Here we go again.  In the Washington Post’s ‘Wonkbook,’ Dylan Matthews trumpets the tired old canard that American consumers benefit from the low price of Chinese imports. 

Matthews cites a University of Chicago study that tried to estimate how Chinese exports have affected the cost of living for low-income Americans.  They found that non-durable goods from China comprise a much bigger share of low-income Americans’ spending than that of wealthier U.S. consumers. Because of this, “from 1994 to 2005, inflation among poor U.S. households grew 6 percentage points slower than among rich households.”

Basically, the study is saying that poor America shops at Wal-Mart and CVS.  And this is great because those folks can buy low-cost goods there.

It’s a great, simple theory.  But it also overlooks the overall ramifications of an increased reliance on exports.  The wider long-term national cost of our mushrooming trade deficit with China is closed factories, lost jobs, and stagnant wages. In fact, the Economic Policy Institute (EPI) found that the trade deficit with China has cost 2.7 million U.S. jobs, 2001-2011.

On a personal note, I was one of those low-income Americans.  When I lost my job in the 2001 recession, I was unemployed for nine months.  All I could find in that time was a job at a bookstore.  I earned roughly $6.50/hour.  After taxes, I was earning roughly $5.35/hour.  A typical, non-durable good, like the ones Matthews celebrates, was a regular-sized Speed Stick deodorant.  At CVS, it cost $4.  So, it was taking me almost one hour to earn the money to buy one household good. 

When we lose good-paying jobs, we can’t afford to buy much of any supposed low-cost imports.  To me, Matthews blog piece is frustratingly elitist.

One more example: A paper mill worker in Wisconsin is earning $70,000/year, with benefits and healthcare for his family.  Thanks to China’s massive subsidization of its paper industry, plus its illegal currency manipulation, he loses his job.  Now, he’s earning hourly wages while working at Wal-Mart or CVS.  How does he support his family, pay for healthcare, put his kids through college?

Sorry, Matthews, your viewpoint doesn’t hold up in the real world.

President Obama and Governor Romney continue to take to the airwaves with competing ads that claim each is tougher than the other in confronting China’s predatory trade practices.

In battleground states like Ohio, Obama has run television spots that tout the tariffs he imposed three years ago on surging tire imports from China.

GOP challenger Romney has also been trekking through Ohio.  On Friday, he blasted the Obama Administration for delaying a Treasury report (due today) that could have been used to formally designate China as a currency manipulator.

Romney has repeatedly promised to hold China accountable for its cheating by designating Beijing as a currency manipulator on day one of his presidency.  In contrast, the Obama Administration has so far refused to take such a step despite seven consecutive opportunities in semi-annual Treasury reports on currency.

Unfortunately for America’s manufacturers and their workers, there’s plenty of hypocrisy to go around.  While President Obama campaigned in 2008 on a strong pledge to tackle China’s currency peg, he has indeed failed to act on it, as Romney accuses.

However, Romney’s running mate, Rep. Paul Ryan (R-WI) doesn’t have a very good track record either.  He had tough words at a campaign stop in Ohio this past weekend, lamenting the manufacturing jobs that America has lost to China.  Sadly, Ryan was among a small minority of Congress that did not support a China currency measure in 2010.  That bill, which passed by a strong, bipartisan vote of 348-79, was intended to specifically address China’s ongoing currency undervaluation.

While Gov. Romney has vowed to tackle China’s currency peg, his real commitment on the issue remains in question.  Currently, a majority of the House has co-sponsored a new bill, H.R.639, “The Currency Reform for Fair Trade Act,” including 64 House Republican cosponsors.  Frustratingly, House Speaker John Boehner has refused to let H.R.639 to come to the floor for a vote, though.

Boehner’s obstruction on the bill is extremely disappointing.  But it becomes all the more unfortunate because Romney has made no public comment on the matter.  As the current standard-bearer for the Republican Party, Romney could easily and publicly confront Boehner on the matter, and ask that the bill move forward.  But he has made no such effort.

