Trade Deals Pass Congress — China Currency Bill More Important Than Ever

Congress just passed three more NAFTA-like trade deals, so our country’s trade deficit is going to get even worse. And pressure on working people to accept pay and benefit cuts and longer and harder working hours is going to get even worse. And the rewards to the top 1%, at the expense of the rest of us, are going to get even greater. But we can still win the fight over China’s manipulation of its currency. If we win this it lessens the difference between prices of goods made there and goods made here and can bring some jobs, factories, countries, industries and wealth back to the 99% of our country that doesn’t benefit from these trade deals.
Message Of Trade Deals — Loud And Clear
The message of these trade deals is loud and clear: shut up and accept pay and benefit cuts and longer and harder working hours. And if you don’t like it we will move your job to a country where working people can’t complain. In fact, labor leaders are regularly murdered in Columbia, one of the countries that Congress just approved a trade deal with. If approving a trade deal with a country in which labor leaders are killed for trying to make things better for working people doesn’t send a loud and clear message to working people here, I don’t know what does.
China Currency
China manipulates its currency to keep it “weak” (low) compared to the “strong” dollar. This means that goods made in China cost much less – up to 40% less – than goods made here, even before any wage differentials, exploitation of the environment, trade cheating, special subsidies and other trade violations are taken into account. China does this in order to capture the jobs, factories, companies and industries that make a country strong. We have let them do this for many years, leading to the economic situation we find ourselves in today.
One reason this continues is that big companies can threaten workers here with moving a job or factory there if they don’t go along with big cuts in wages and benefits and working standards — or just move the factory or company to take advantage of the differential. This benefits a wealthy few in the short term, and China in the long term after those wealthy few have sold the rest of out and cashed out for themselves.
This trade situation with China, while greatly enriching the top 1% here (and there), has hurt the rest of us so much, and drained so much wealth from the country, that even some Republicans are willing to support doing something about it. There are 61 Republican cosponsors of the bill to confront China over their currency manipulation!
Wall Street Sides With China
The Club For Growth, a Wall Street front group, has made the China currency bill a “litmus test.” They have said they will oppose any Republicans who vote for it, siding with America against China. From Politico recently, Club for Growth warns GOP on China currency bill,

The influential Club for Growth is pressuring Republican presidential candidates and lawmakers to oppose bipartisan legislation cracking down on China’s currency policies.
… The Club for Growth has urged lawmakers to vote no on the bill, warning that the vote will be included in the group’s 2011 Congressional Scorecard, used to measure how fiscally conservative they are.

The Wall Street group says we should instead pass tax cuts, deregulate controls over how businesses behave toward the environment, workers, customers and their communities, and get rid of unions so the United States can be more like China, which they say would bring companies back.
What To Do
We need to get the bill voted on in the House of Representatives. Speaker Boehner is siding with China and refusing to let this bill come up for a vote. But there is a “discharge petition” circulating, that can force the bill to the floor for a vote. Click here for a list of 61 Republicans who cosponsored this bill but have not signed the petition to bring it up for a vote. Call these 61 Representatives and tell them you want them to help bring the bill to the House floor for a vote.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Jackson Mich Keep It Made In America Town Hall — An Energized Event

Yesterday I was in Jackson Michigan to attend the 2010 “Keep it Made in America” Town Hall Tour meeting. It was a very well-attended event, and everyone I spoke with seemed energized because someone is out there talking about what they consider an important issue, and thought that manufacturing is vitally important to the country, for jobs, and so we can pay our bills.
Jackson
Jackson, for your information, makes a claim to be the city where the Republican Party was founded in 1854. One thing is for sure, it was a very, very, very different party then.
I last visited Jackson three years ago. The downtown was dreary, and I remember walking around trying to find a place to buy a sandwich, giving up and ending up at a dreary fast-food place outside of town. Like Flint, things appear to be changing. In Flint is has been public/private government/business partnerships that has helped revive the downtown and the area. The University of Michigan has opened a Flint campus right downtown and you can feel the difference. I’m moving fast on this road trip so I didn’t have time to investigate what is behind the different feeling in Jackson. But I had trouble getting to flint because I kept passing all these highway construction zones with ARRA (stimulus) signs. The official U-3 unemployment rate is down to 12.8% from 15.2 earlier this year.
The Town Hall
The meeting was in the Commonwealth Community Center, downtown. The large room was full, approx 275-300 attendees. I asked around and things were getting started and people were getting seated and it was a diverse audience politically, including some Tea Party supporters. Everyone I spoke with seemed energized because someone is out there talking about what they consider an important issue, and thought that manufacturing is vitally important to the country, for jobs, and so we can pay our bills. A recent poll found that 74% of tea party supporters want government strategy for manufacturing
The format was speakers, a brief PowerPoint presentation, buffet dinner and a panel on manufacturing featuring local business, labor and others. Following is a brief summary trying to catch the essence of what some of the speakers said.
Jackson’s Mayor Karen Dunigan gave a very short welcoming talk, saying “Every day politicians speak about jobs, and yet we are still losing jobs.”
Next, Lansing Michigan’s Mayor and candidate for Governor Virg Bernero spoke, saying that when they say we are done with manufacturing, that it is a thing of the past, they are saying we are done with America being a great country. You can’t just have consumption, you have to make things. It isn’t gross domestic consumption, it is gross domestic product, with “product” being a key word.
Congressman Mark Schauer, MI-7, “Cash for Clunkers invested in auto industry, got our steel plant to reopen, 3 shifts of workers now here in Jackson, we need to do more of that, fight for jobs in Michigan,” and he had a debate in an hour gotta go. “We need to make decisions about educating our workforce, trade, make sure our dollars are not stimulating jobs in China… We were the arsenal of democracy, and China is spending twice what we are spending on renewable energy technology.”
The Panel

