EXTREMES BEGET EXTREMES
A Balanced Approach to
Global Trade and the
Role of Governments
Free Trade
2
Currency Manipulation
“Greater scope for market forces
to determine the value of the
Yuan would reduce an
important distortion in the
Chinese economy, namely the
incentive for Chinese firms to
focus on exporting rather than
producing for the domestic
market.”
Federal Reserve Chairman,
Ben Bernanke, December 2006.
3
Currency Manipulation
• Nations undervalue their own currency to gain an
unfair advantage in global trade.
RESULT:
• Exports are cheap, and imports are expensive. They
sell their goods, but don’t buy others’ goods.
• China undervalues its currency up to 40% in relation
to the U.S. Dollar to make its goods cheaper. People
buy Chinese goods because they are cheaper than
the same goods made in America.
If China ended its currency manipulation, the U.S. economy
could grow by as much as $250 billion and 2.5 million new jobs!
4
Currency Manipulation
How China Does It:
1. Purchasing American Treasury Bills
This creates debt for America and floods our markets with
cash, which when done over time helps maintain the
undervalue of the yuan.
2. “Surrender Requirements”
People with dollars in China are forced to turn them in for yuan
to the Central Bank, which controls the exchange rate.
3. Government Control of Business
Many corporations are owned or controlled by the government,
which uses profits to buy more financial instruments to control
the currency value.
America’s trade deficit with China is increasing by about
$1 Billion per day!
5
6
U.S. Dollars per Chinese Yuan
Exchange Rate (1993-2010)
0.18
0.17
0.16
0.15
0.14
0.13
0.12
0.11
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
Sep-95
Jun-95
Mar-95
Dec-94
Sep-94
Jun-94
Mar-94
Dec-93
Sep-93
Jun-93
Mar-93
0.10
U.S. Dollars per Yuan
7
Source: Pacific Exchange Rate Service
U.S. Dollars per Malaysian Ringgit
Exchange Rate (1993-2010)
0.45
0.40
0.35
0.30
0.25
0.20
0.15
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
Sep-95
Jun-95
Mar-95
Dec-94
Sep-94
Jun-94
Mar-94
Dec-93
Sep-93
Jun-93
Mar-93
0.10
U.S. Dollars per Ringgit
8
Source: Pacific Exchange Rate Service
U.S. Dollars per Thai Baht
Exchange Rate (1993-2010)
0.045
0.040
0.035
0.030
0.025
0.020
0.015
0.010
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
Sep-95
Jun-95
Mar-95
Dec-94
Sep-94
Jun-94
Mar-94
Dec-93
Sep-93
Jun-93
Mar-93
0.005
9
Source: Pacific Exchange Rate Service
U.S. Dollars per Baht
U.S. Dollars per Indonesian Rupiah
Exchange Rate (1995-2010)
0.0005
0.0004
0.0003
0.0002
0.0001
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
0.0000
U.S. Dollars per Rupiah
10
Source: Pacific Exchange Rate Service
U.S. Dollars per Japanese Yen
Exchange Rate (1993-2010)
0.014
0.012
0.010
0.008
0.006
0.004
0.002
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
Sep-95
Jun-95
Mar-95
Dec-94
Sep-94
Jun-94
Mar-94
Dec-93
Sep-93
Jun-93
Mar-93
0.000
U.S. Dollars per Yen
11
Source: Pacific Exchange Rate Service
U.S. Dollars per South Korean Won
Exchange Rate (1993-2010)
0.0014
0.0012
0.0010
0.0008
0.0006
0.0004
0.0002
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
Sep-95
Jun-95
Mar-95
Dec-94
Sep-94
Jun-94
Mar-94
Dec-93
Sep-93
Jun-93
Mar-93
0.0000
U.S. Dollars per Won
12
Source: Pacific Exchange Rate Service
U.S. Dollars per Taiwanese Dollar
Exchange Rate (1993-2010)
0.045
0.040
0.035
0.030
0.025
0.020
0.015
0.010
0.005
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
Mar-99
Dec-98
Sep-98
Jun-98
Mar-98
Dec-97
Sep-97
Jun-97
Mar-97
Dec-96
Sep-96
Jun-96
Mar-96
Dec-95
Sep-95
Jun-95
Mar-95
Dec-94
Sep-94
Jun-94
Mar-94
Dec-93
Sep-93
Jun-93
Mar-93
0.000
U.S. Dollars per Dollar
13
Source: Pacific Exchange Rate Service
U.S. Manufacturing Jobs
(in thousands)
20,000
17,500
15,000
12,500
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
10,000
Nearly 6 million manufacturing jobs have been lost since
manufacturing last peaked in 1998
Source: U.S. Bureau of Labor Statistics, Not Seasonally Adjusted
14
14
U.S. Manufacturing
As a Percentage of Gross Domestic Product
% of U.S. GDP
24.0%
20.0%
16.0%
45%
Drop
12.0%
2008
Source: US Department of Commerce, Bureau of Economic Analysis (BEA). Manufacturing Industry value added as a percentage of GDP (Apr. 9, 2008).