And so the “China issue” muddles along.

Not so long ago, the U.S.-China Business Council released a study showing that U.S. exports to China have risen over the past decade.  Their point was, isn’t this great– trade with China means that U.S. exports keep growing.

It’s all in the way you spin the data, though.  In actuality, while exports to China may be growing, imports from China have grown at a far greater rate.  And so, if you look at both exports AND imports, you see a situation where the U.S. trade deficit with China has jumped by more than $200 billion over the last decade.

In another example of disingenuous data slicing, CounterPunch‘s John Walsh says that U.S. manufacturing is doing great, and any decline in America’s industrial employment is simply due to increasing automation.  In fact, Walsh deplores the “demonization of China,” though he makes no comment on Beijing’s intellectual property theft, human rights abuses, disregard for environmental norms, and, most significantly, a wide array of trade practices that violate world trade law.

Walsh praises U.S. manufacturing output, which has continually risen, though he recognizes that China’s steep climb in the past decade means it is “now slightly ahead” of the U.S.

What’s really going on, according to Walsh, is that U.S. manufacturing output continues to climb, though employment has continually fallen since roughly 2000.  To him this “cannot be explained by offshoring. There is only one explanation – automation.”

So, in Walsh’s view, the millions of lost U.S. manufacturing jobs are due to gains in automation.  No mention of the fact that U.S. workers and factories are the most productive in the world.

Walsh believes the U.S. has shed petty manufacturing sectors like “T-shirts and shoes” but still exports “high value-added, high profit items.”  This sort of attitude reveals the condescension that has allowed vast swaths of textile jobs to leave the U.S., devastating communities in states like North Carolina and South Carolina.

More significantly, though, it’s not even accurate.  What’s truly troubling about America’s unbalanced trade relationship with China is that a significant percentage of the estimated 2.7 million jobs lost due to the U.S. trade deficit with China (from 2001-2011) are in high-tech sectors.

According to a study by the Economic Policy Institute (EPI), the U.S. trade deficit with China in the computer and electronic parts industry displaced more than 1 million jobs in high-tech industries, 2001-2011. In fact, rapidly growing imports of computer and electronic parts, including computers, semiconductors and audio-video equipment, accounted for nearly 55 percent of the $217.5 billion increase in the U.S. trade deficit with China in that time.

If Walsh claims automation is at fault for these lost jobs, he’s simply wrong.  Research, design, and engineering jobs can not be automated.  Some of the greatest percentages of job loss to China in the EPI study were in communities like Silicon Valley.  Simply put, China is now claiming a greater and greater number of America’s best and brightest jobs.

Walsh’s views is clinical, and based on a calculated analysis of graphs and data.  But it ignores very real-world common sense.  Instead of worrying about “China bashing,” why not look into the legitimate grievances that America’s manufacturers and their workers have toward China, and take action when Beijing continually violates trade agreements for its own benefit.

The presidential campaign is in high gear, and both candidates are firing back and forth with “I can do more to save manufacturing than you can” and “I can do more about China than you can.”

With just over a month until Election Day, the Obama campaign has released a new two-minute ad with the President laying out his plan to “keep America moving.” 

• Specifically, the president want to “create a million new manufacturing jobs, help businesses double their exports, and give tax breaks to the companies that invest in America, not ones that ship our jobs overseas.” 
• He also points to aggressive trade action on China: “He has filed more China trade cases in one term than his predecessor did in two” and is “challenging China’s unfair trade practices that hurt American autoworkers.”

In response, the Romney campaign says that:

• President Obama has been weak on tackling China because he doesn’t want to “embarrass” them.
• The president should designate China a currency manipulator if he’s serious abut taking action.

Okay, fact checking on both sides…

1. President Obama has failed seven times to designate China as a currency manipulator, a clear departure from his campaign promises in 2008.

