Obama's second term foe - China: Column
Obama's second term foe - China: Column
January 20, 2013
Our relationship with the Asian giant is diplomacy at the expense of our middle class.
After President Obama's inauguration on Monday, he'll have plenty to do immediately – confirmation battles to fight, a simmering debate over gun control and another debt limit crisis to navigate. When the smoke clears, pundits will parse the results to decide how successful the White House has been in pursuing its early agenda.
But millions of Americans around the country will be focused on a more unambiguous measure of success: The number of jobs that this administration helps create.
This White House understands the simple power behind that sentiment. It's what got a promise to double exports by 2014 and create 1 million new manufacturing jobs by 2016 into the president's convention speech in September.
Those are relatively modest goals when you consider the 5.5 million manufacturing jobs shed last decade. But they're a step in the right direction, especially in the face of mounting evidence that unwise trade policies helped put us in this economic hole in the first place.
Consider a recent working paper from two economists – the Fed's Justin Pierce and Yale's Peter Schott – that found granting China a much-coveted normalized trade status in 2000 can be directly linked to massive domestic job loss in the manufacturing sector.
When Congress extended Permanent Normalized Trade Relations (PNTR) to Beijing in late 2000, it didn't do much directly to reduce tariffs on Chinese exports. But it did let everyone know that high tariffs were a thing of the past. That certainty, in turn, gave businesses the go-ahead to send millions of middle-class jobs offshore. Pierce and Schott conclude that roughly 30% of American manufacturing job loss since 2001 can be tied to the China PNTR decision.
We've heard it before and you will hear it again: Liberalized trade will lead to a freer China. But most human rights observers would say evidence of growing Chinese democracy has been scant. In fact, Beijing's wealth has only enhanced its tools of oppression.
What did we get in return for this deal? A trade deficit with that country that keeps shattering records ($295 billion in 2011, $290 billion through November 2012), fueled by a glut of artificially cheap imports that are swamping stateside competition. But it's hard for working families to benefit from the modestly lower prices on the shelves of retail chains when household incomes have been drastically reduced by the loss of a steady paycheck.
Increasingly, the evidence suggests this is diplomacy at the expense of our middle class. But if trade is diplomacy, then at some point we have to stop relying on America's ability to simply consume its way through its problems.
Manufacturing isn't simply putting the bits and pieces together. Designing a product and building it next door promotes a creative synergy that improves production and, in effect, incubates the next big idea. When you give up your manufacturing base, don't be surprised to see other jobs follow.
President Obama said as much in a visit to a Daimler plant in Detroit in December. The rhetoric suggests the president gets it. But to turn rhetoric into reality, there are concrete steps he can take in his second term. I suggest the following:
We should invest more education funding in vocational and technical skills programs; we should demand Buy American clauses in all procurement for federal infrastructure projects; we should reshape the tax code to provide incentives for inward investment and job creation; and we should demand action from the Administration and World Trade Organization when trade cheats like China illegally subsidize competitive industries and manipulate their currency to artificially cheapen their exports, just like they do now.
Politicians recognize the power behind the support for American manufacturing – it's what made trade and jobs hot topics on the campaign trail and made the American factory floor the most ubiquitous image of political advertising during the last election campaign. But it's long past time we did something about it. America makes things. But we certainly could and should be making more.
Scott Paul is President of the Alliance for American Manufacturing (AAM).