  • Sharon Collins, local restaurant owner: The Pickle Barrel Deli
  • Mark Gaffney, President Michigan AFL-CIO
  • Amanda Proctor, Exec Director, Shop Rat Foundation
  • Bill Rayl, Jackson Area Manufacturers Association, also on the Council of the National Association of Manufacturers
  • Moderator: Scott Paul, Alliance for American Manufacturing
  • From notes:
    The Shop Rat Foundation offers hands-on skilled trade education to kids, creating the next generation of proud skilled workers and citizens (shop rats).
    Rayl: The federal government needs to step up in this country and realize that the gloves are off on the global playing field, it’s not a playing field it’s a war field, they’re cleaning up, free trade is one thing fair trade is another. We need government to help us out, to fight these trade practices.
    We need to be able to go out there and compete. We want ot do it. China has a big market for us when we can play fair but they hamstring us, one hand tied behind our back, Chinese government is fighting us all the time.
    Scott: There may be difference between business and labor on a lot of issues but on American manufacturing there is very little disagreement, especially on holding China actable, R&D tax credit, there is a lot of support for doing all of it.
    Rayl: Manufacturing is not a Democrat or Republican issue, it’s an American issue, we can make anything you throw at us, we have great skilled workers out there, companies that want to keep those people in good paying jobs, give health care and all that stuff, but we can’t do it if we can’t compete on an even playing field.
    Gaffney: A trade agreement that lets a company just pack up a factory and move it to another country just because wages are lower, leaving behind a devastated community and unemployment, is just bad policy.
    As the country tries to get out of bad economic times hopefully the people in Washington figure out that manufacturing is the way to help. IF there aren’t good-paying jobs for people to go back to, what are we going to do?

    Amanda:
    Q) Filling a need, do you think what we have now with our high schools and Community Colleges is enough?
    A) Definitely some great programs out there. Lot of great but definitely not enough, we’re trying to push, we need to focus on education more than we are. A lot of people don’t think it’s not worth the time to train a 6th grader, don’t think that far back, but I want to stress you’ve got to get them young, get them interested, without middle and high school programs going on anymore kids don’t know about trade skills, they’re afraid of tools, but get them doing that, they are more confident, they will go out get a job or go on to vocational schools.
    Manufacturing In Michigan
    I guess I don’t have to tell you that Michigan is known for automobiles. But manufacturing in Michigan was wiped out in the 2000-2008 period. There were 897,100 people working in manufacturing in Michigan in 2000. There are 466,400 people working in manufacturing in Michigan now.
    Other Jackson Town Hall Resources
    MLive.com covered Virg Bernero speaking at the rally.
    Steve Capozolla was live-blogging Jackson’s town hall event last night.
    A local radio station has posted some audio from the event here.
    Details of the Keep It Made In America Town Hall Tour
    And this: American Made Shopper had a display at the meeting. They only sell items that are Made In America.
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
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    How “Free Trade” Led To Currency War

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    Lyndon Johnson is said to have commented that the press is like birds sitting on a telephone line. When one flies away, they all fly away. This week they are all flying around squawking “currency war!” But the world has been in a currency/trade war for some time, with only one side fighting and the rest losing. Now the world, on the edge of defeat in that war, sees that China is not “trading” they are taking. So, how to fight back, without (further) blowing up the world’s economy?
    The world can’t get to full recovery from this terrible recession without more balanced trade. That is a huge part of the equation. Our trade deficits started with Reagan when “free trade” was used to force concessions from labor by threatening to move the factories to non-democracies, away from the wage and environmental protections We, the People fought so hard to achieve. The wage squeeze resulted in unprecedented concentration of wealth – and loss of buying power for the rest of the population. Under ‘W’ Bush, Wall Street used China for short-term profits and bonuses and China used the power that brought to buy advantage around the world. So now the rest of us are living with the long-term consequences of race-to-the-bottom policies. Namely, the bottom.
    That loss of buying power — lack of demand — is holding back recovery. To lift the economy we need to lift wages. We can’t get there without challenging current arrangements with China.
    Yves Smith sums up this “full boil,” in Currency War Threats Escalating, at naked capitalism,