2. If Mitt Romney is so serious about tackling China’s currency undervaluation, why hasn’t he pressured House Speaker John Boehner to allow a vote on currency legislation?

Let’s look at some simple stats…

U.S. manufacturing employment in January 2000: 17,292,000

U.S. manufacturing employment in January 2012: 11,860,000

Annual U.S. trade deficit with China in 2000: $83.8 billion

Annual U.S. trade deficit with China in 2011: $295.4 billion

What do we see from this:

• A trade deficit with China that has climbed by more than $200 billion in the last decade.
• A manufacturing sector that has lost more than 5 million jobs in a dozen years.

The conclusion seems fairly obvious: At the same time that the trade deficit with China has increased, the U.S. has lost millions of manufacturing jobs.

A poll released in July by the Alliance for American Manufacturing (AAM) found that an overwhelming majority of U.S. voters are greatly concerned by this loss of manufacturing, and they want to see Washington get tough on China.

This would seem fairly logical, given such massive job loss in the manufacturing sector as well as the skyrocketing trade deficit with China.

However, a different poll conducted by the Pew Research Center finds that America’s “experts” have a very different view than the general public. Apparently, scholars and the news media are far less likely to worry about Beijing’s burgeoning economic power and U.S. jobs lost to China.

The disparity in views between the general public and elite opinion makers is extremely troubling, especially when one considers that these same elites have been consistently wrong on China, dating back to 2000. Essentially, the argument at that time in favor of opening trade with China was that Beijing would soon liberalize its markets. Increased commerce would bring a wave of new jobs and greater democracy to the Chinese people. Simultaneously, this new prosperity would help open the Chinese market to more U.S. exports.

Sadly, the exact opposite has happened. Political repression, especially in Tibet, has continued apace. China continues to maintain closed markets while deliberately undervaluing its currency. And U.S. manufacturers have continued to lose market share.

In fact, a study by the Economic Policy Institute (EPI) found that the growing U.S. trade deficit with China cost more than 2.7 million American jobs between 2001 and 2011, with job losses in every state.

It’s amazing, then, that the so-called elite opinion makers in the U.S. have been so completely, brazenly wrong when it comes to the core issues affecting the nation’s economy. Hopefully, the prevailing view of the American people will start to win out, as the “China issue” takes center stage during this year’s election season.

Read more in this Pew Global report.

It’s interesting to see the U.S. competing head-to-head with China for the top of the Olympic medal standings.  As Andrew Weber points out in USA Today, for decades this close competition was instead the exclusive battle of the U.S. vs. the USSR.

But times have changed, and nothing confirms more palpably for the American people that China is on the rise as a world power than it’s dominance in the 2012 Olympics.

Weber suggests that the U.S. will eventually gather the most medals at the London games, but until the past few days, China was leading in the overall standings.

China’s emergance as a dominant Olympic power is a tangible extension of the nation’s expanding economic power.  With a massive industrial presence on the world stage, including a steel industry that dwarfs any other nation, and a trade surplus over the United States that hit $295 billion last year, there can be little doubt that the People’s Republic is a force to be reckoned with.

This doesn’t necessarily sit well with the American public.  Beijing is home to a repressive regime that utilizes whatever means necessary to hold on to power.  And China’s leadership employs a host of predatory trade practices to ensure that it undercuts U.S. manufacturers.

When asked about China’s persistent trade violations in a recent poll conducted by the Alliance for American Manufacturing (AAM), U.S. voters said they emphatically support tough action on Beijing’s cheating on currency and other trade obligations.

More significantly, a majority of voters (56 percent) no longer see the U.S. as having the world’s strongest economy.  A plurality of those surveyed (31%) thought China now holds the top economic spot.

Seeing China at the top of the Olympic medal count can only confirm for many that the People’s Republic is the world’s new superpower.  But America’s democratic system is worth fighting for, and 88 percent of voters believe that it’s possible for America to have the strongest economy.  In fact, 92 percent believe that it is important for the U.S. to regain that position.

