Why Competing with China Matters

Posted by spaul on 01/25/2011

Alliance for American Manufacturing (AAM) Executive Director Scott Paul has published the following response to a piece in today's Washington Post by Ezra Klein.

Ezra Klein could not be more wrong about our competition with China.  I agree with Ezra that competition should ultimately be about what good we can do for America—innovation, jobs, quality of life.  But, Ezra misses the mark on some key points, and gives his readers a very false impression of the real data.

Klein claims that we don’t really compete with China all that much, which is incredibly misleading, as a cursory look at trade statistics would reveal.  We compete head-head with China on a startling array of goods: autos and auto parts (increasingly so), energy-intensive industries (steel, glass, paper, etc.), clean energy goods, high tech goods (like semi-conductors), machine tools, as well as growing competition in capital goods—and that’s just the tip of the iceberg.  This is the heart of our manufacturing base and its value chains.  Any look at two-way trade with China reveals that it’s not simply a case of America sending high-value products to China and getting cheap plastic stuff in exchange.  The reality is much more nuanced.  China sends a staggering range of advanced technology products to the United States.  And, believe it or not, some of our fastest growing exports to China are scrap metal, scrap paper, and raw commodities—hardly job engines of the future.

Ezra’s analysis that China is competing with other Asian economies while we are competing with Canada and Western Europe is just absurd and old-fashioned.  China, Germany, and Japan are really the only industrial powers that can come close to matching our output, and we compete head-to-head on many high-value manufacturing goods.  Globalization and trade can benefit a whole lot of folks, but when it is shaped by mercantilism on the part of China, industrial policies on the part of Germany and Japan, as well as apathy on the part of America, the results will be skewed.  Ultimately, there are limits to global consumption, and we will only be able to capture those limited markets if we pursue quality and price. There is no guarantee that everybody wins.  Competition, like it or not, is in many respects a zero sum game.   

Ezra insults an extraordinary number of blue-collar workers—perhaps unintentionally—by staking out the elitist claim that we really don’t want to make a lot of the stuff that China makes.  So, we don’t want to make machine tools? Autos? Robotics? Wind turbines? Solar panels? Semiconductors? High-speed rail engines?  This isn’t a question of buggy whips vs. airplanes.  The blue collar workers I talk to take pride in their work and the fact they earn a family-supporting wage.  We can’t wave a magic wand and make every production worker a health care technician, massage therapist, or screenwriter, or for that matter, domestic policy writer.  Nor should we.  I suppose it’s easy to dismiss factory work when you do not engage in it.  This is the type of arrogance that is infuriating to middle class workers who seek answers and instead receive lectures and insults—intended or otherwise.

Finally, American innovation and job creation do not take place in a vacuum.  Dismissing the role of China, which has a large, oppressed workforce, heavy government support for industry, an undervalued currency, and other classic mercantilist policies, would be ill-advised.  And, this is not just an economic competition.  It is, in large measure, a competition of political systems, and perhaps some day soon, spheres of military influence. The ability of America to create jobs and innovate erodes dramatically if we don’t invest properly here in education, research, and infrastructure.  But it will erode even faster if we permit China’s mercantilism to go unaddressed.

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