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
8.0%
15
The State Crisis: Manufacturing Jobs Lost
June 1998 to September 2010
16
Wal-Mart’ing of America
Employment in Manufacturing vs. Retail Sectors
Manufacturing
Retail
Employees (Millions)
20
16
12
Less Manufacturing
Jobs now than any
time since 1941!
8
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
Average Manufacturing Job: $23.31 /hr
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
1958
1956
1954
1952
1950
4
Average Retail Job: $15.70 /hr
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics Survey, Not Seasonally Adjusted; Average hourly Earnings of All Employees
17
World Exports
As a Percentage of World Gross Domestic Product
25%
17.1%
20%
29.9%
20.0%
25.2%
30%
20.9%
% of Global GDP
35%
27.1%
29.1%
32.6%
40%
15%
2010
2008
2006
2004
2002
2000
1998
Source: International Monetary Fund, World Economic Outlook Database, Oct. 2010
1996
1994
1992
1990
1988
1986
1984
1982
1980
10%
18
Manufacturing Jobs vs. Trade Deficit
(2000-2010)
900
800
17000
Trade Deficit
700
16000
600
15000
500
400
14000
300
Manufacturing Jobs
13000
200
12000
100
11000
U.S. Trade in Goods Deficit in Billions of Dollars
(Over Previous 4 Quarters)
U.S. Employees in Manufacturing (in Thousands)
18000
0
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Source: U.S. Census Bureau, U.S. Bureau of Labor Statistics
19
U.S. Trade Deficit
(1997-2010)
900
Billions of Dollars
800
700
600
500
400
300
China will
200
Account for
almost 40% of
the U.S. Trade
Deficit in 2010!
100
2010
2009
2008
2007
Source: U.S. Trade in Goods with World (Seasonally Adjusted) in Billions of Dollars U.S. Census Bureau
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
20
U.S. Trade Deficit
Top Trading Partners 1997-2010
255 %
$640
600
500
$260
$79
100
0
$56
China
Japan
94 %
200
1997
359 %
300
368 %
400
423 %
Billions of Dollars
700
2010
$67
$30
EU
Canada
Mexico
U.S. Trade in Goods with World (Seasonally Adjusted) in Billions of Dollars, estimated through Dec. 2010; U.S. Census Bureau
World
21
Sept. 2010
120
100
80
60
40
Value of U.S. Dollar, Trade Weighted Index
Value of U.S. Dollar (1973-2010)
(as valued against currencies of major U.S. trading partners)
140
20
0
-1
ay
M 09
ar
M 8
0
nJa 6
-0
ov
N 5
0
pSe 4
l-0
Ju 03
ay
M 2
-0
ar
M 1
0
nJa 9
-9
ov
N 8
9
pSe 7
l-9
Ju 96
ay
M 5
-9
ar
M 4
9
nJa 2
-9
ov
N 1
9
pSe 0
l-9
Ju 89
ay
M 8
-8
ar
M 7
8
nJa 85
ov
N 4
8
pSe 3
l-8
Ju 82
ay
M 1
-8
ar
M 0
8
nJa 8
-7
ov
N 7
7
pSe 6
l-7
Ju 75
ay
M 74
ar
73
nM
Ja
22
Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index)
Trade Deficit vs. Value of U.S. Dollar
(2000-2010)
900
140
130
Trade Deficit
700
600
120
500
400
110
300
Value of U.S. Dollar
200
100
(Trade Weighted)
Value of U.S. Dollar Trade Weighted Index
U.S. Trade in Goods Deficit in Billions of Dollars
(Over Previous 4 Quarters)
800
100
0
90
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Source: U.S. Census Bureau, U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index)
23
Manufacturing Jobs vs. Value of U.S. Dollar
(2000-2010)
140
Dollar Spikes Jobs Vanish
17000
130
16000
Value of U.S. Dollar
15000
120
(Trade Weighted)
14000
110
13000
100
Manufacturing Jobs
12000
11000
Value of U.S. Dollar Trade Weighted Index
U.S. Employees in Manufacturing (in Thousands)
18000
90
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Labor Statistics
24
The Dollar Goes Up –
Manufacturing Profits Go Down!
