[CTC] How to Make an American Job Before It's Too late

Wed Jul 7 15:58:34 PDT 2010

"Doubling U.S. Exports" Not a Sufficient Jobs Policy: Not Even Close 

Leo Hindery, Jr..Chairman, U.S. Economy/Smart Globalization Initiative at
the New America Foundation

Posted: July 6, 2010 

http://www.huffingtonpost.com/leo-hindery-jr/doubling-us-exports-not-a_b_636
103.html

In his January State of the Union Speech, President Obama first committed
his administration to the goal of doubling U.S. exports within five years.
Mr. Obama said that this will "create two million jobs, about the same
number that the U.S. manufacturing sector has shed during this economic
downturn." His administration spokesman said just the other day that "the
U.S. is on track to hit this export target."

There are three problems with this pledge. First, doubling U.S. exports
would create just 10 percent of the 22 million new jobs we need, and yet,
combined with multiple new free trade agreements (FTAs), it seems to be the
only specific jobs policy coming from the White House. Second, this strategy
wrongly overshadows the more critical imperative of 'import substitution'.
Third, the first three FTAs being proposed -- with South Korea, Panama and
Colombia -- are very poorly negotiated and will cause even more American
jobs to be lost overseas.

As the United States Business and Industry Council (USBIC) just concluded: 

"the President's decision to limit his trade-related recovery policies to
export expansion efforts is too narrow, since the most promising source of
the new orders needed by U.S.-based manufacturers and their workers are home
market shares that have been lost to imports." 

And as the economist Clyde Prestowitz has determined, with plenty of
supporting evidence, "the more free trade agreements the U.S. has entered
into, the bigger America's trade imbalances have become and the less our
allies have seemed to like or pay attention to us".

To appreciate why doubling U.S. exports and rushing into new FTAs isn't at
all the combined overall trade and jobs policy we require as a nation, all
we need to do is look carefully at the pending FTA with South Korea (the
ROK), the largest of the three pending FTAs, and do so against the backdrop
of the dismal results of NAFTA and China's entry into the WTO.

The South Korea FTA

The Obama administration says that it has "made new progress" on the ROK FTA
first negotiated by the Bush administration in 2007 and is now poised to
advance it. Unless, however, "new progress" means a substantial
renegotiation of the simply awful version we have in front of us, then the
Obama administration will be giving a major unwarranted victory to America's
multinational corporations and Korean workers at the expense of America's
workers. And assuredly down the road, we will see results that track the
screw-ups which NAFTA and China-WTO each became, differing only in relative
size. 

Polls in Korea have shown that South Koreans widely believe that their
negotiators bested the U.S. in the 2007 and later negotiations -- and they
absolutely did, especially in automobiles. The FTA would lock in Hyundai
Motor Corp.'s dominance of the South Korea market while locking out American
manufactured vehicles. In beef, the U.S. would largely be excluded from
exporting all but young carcasses. South Korea currently exports each year
to the U.S. about $40 billion of goods and services while we send only $29
billion of our goods to it, and with this already large imbalance it is
complete poppycock for the White House to now threaten American workers (and
Congress) by saying that without the ROK FTA "we stand to lose about $30
billion in [U.S.] exports".

As Mr. Prestowitz has noted, America's trade problems with Korea stem from
"its undervalued currency, the inability of its anti-trust regime to
discipline the predatory business practices of its giant chaebol whose
control of distribution can impede entry of foreign products into the
market, the unwillingness of its courts to enforce intellectual property
rights for foreign companies, and deeply rooted 'buy Korea' attitudes." The
Bush-cum-Obama ROK FTA doesn't address a single one of these issues.

NAFTA and China's Entry Into the WTO

In pushing forward the South Korea, Panama and Colombia FTAs, the
administration is completely overlooking what happens when FTAs are not fair
and balanced and don't provide clear and measurable benefits for American
workers. 

When NAFTA was proposed in 1993, five promises were made about the positive
effects that were certain to come to the U.S., not one of which has been
kept. The two 'biggies,' of course, were that (1) "NAFTA will generate a
U.S. trade surplus with Mexico of around $100 billion between the years 2000
and 2010" -- in fact, our trade deficit with Mexico for these ten years will
be around $527 billion; and (2) "NAFTA will create many new high-wage jobs
in the United States" -- instead, at least two million American workers have
already lost their jobs.

Two recent examples confirm this. First, just this month, we watched
Whirlpool completely shut down its once 10,000-worker plant in Evansville,
Indiana and move the last remaining operations and jobs to Mexico -- when
the workers were asked who's to blame, they said President Bill Clinton for
having negotiated NAFTA. Second, and of even greater impact, we've learned,
also this month, that despite the Obama administration spending $80 billion
last year propping up General Motors and Chrysler, the Big Three U.S. auto
companies, including Ford, are now intending to put most of their new jobs
and plant capacity in Mexico, with NAFTA's imbalances again 'setting the
table.' 

