(What’s Left of) Our Economy: New Lows for Mainstream Media Coverage of Trade & Manufacturing

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Don Lee, exports, imports, intermediate goods, Mainstream Media, manufacturing, media, MSM, National Foreign Trade Council, offshoring lobby, producer goods, The Los Angeles Times, The New York Times, Trade, U.S. Business and Industry Council, William Reinsch, {What's Left of) Our Economy

Everyone, no matter what their views on trade and related economic issues, agrees that reviving the U.S. domestic manufacturing sector represents a major challenge. What everyone needs to agree on is that the goal will never be reached as long as the Mainstream Media keeps presenting views on the subject that are as silly as they are downright ignorant. If you think I’m exaggerating, consider these two recent examples.

The first came in a piece by a team of New York Times reporters earlier this month. According to headline on the December 2 article, “Trump’s Tough Trade Talk Could Damage American Factories.” The reason?

“[M]any existing American manufacturing jobs depend heavily on access to a broad array of goods drawn from a global supply chain — fabrics, chemicals, electronics and other parts. …Mr. Trump’s signature trade promise [steep tariff hikes], one ostensibly aimed at protecting American jobs, may well deliver the reverse: It risks making successful American manufacturers more vulnerable by raising their costs. It would unleash havoc on the global supply chain, prompting some multinationals to leave the United States and shift manufacturing to countries where they can be assured of buying components at the lowest prices.”

To be sure, this article suffers numerous flaws. For instance, what’s the “U.S.-made product” it uses as its signature example of globalization-related trends that (one must logically assume) are being portrayed as beneficial for American industry? A movie seat chair comprised of two-thirds imported parts by value. Talk about a formula for a hollowed out manufacturing base!

But the main problem is with the authors’ apparent belief that these parts and components and materials (often called intermediate or producer goods) must be imported because they’re either not made in America, or can’t be made in America at all, or at competitive prices.

Nothing could be further from the truth. In fact, a huge percentage of American manufacturing output consists precisely of these products. It’s hard to know exactly how big because of shortcomings in U.S. data collection. But the U.S. Census Bureau’s monthly trade figures show that, on a pre-inflation basis, America’s goods exports for the first 10 months of this year have totaled just over $1.2 trillion. Of those, nearly 62.5 percent consisted of “capital goods” and “industrial supplies” – i.e., intermediate goods. (See Exhibit 6 in this release.)

But such exports are surely far greater, because the Census figures don’t break out the numbers for auto parts.

Similar problems plague American manufacturing output numbers, but also leave no doubt about the prominence of intermediate goods in the U.S. industrial complex. They show that, in 2014 (the last year for which detailed data are available), American manufacturing’s pre-inflation production was slightly more than $2 trillion. Of this amount, nearly 37.5 percent consists of products clearly identifiable as intermediate goods (like machinery, metals, and chemicals).

But again, due to data shortcomings, it’s difficult to tease out other leading intermediates – including not only auto parts but semiconductors and other electronics components and electrical equipment. (These figures are calculated from the “GDP by State” interactive tables in this section of the Commerce Department Bureau of Economic Affairs website, which includes national totals.)

So the claim that Trump-ian tariffs would eviscerate domestic manufacturing by cutting off American industry’s access to imported producer goods completely ignores the potentially greatly positive impact of stimulating demand for the nation’s immense (remaining) domestic producer goods complex.

The second example is even nuttier. In a December 12 piece, Los Angeles Times reporter Don Lee quoted an attack on tariffs from William Reinsch, identified as a “distinguished fellow at the nonpartisan Stimson Center.” That’s a big problem right there, as what Lee didn’t mention is that for 15 years, Reinsch was president of the National Foreign Trade Council, a pillar of Washington’s corporate offshoring lobby.

Yet it was Reinsch’s actual statement – and Lee’s apparent failure to see its fatal flaw – that was the real eye-opener. According to Lee, one of Reinsch’s main objections to tariffs broadly is that “We may assemble more stuff here, but we’ll export less because they’ll be more expensive. We’re going to be losing market share. Ultimately, the cost is jobs.”

Of course, as shown by that aforementioned New York Times article, too much American manufacturing already consist of “assembly.” More important, however, is that it seemingly hasn’t occurred to Reinsch or to Lee that the United States is running immense trade deficits overall, and especially in manufacturing. In other words, all else equal, the potential gains of producing “more stuff here” (and Reinsch never explains why it would be restricted to assembly) vastly outweigh the losses from exporting less.