    Last week, the simmering threat of trade disputes erupted into a full boil when Brazil’s finance minister Guido Mantega said that national governments around the world were weakening their currencies in an “international currency war” to gain competitive advantage. Mantega stressed that Brazil was prepared to back his words with action to lower the value of the Brazilian real. Yesterday, IMF chief Dominique Struass-Kahn warned that countries were beginning to use their currencies as “a policy weapon” in a Financial Times interview.

    So does the world now go into a full-on, chaotic currency/trade war? Martin Wolf weighs in at the Financial Times, How to fight the currency wars with stubborn China, (Click through to see the charts)

    Has the time for a currency war with China arrived? The answer looks increasingly to be yes. The politics and economics of an assault on Chinese exchange rate policy are increasingly convincing. The idea is, of course, deeply disturbing. But I no longer believe there is an alternative.

    Wolf runs down the issues.
    Currency manipulation? “If a decision to invest half a country’s gross domestic product in currency reserves is not exchange rate manipulation, what is?”
    Does it matter? “By keeping its real exchange rate down, China subsidises production of its exports and import substitutes. Since China is now the world’s biggest exporter, this has to be a significant distortion of world trade.”
    What might China reasonably be asked to do? Stop the manipulation and increase domestic demand. “[T]he menu of possible options for the Chinese authorities could include a cap on the intervention, an end to sterilisation of the monetary consequences and targets for real domestic demand, household consumption and the current account.”
    Can other countries shift China’s policies, with limited collateral damage?

    Negotiation remains a hope. The rest of Group of 20 leading countries should unite in calling for these changes. But if negotiation continues to fail, alternatives must be considered. Import surcharges are one possibility. … countervailing currency intervention … affected countries could prevent other countries from purchasing their financial instruments, unless the latter offered reciprocal access to their financial markets.

    OK, about that “without (further) blowing up the world’s economy” I mentioned at the top. Instead of tariffs and other trade sanctions Wolf suggests currency-rate counter-policies,

    “I find ideas for intervention in capital markets far more attractive than those involving action against trade. … A trade war would be very dangerous. Insisting that China stop purchasing the liabilities of other countries so long as it operates tight controls on capital inflows is, instead, direct and proportionate and, above all, moves the world towards market opening.”

    Will China retaliate by ceasing to buy US bonds? If they do, that would be a good thing.

    Some fear that a cessation of Chinese purchases of US government bonds would lead to a collapse. Nothing is less likely, given the massive financial surpluses of the private sectors of the world and the continuing role of the dollar. If it weakened the dollar, however, that would be helpful, not damaging.

    Yves Smith weighs in on Wolf’s recommendations,

    Yves here. I see the odds of things going Wolf’s way as close to zero. China has no intention of “opening” its markets to investment bankers; it is not about to have its capital markets colonized, and it lacks the domestic finance skills to cope. China has made a close study of the errors Japan made in its peak years, in the 1980s, and one was the overly rapid deregulation of its financial sector….in response to US pressure.
    Similarly, the impetus to put pressure on China IS coming from the trade front, due to high unemployment. Action on the trade/tariff front looks like a more direct remedy, even if, as Auerback points out, the lags in trade are long. And with more economists lining up behind the crowd-pleasing idea of getting tough with China, the pressures and the intellectual cover, are in place.
    Even though no one wants a trade war with China, it is not beyond the real of possibility that we wind up there. … he odds of miscalculation have to be magnified when operating across a large cultural divide.

    I wrote the other day, and want to repeat: There are always winners and losers. Right now in China there are currently winners and losers from the manipulated currency rate. If rates adjust to where they should be China might lose some jobs, but Chinese workers will immediately be higher-paid relative to the world than they had been, and Chinese consumers will also be more able to buy things made elsewhere.
    Right now those in control of industries that are moving to China are winners and those in China who want higher pay and want to import are losers. And as is the way of the world the winners in China are fighting to keep their advantages, while the losers want change to occur. And outside of China the winners are fighting to keep their advantages, while the losers want change to occur.
    But if China starts bringing its currency to market rates the world’s winners and losers will be the winners and losers for the right reasons. It is time for China to move on from currency manipulation.
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