But even more imbalanced has been China's entry into the WTO, which occurred
a decade ago. Back then, President Clinton promised that this would be "a
hundred-to-nothing deal for America when it comes to the economic
consequences" -- instead, our overall trade deficit with China has increased
173 percent since 2000, China is now responsible for around 75 percent of
our overall annual trade deficit in manufactured goods, and we've lost more
than one-third of our manufacturing jobs, mostly to China (and Mexico). 

President Obama is not wrong to want to double U.S. exports -- with every $1
billion increase in the U.S. trade deficit 10,000 to 20,000 American jobs
are lost -- but this achievement would, in his words, create only two
million new jobs and then only over five years, when we need to create 22
million new jobs now. 

There are the five things the President needs to do to bring this all
together:

1. He needs to assert that job creation is the number one objective of his
administration's economic policies. This means, as many of us have been
demanding for years, outspokenly 'valuing manufacturing' and having a
domestic manufacturing policy for America that is as jobs-centric and
mercantilist as the policies of our major trading partners. 

2. He then needs to get his entire administration committed to and acting in
support of his exports and trade agenda. Right now, this isn't even close to
being the case. For example, 

(a) Larry Summers, chairman of his National Economic Council, continues to
say that a job is a job, the loss of manufacturing jobs and goods can be
offset by the export of movies and management consulting and legal services,
and the U.S. economy is strong when GDP grows no matter the real
unemployment rate and the magnitude of our trade deficit, all of which is
complete BS;

(b) James McNerney, chairman of the President's Export Council (and CEO of
Boeing), says that Mr. Obama's export goals won't be met unless the U.S.
finalizes those job-eliminating FTAs with South Korea, Colombia and Panama
while confidentially telling Boeing's suppliers that they should begin
making parts in Mexico; and 

(c) The U.S. Export-Import Bank denied, just last week, loan guarantees to
an Indian utility building a power plant poised to buy $600 million worth of
US-manufactured mining equipment from Bucyrus International, a South
Milwaukee-based company, solely because the project's "carbon footprint" was
deemed too large, even though there are no objective guidelines by which the
Bank could make this judgment.

3. He needs to shift our global trade focus to fair and balanced "bilateral
and regional trade agreements," as the other members of the G-8 just
acknowledged in Toronto, which means dropping his commitment to finishing
the nine-year-old Doha round of global trade talks, which frankly he should
have abandoned the first day of his presidency. In the process, because the
proposed FTAs with South Korea, Colombia and Panama are definitely not fair
and balanced, they need to be radically amended or we need to start each
negotiation over again. 

4. He especially needs to level the trade playing field between the U.S. and
China, absent which there is simply no way to double U.S. exports, balance
our trade, and create those millions of new jobs. The actions needed remain
obvious: 

(a) Balance out China's unfair trade advantages gained through its abysmally
low direct labor costs and lack of meaningful environmental and labor
standards; and 

(b) With tariffs and levies (and a baseball bat if need be) go after China's
currency manipulation, its regulations that block non-Chinese firms from
selling their products to Chinese government agencies, its technical
standards that prevent or at least greatly hinder the Chinese government and
businesses from buying non-Chinese goods, and its rules that force Western
companies to give up technological secrets in exchange for access to China's
markets.

5. He needs to emphasize the primary (not secondary) role of responsible
'big business' in creating the bulk of the millions of new jobs we need and
stop saying, as he did on June 11, that, "Government can't create
private-sector jobs, but it can create the conditions for small
businesses...to grow and hire more people." This fixation with small
businesses started in the Reagan administration, but that was only after
what we thought was a largely non-erodible manufacturing foundation had been
established with 20 percent of America's workers in, and 20 percent of GDP
coming from, manufacturing. With 50,000 factories having closed in just the
last decade, however, the corresponding figure today in each category is 11
percent, and no matter what the theory of "comparative advantage" says, this
nearly halving of our industrial base, especially our big-company
manufacturing base, means that America, with its very large population, wide
geography and great diversity, is destined for economic mediocrity unless we
give large American corporations policies and incentives that generally
mirror those available to them overseas. 

Last Friday, President Obama said, "Make no mistake, we are headed in the
right direction [even as] we continue to fight headwinds from volatile
global markets." In fact, we're not even close to making sufficient progress
in reemploying America, and those "headwinds" are actually powerful turbines
pointed in our faces by China and Mexico (and India). I can only hope that
the continuing depressing trade and real unemployment numbers will wake up
President Obama and his economic team to the reality that if they want to
reach their export and trade goals and materially reduce U.S. unemployment,
they need to materially change course.

So, Mr. President, take the five actions outlined above and there will be
'prosperity throughout the land', as they say. Don't take them, however, and
a double dip recession will look like a God-send compared to the extended
jobless recovery that will hang around our economy like the plague for years
to come. 

Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization
Initiative at the New America Foundation and a member of the Council on
Foreign Relations. Currently an investor in media companies, he is the
former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their
successor AT&T Broadband. He also serves on the Board of the Huffington Post
Investigative Fund. 

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