Outsized domestic gains are even likelier because the United States has much more control over its own market and access to it than over foreign markets. Nor do Reinsch and Lee seem to know that the nation has been losing major market share even in advanced manufacturing industries for many years, as documented by several reports of mine issued by the U.S. Business and Industry Council. Here’s the latest.

President-elect Trump’s trade policy proposals are anything beyond controversy, and a thoroughgoing debate over the best globalization approach for the U.S. economy would be a long overdue and welcome development. Sadly, these two articles make clear that too much of the Mainstream Media remain far from making valuable contributions.

(What’s Left of) Our Economy: Big Business Still Favors A TPP Fast Track – for Everyone Else

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Business Roundtable, Congress, fast track, Michael Froman, National Foreign Trade Council, Obama, offshoring lobby, Orrin Hatch, Paul Ryan, Ted Cruz, TPA, TPP. Trans-Pacific Partnership, Trade, Trade Promotion Authority, {What's Left of) Our Economy

A funny thing has happened to the Offshoring Lobby groups that pushed so hard (and successfully) for Congress to give President Obama fast track trade negotiating authority. Now that they’ve seen the text of the Trans-Pacific Partnership (TPP) trade deal whose passage they’ve also urged, several have decided they don’t like the core provision of fast track trade negotiating authority.

Central to the case for fast track – now officially known as Trade Promotion Authority (TPA) – is that preventing Congress from monkeying around with the final text of trade agreements negotiated by presidents and their aides is vital to persuading America’s interlocutors to negotiate seriously. If American lawmakers could amend the deal at will, why would foreign leaders put forward their best offers, especially if they might anger powerful domestic constituencies?

That’s what U.S. Trade Representative Michael Froman has made unmistakably clear. In a late-2014 article in Foreign Affairs, Mr. Obama’s chief trade diplomat wrote, “By ensuring that Congress will consider trade agreements as they have been negotiated by the executive branch, TPA gives U.S. trading partners the necessary confidence to put their best and final offers on the table.”

The Republican leaders who have supported the president’s trade agenda agreed as well. According to Senate Finance Committee Chair Orrin Hatch of Utah, TPA “allows for trade deals to be submitted to Congress for an up-or-down vote, an incentive for negotiating nations to put their best offer forward for any deal.” And before he was elected Speaker and chaired the House Ways and Means Committee, Wisconsin’s Paul Ryan contended (in an article co-authored with Texas Republican Senator and current presidential candidate Ted Cruz, “By establishing TPA, Congress will send a signal to the world. America’s trading partners will know that the U.S. is trustworthy and then put their best offers on the table. America’s rivals will know that the U.S. is serious and won’t abandon the field.”

When Congress was considering fast track, moreover, leading business groups strongly echoed this line. As specified in a statement from the Trade Benefits America coalition that spearheaded the pro-fast track lobbying campaign, fast track historically ”has provided our trade negotiating partners with a degree of comfort that the United States is committed to the international trade negotiating process and the trade agreements we negotiate.”

One of the coalition’s major members, the National Foreign Trade Council (NFTC), was even more explicit: “Without U.S. trade negotiating authority, other countries will be unwilling to negotiate with the United States for fear that U.S. commitments and concessions would not hold weight.  In particular, they would be unwilling to put important politically sensitive concessions on the table.”

Last week, however, some of these organizations were changing their tune. In a statement calling for Congress to pass the TPP, the Business Roundtable declared that it also wanted to administration “to quickly address the remaining issues that impact certain business sectors in order to ensure the broadest possible benefits to all sectors of U.S. business, which will enable the broadest support possible for the TPP.” Huh? It’s true that Congress can attempt to clear up purported ambiguities in the text when it writes implementing legislation, but as for changing the text itself? Sorry, but that’s a no-no under TPA. Unless the Roundtable wants to reopen the entire negotiation?

Similarly, the NFTC reported that it is “encouraged by discussions that are underway between Congress and the Administration to address provisions in the agreement in order to further improve trade and investment liberalization, and strengthen the system of international trade and investment disciplines and procedures, including dispute settlement, for all of American business. Early resolution of areas for improvement identified by the business community will speed approval by Congress in 2016.”

