
Race
Black
6%
Other
2%
Employment Status
Unemployed
7%
Full Time
44%
Retired
39%
Political Party
Independent
21%
Don't Know
2%
Democratic
36%
Part Time
10%
Republican
42%
White
92%
Identify the one or two most important
issues that the federal government should
deal with.
Iraq War/Terrorism
34%
29%
7%
Jobs/Unemployment/E
conomy
Health Care
4%
Education
Identify the one or two most important issues that
the state government should deal with.
Jobs/Unemployment/Economy
33%
15%
14%
Education
Taxes
8%
Health Care
Have free trade agreements (NAFTA, WTO)
been good or bad for the U.S.?
Don't Know
15%
Good
17%
Bad
40%
Mixed
Results
28%
Has the emergence of China as economic
superpower been good or bad for the U.S.?
Don't Know
16%
Bad
37%
Good
15%
Mixed
Results
32%
Do you agree with foreign governments “pegging”
currencies to U.S.$, making foreign goods less
expensive, and exporting U.S. jobs?
Agree
18%
Don't Know
24%
Disagree
58%
Do you agree or disagree that “outsourcing”
of U.S. service jobs is inevitable and good
for Americans?
Don't know
11%
Agree
14%
Disagree
75%
In today’s economy: Are you worried about
a major wage earner losing a job?
Not
Worried
53%
Worried
46%
Don't Know
1%
For each: A major reason, minor reason, or not a reason
for U.S. job losses to foreign competitors
Foreign
subsidies/incentives
46%
U.S. labor unions
46%
Weak corp.
leadership
Foreign health/enviro
standards low
Consumers put price
1st
30%
24%
48%
64%
21%
81%
10%
15%
17%
59%
15%
20%
26%
Investor/CEO put
profit 1st
11%
9%
10%
14%
6%
2%
11%
6%
4%
Foreign pay much
lower
Major reason
9%
84%
Minor reason
Not a reason
6%
Don't Know
5%
Indiana voters were asked to rate how well national,
state legislatures have done their jobs “lately”
Indiana State
Legislature
31%
43%
18% 7%
1%
U.S. Congress
23%
45%
26%
5%
1%
Excellent
Good
Fair
Poor
Not Sure
Indiana manufacturing job loss
2000-2003
680,000
86,000 manufacturing
jobs lost since 2000
660,000
640,000
620,000
U.S. Bureau of Labor Statistics
600,000
580,000
560,000
540,000
520,000
2000
2003
Manufacturing employment
The issue and the elections
• Indiana can be a pivotal state in November
• 98% of the state’s voters say that the
economy is important to their vote
• Almost 23% of Indiana’s workers are in
manufacturing
Indiana voter
• Almost 90% of eligible voters are
registered (4 million out of 4.5 million)
• Recent Indiana voter turnout: 56%
Indiana Statewide Analysis
2000 Gubernatorial Race
Total Eligible Voters
4,448,000
4,016,440
2,179,413
1,232,525
908,285
56%
Registered Voters
Total Voters
Winner by 324,240 Votes
42%
Loser
Montgomery County Analysis
(92 Counties in Indiana)
Total Eligible Voters
27,863
23,759
13,305
6,570
6,263
51%
Registered Voters
Total Voters
Winner by 307 Votes
49%
Loser
Your vote can make a big
difference
For example
• 650 Nucor employees at Nucor
Crawfordsville
• Voting power – 650 people times 1.7
registered voters per household = 1,105
votes
• 537 votes -- The margin of victory in
Florida in the 2000 electoral college vote
How can I make a difference?
Four Simple Suggestions
1. Ask your elected officials how they are actively
opposing currency manipulation and other unfair
trade practices
How can I make a difference?
Four Simple Suggestions
1. Ask your elected officials how they are actively
opposing currency manipulation and other unfair
trade practices
2. Ask your local officials to pass resolutions and to
write your congressional delegation to urge
immediate action
How can I make a difference?
Four Simple Suggestions
1. Ask your elected officials how they are actively
opposing currency manipulation and other unfair
trade practices
2. Ask your local officials to pass resolutions and to
write your congressional delegation to urge
immediate action
3. Spread the word – to friends, business people,
your community – on the negative impacts of
unfair trade, currency manipulation
How can I make a difference?
Four Simple Suggestions
1. Ask your elected officials how they are actively
opposing currency manipulation and other unfair
trade practices
2. Ask your local officials to pass resolutions and to
write your congressional delegation to urge
immediate action
3. Spread the word – to friends, business people,
your community – on the negative impacts of
unfair trade, currency manipulation
4. Register to vote. Vote for candidates who will
stand up for U.S. jobs
How can I make a difference?
Seek support of elected officials for a
comprehensive, pro-manufacturing
platform
•
•
•
•
Tort reform
Tax reform & tax relief
Containing health care costs
Cost benefit analysis of new regulatory
requirements
American and Indiana Jobs
Make Your Vote Important
• Some foreign governments and
multi-national corporate interests
want you to think your vote doesn’t
count
• Turn the trade war around – help us
restore fair trade with your votes
American and Indiana Jobs
Make Your Vote Important
• Indiana voter survey: 37% see China’s
emergence as economic superpower as
bad for U.S., and 58% disagree with
foreign governments pegging their
currency to U.S. dollar
• Take action and win the trade war