140
15%
130
14%
120
Value of U.S. Dollar
13%
(Trade Weighted)
12%
110
11%
Manufacturing Profits
100
(As Share of National Income)
10%
9%
Value of U.S. Dollar Trade Weighted Index
Profit Share of National Income in Domestic Manufacturing
16%
90
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Economic Analysis, Nati’ Income w/o Capital Consumption Adj. by Industry
25
Declining U.S. Industry
•
•
•
•
•
•
•
Machinery
Autos
Textiles
Lumber/Paper
Chemicals
Aerospace
Metals
26
70%
78%
140,000
64%
Fiber, Yarn &
Thread
Flat Glass and
Other Blown Glass
Audio & Video
Equipment
Bare Printed
Circuit Boards
Light Trucks and
Untility Vehicles
Broadwoven
Fabrics
27
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics Survey, Not Seasonally Adjusted
53%
62%
58%
80,000
Manufactured and
Mobile Homes
Computer Storage
Devices
1998
2010
0
51%
60,000
72%
100,000
Manufacturing Jobs
Endangered Manufacturing Industries
120,000
40,000
20,000
United States Steel Imports
Steel Imports (million metric tons)
$36.6
41.1
$29.0
30.2
29
$31.3
2008
$16.8
14.7
$23.3
2007
$10.4
2002
$21.4
21
2001
$12.1
2000
$11.5
1999
$14.9
Source: U.S. Census Bureau
$12.6
$16.3
1998
29.1
32.5
27.4
29.7
32.4
34.4
37.7
45
40
35
30
25
20
15
10
5
0
Value (in billions of dollars)
2003
2004
2005
2006
2009
28
Chinese Steel Production
(1998-2010)
700
Estimated
630 mmt in 2010
Millions of Metric Tons
600
500
400
300
200
100
2010
2009
2008
2007
2006
2005
Total Production of Crude Steel – World Steel Association, Steel Statistical Yearbook 2010
2004
2003
2002
2001
2000
1999
1998
0
29
Chinese vs. U.S. Steel Production
in Millions of Metric Tons
600
500
400
300
200
100
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
China
Total Production of Crude Steel – World Steel Association, Steel Statistical Yearbook 2010
U.S.
30
U.S. - China Direct Investment
(2000 – 2009)
60
China Direct
Investment in U.S.
Billions of U.S. Dollars
50
U.S. Direct
Investment in China
40
30
20
10
Source: The U.S. Bureau of Economic Analysis, Direct Investment, Direct Investment Position on a Historical-Cost Basis
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
31
The Dollar Goes Up –
Manufacturing Investments Go Down!
140
Value of U.S. Dollar
15%
(Trade Weighted)
130
14%
120
13%
110
12%
100
11%
90
10%
80
9%
70
8%
60
Domestic Manufacturing Investment
(As Share of Investment in Private Fixed Assets)
7%
Value of U.S. Dollar Trade Weighted Index
Share of Manufacturing Industry Investment in Private Fixed Assets
16%
50
6%
40
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Economic Analysis, Investment in Private Fixed Assets by Industry
32
The Dollar Goes Up –
Investments Go Overseas!
60
14%
50
12%
Domestic Manufacturing Investment
10%
40
(As Share of Investment in Private Fixed Assets)
8%
30
6%
20
4%
10
U.S. Direct Investment in China (Billions of Dollars)
Share of Manufacturing Industry Investment in Private Fixed Assets
16%
U.S. Direct Investment
in China
2%
0%
0
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Economic Analysis, Investment in Private Fixed Assets by Industry
33
Major Issues in International Trade
• Currency manipulation
– China and other Asian countries keep the value of their
currencies artificially low to make their exports cheaper and
imports more expensive
• Subsidies
– China has provided billions of dollars in subsidies, directly and
indirectly, to its steel industry
• Attempts to weaken the trade laws
– Multinational corporations that want to be able to rely on dumped
and subsidized merchandise
• Climate change
– Some solutions would encourage U.S. manufacturing to move to
China and elsewhere, leading to greater greenhouse gas
emissions
34
Trade Distortions: Do More.
Determining the best path forward for America is not just the responsibility of the
government and major corporations. The ultimate responsibility for the future of
America lies with informed American voters.
Your vote is your voice, and you have the right to be heard. Speak up for your jobs,
your families, your country, and your future.
Know More. Do More. Nucor.
35