With due respect, what on earth are they talking about other than the aforementioned clarifications and interpretations that unfortunately are entirely unilateral, and have no standing under the new TPP regime?

It seems that when the Offshoring Lobby touted the importance of banning Congressional amendments to TPP, it meant all amendments except its own. You can’t blame its organizations for seeking such blatant favoritism; it’s their job. Now we’ll see if Congress believes that enforcing the principle of equality under the law is its job.

Our So-Called Foreign Policy: The Offshoring Lobby All But Admits Its Failure on China Policy

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China, multinational corporations, National Foreign Trade Council, offshoring lobby, Our So-Called Foreign Policy, Trade, U.S-China Economic and Security Review Commission, William A. Reinsch, WTO

I blame Thanksgiving – for my neglect to date of the latest annual report of the U.S.-China Economic and Security Review Commission. What kind of date is November 20 for the release?

Seriously, these reports on the latest major developments and trends in U.S.-China relations are always worth covering, and I will be turning to the main findings and recommendations sometime next week. But in many ways, the most striking feature of this year’s edition is the the page-and-a-half’s worth of “additional views” by Commission Vice-Chairman William A. Reinsch (which start on page 556) .

It’s hard to imagine a better example of how Washington, D.C.’s offshoring lobby has been tying itself up in knots recently as the China trade and economic, and inevitably related technology and security policies, they’ve pushed so long and so effectively keep backfiring ever more strikingly for its own corporate fortunes and the U.S. economy. And as a result, the Reinsch remarks raise the question of how much influence on China issues should continue to be wielded by special interests and their spokespeople that for so long have been so completely wrong on this matter.

Reinsch, a Commissioner since the panel’s birth in 2001, is a former longtime Congressional staff member who served in senior Commerce Department positions during the Clinton years. The year he was appointed to the China Commission, he was also named President of the National Foreign Trade Council, whose membership is dominated by job-exporting, panda-hugging multinational manufacturers and lots of their enablers on Wall Street. (Yes, WalMart belongs, too.)

As he states in his remarks, Reinsch has had a consistent record over the last decade-and-a-half of “lamenting” the Commission’s “consistent tendency to focus unrelentingly on the bad news at the expense of promising developments in the relationship.” He describes himself as having spent much of his professional life “studying China, and arguing for greater efforts at mutual understanding that focus on the benefits of cooperation” and as “an optimist about the relationship.” Therefore, Reinsch writes, he has long believed that “the fundamental policy goal for each country should be to keep…out of power” figures who “believe the other is an existential threat.”

Now Reinsch finds himself lamenting something else: “This year, however, there is precious little good news to report” on the China front, he writes, and goes on to provide an indictment of Beijing’s recent behavior ending with the claim that China’s leadership does increasingly seem to view the United States as an existential threat. In fact, more specifically, he contends, “It appears the Chinese have embarked on a path intended to push the U.S. To choose between confronting them militarily or abandoning our friends and allies in the region, gambling that we will choose the latter.”

Reinsch strongly implies that China’s current leadership – which came into power in late 2012 – is the main problem. But since the original Nixon-era opening, Beijing had been challenging major U.S. national security interests for years before, especially by transferring weapons-of-mass-destruction technology to rogue states. Since its admission at the end of 2001, China also has been routinely violating trade agreements with the United States and its World Trade Organization (WTO) commitments, which literally steals growth and jobs from Americans. Nothing could be more obvious than the failure of approaches favored by Reinsch and the rest of the offshoring lobby to deal adequately with these threats. If anything, their main effect appears to have been emboldening the Chinese.

But Reinsch appears confident that America’s China policy status quo should continue. His recipe for dealing with Chinese muscle-flexing in East Asia? “Adroit diplomacy.” He continues to insist that U.S. responses to Beijing’s predatory trade policies conform to America’s WTO and other multilateral obligations, even though no evidence shows that this approach has worked adequately. And positively ludicrous is his belief that such rule-of-law approaches – which are exactly the ones that have been followed – will help “move [China] in that direction. His own account of China’s backsliding on this front makes that clear.

In fairness to Reinsch, however, his position as a lobbyist for offshoring multinationals and others that have profited handsomely (so far) from the China policy status quo prevents him from supporting more promising U.S. strategies. As for the Obama administration and Members of Congress: What’s their excuse?