The U.S. currently leads in the Olympic medal standings.  But it’s a tight race, and one that looks likely to prefigure a lengthy battle on the world stage between the U.S. and China.

Read more about U.S. voter attitudes toward China and the economy.

Kudos to Matt Miller in the Washington Post for asking the $295 billion question– WHO’S GOT THE GUTS TO FINALLY GET TOUGH ON CHINA?

While ManufactureThis has been saying for years that it’s time to tackle China’s egregious cheating at world trade, it’s nice to see the message taking hold.  Miller’s basic concern is very similar to that of the Alliance for American Manufacturing (AAM): “Currency manipulation is responsible for millions of lost jobs in the United States.”

As Miller sees it, both the Democratic and Republican parties “have caved for years in the face of China’s bare-faced mercantilism — thanks to risk aversion and negotiating incompetence that have betrayed American workers.”

Here’s where America is at with China right now:

• The U.S. racked up a $295 billion trade deficit with China in 2011.
• The ongoing U.S. trade deficit with China has cost 2.8 million jobs since 2001.

Essentially, the U.S. imports far more from China than it exports, which results in a bilateral trade deficit that dwarfs any trade gap that America has with other industrialized nations.

This shouldn’t come as a total surprise since China has built such a massive export machine, in part by deliberately undervaluing its currency, in violation of world trade law.

This cheating has paid off for China, and Miller cites the work of H.W. Brock, who sees China’s currency so undervalued that it is “arguably one-sixth of what it should be.”  Brock calls Washington’s failure to do anything about it a “political disgrace.”

The bottom line, according to Miller, is that “China’s brazen currency manipulation and routine theft of American intellectual property has tilted the playing field unfairly against U.S. jobs.”

So what will either Obama or Romney do?

Obama talked tough on China in the 2008 campaign, especially on China’s deliberate currency manipulation.  However, he has not designated China as a currency manipulator since taking office.  His administration has filed trade cases against China, though, and has instituted safeguards on surging Chinese tires.

Romney has been taking flak lately for his record at Bain Capital, which has been characterized as very pro-outsourcing.  However, Romney has been campaigning on a very hard-line China message.  Specifically, he has promised to designate China as a currency manipulator and has also vowed to bar China from access to U.S. government contracts until U.S. firms receive reciprocal access.

Miller concludes by wondering if either Obama or Romney can really take effective action on China:

On Tuesday, Romney, who called China a currency manipulator early on, repeated the charge in his speech to the VFW. He plans on painting Obama as soft on Beijing.

Still, if Romney got rich at Bain in part by tapping China’s unfair advantages, how can he offer himself as the man who can bring China to heel?

Read more.

The New York Times’ Keith Bradsher reports that China’s domestic economy has been stumbling of late due to a slowdown in construction and a sluggish retail market.

But that’s not a major problem because China has an ace-in-the-hole.  Whenever the economy of the People’s Republic hits any headwinds, Beijing can always ramp up exports to support job growth.

According to Bradsher, China’s exports surged 15.3% in May 2012 compared to May 2011.  That’s twice as fast as economists had expected.  Apparently, May actually clocked in as the biggest month ever for Chinese exports, and the country’s trade surplus has expanded in each of the last three months.

All of this massive exporting is more than enough to preserve millions of factory jobs throughout China’s industrial sector.

What’s most instructive, though, is that China is depending on the U.S. market, not the EU, as its biggest customer.  Apparently, exports to the U.S. were up 23% in May from a year earlier, but only increased 3.2% to the European Union.

Helping to fuel this massive sales boom to the U.S. is China’s deliberately undervalued currency.  By pegging its currency to the dollar at an artificially low rate, Beijing is making sure that its exports are exceedingly cheap in the U.S.  Conversely, U.S. exports become more expensive due to this preferential currency rate. 

