I had to skip my second night with the Palin book to attend (and work at) a town hall meeting in Baltimore about U.S. manufacturing policy, or rather, the need for a U.S. manufacturing policy.
I’ve been working on this issue for a while but I finally understood more about why U.S. manufacturing has declined so significantly. I always understood that China was part of the problem, but I just assumed it was because they were winning in the market place: they could make and sell products more cheaply than we could. I thought this was only because they paid their workers much less and ignored the environmental damage their manufacturing methods cause.
That is only part of the problem.
China is not competing with U.S. manufacturers in an open market place. They are cheating.
“Chinese currency manipulation” is a term that gets thrown around by people who understand these issues.
I had no idea what this meant, other than the fact that “manipulation” is a bad thing. Last night, I finally understood and I think it’s important that more people do too.
Basically, if China operated as other countries do (and as they are supposed to do under international agreements), our trade imbalance would tilt out of their favor, jobs would be saved and created here in the U.S. and we could fairly compete (and even win) in the international marketplace.
China is artificially setting the exchange rates of their currency in order to gain an unfair advantage. That’s why Chinese products are so cheap. As AAM, the host of last night’s town hall, describes it:
“This made China?s exports to the U.S. relatively cheaper than they should have been and made U.S. exports to China more expensive than they should have been. This had two-fold negative effects on American industry. On one hand, the relatively cheap Chinese imports drove domestic manufacturers, who could not compete with that price, out of business. On the other, the relatively expensive imports of U.S. products into China limited consumption of U.S. goods there, putting many export-intensive U.S. companies out of business.”
And China has taken full advantage – to our detriment – since they entered the World Trade Organization in 2001 and then established Normal Trade Relations with the U.S. Check out this graphic:
I grew up in Cleveland in the 1980s and my dad was a machinist. I remember the dips shown on this graphic. I had no idea how much worse it’s been in this decade! Looking at this graphic, it is NO wonder our economy is in the shape it’s in now.
But it also points to some solutions – like requiring China to compete fairly. If they don’t, we should do exactly what the Obama administration has started doing: enforce international trade rules. Tariffs were recently added to Chinese tires which had been flooding U.S markets at artificially low prices (and costing U.S companies and U.S. workers). The result of the tariff: American companies have actually been able to successfully compete and have even started rehiring workers.
Imagine what would happen if we fully enforced the trade rules. It’s only fair.