Despite continuing Congressional concern, the problem is actually getting worse.  Bradsher reports that Beijing has actually depreciated its currency more of late.  The Yuan fell nearly 1 percent against the dollar last month, and Bradsher says this is the “largest drop since Beijing officials unpegged the currency from the dollar in July 2005.”

The fact that Beijing can adjust its currency so precisely is proof yet again that it deliberately manipulates the Yuan to gain an export advantage.  But despite this blunt evidence, the Obama Administration has now refrained from designating China as a currency manipulator seven times.

Even though President Obama talked tough on China in the 2008 campaign, and promised action on the currency issue, his Administration has basically given China a “blank check” by not naming them a currency manipulator.

By contrast, GOP Republican hopeful Mitt Romney has taken a hard line in his campaign, promising to cite China for its currency peg on day one of his presidency.

National polling makes clear that the American people overwhelmingly support such action on China’s brazen violations of world trade law, including its currency undervaluation.  Thus, Romney’s campaign rhetoric is well-timed and well-informed.

Amazingly, Speaker of the House John Boehner has continued to block movement on a House currency bill despite overwhelming, bipartisan, majority support for such legislation. The House is considering H.R.639, the Currency Reform for Fair Trade Act, which has 233 cosponsors, including 65 Republicans.  (In 2010, the House passed a similar bill, H.R.2378, the Currency Reform for Fair Trade Act, by a strong, bipartisan vote of 348-79, including 99 Republicans.)

Similarly, the Senate passed S.1619, the Currency Exchange Rate Oversight Reform Act of 2011, last fall by a bipartisan vote of 63-35.

What’s clear is that Speaker Boehner is single-handedly thwarting the majority will of both Congress and the American people.  It’s almost inexplicable that Boehner would stand in the way of such modest legislation to address China’s mercantilism.

The Alliance for American Manufacturing (AAM) has repeatedly called for Boehner to allow H.R.639 to come to a vote.  Passage of such legislation would be an obvious step forward to provide a level playing field for America’s manufacturers and their workers.

We’ve reported frequently on the abusive labor practices and suicides at Apple’s Foxconn factory in China.  Essentially, Apple outsources the production of its iPad and iPhone to a massive labor facility in Chengdu, China. 

On the plus side for Apple, labor costs at the Foxconn factory are low, with worker schedules and logistics rigorously enforced.  Apple not only gets production accomplished on a strict, no-questions-asked timeline, but it also benefits from China’s undervalued currency and rampant industrial subsidies.

However, one has to wonder if Apple ever sees the overall costs of using a demoralized Chinese workforce while conducting quality control from 7,000 miles away as really worth the effort.

For starters, Apple could produce the iPad in the U.S.  We explained this recently, pointing out that labor costs are not a major component of Apple’s production.  Plus, U.S. manufacturers are far more productive and efficient than their Chinese counterparts.

Bottom line: Apple COULD build their products in the U.S. 

So what to make of the latest news coming out of Chengdu, that dozens of workers at the Foxconn plant were arrested in the wake of riots against security staff?

Apparently, a clash with security staff at a male dormitory for Foxconn workers escalated to the point where as many as 1,000 workers eventually rioted.  While the initial dispute may have dealt with an incident of theft, what becomes clear is that the workers are unhappy, and the chronic poor treatment they’ve endured has heated tempers to the boiling point.  In the ensuing riot, workers reportedly threw trash bins, chairs, pots, bottles, and even fireworks from the upper floors of their dormitory, destroying public facilities.

Hundreds of police officers eventually suppressed the rioting, and dozens were arrested.

In the wake of such a messy situation, Apple can do the requisite damage control.  But the true costs of outsourcing once again become apparent.

Facts are stubborn things, and the poor overall working conditions at Foxconn are hard to hide.  Apple could have a much cleaner conscience if it chose to reshore operations and starting making their products in the U.S.

Read more about the latest riots at Apple’s factory.