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Don’t Dawdle on Economic and National Security

Monday, July 31st, 2017

The future of the American steel and aluminum industries is not a matter for dithering.

Each mill and smelter that remains operating is too vital. Each is too crucial to the economic viability of a corporation, a community, and thousands of workers and their families.

Each also is too essential to national security, which relies on American-produced metals for critical infrastructure, from bridge construction to the electrical grid, and for munitions, from fighter jets to bullet-proof vests.

There is no more time for waiting. International trade law must be enforced now. Throughout his campaign, Donald Trump pledged his support to workers and these industries. And he followed through by launching within three months of taking office as president special investigations into the effects of steel and aluminum imports on national security.

Such inquiries may take as long as a year to conclude, but the administration expedited the process. Until it didn’t. Now steel and aluminum corporations, their communities and their workers are being told to wait. It’s a delay that could kill more American mills and smelters.

The nation lost nine aluminum smelters over the past six years, leaving only five in the entire country, and most of them are now operating at reduced levels. Beginning in January 2015, steel companies laid off 14,000 workers as they closed mills and sections of mills.

For example, Allegheny Technologies shuttered a plant that made grain oriented electrical steel in 2016, leaving only one U.S. company, AK Steel, now producing this component critical to electricity transmission.

As mills and smelters disappear, the military is further restricted in its ability to secure domestically produced essential metals in time of crisis.

The primary culprit in this scary scenario is overcapacity and overproduction in China, which overwhelms the world market with illegally subsidized, grossly underpriced aluminum and steel.

China has promised repeatedly to solve this problem. On Thursday it pledged again, this time contending it wanted to work globally to deal with the issue of aluminum overcapacity – a problem Beijing created. Over the past six years, using massive government subsidies, China quickly ramped up capacity to become the largest aluminum producer in the world.

China can’t be trusted on this because it never keeps its promises. It has never cut its steelmaking capacity after announcing again and again that it would.

In negotiations two weeks ago, Trump cabinet members could not even get a specific commitment out of China to do it. There’s no evidence China will stop overproducing steel or aluminum now. Waiting is useless. And destructive to American manufacturing.

The American steel and aluminum industries have fought back, filing and winning dozens of trade cases against imports of specific products. But the resulting tariffs and other penalties imposed by the U.S. Commerce Department and U.S. International Trade Commission (ITC) didn’t solve the problem.

Instead of paying U.S. tariffs, China shipped its government-supported excess of these products to other countries, artificially suppressing world prices and warping what is supposed to be a free market.

Also, this traditional process for seeking relief from unfair trade takes too long. More than a year may elapse before companies and workers get a final decision. And that will be for just one product, like aluminum extrusions, aluminum foil, welded stainless steel pressure pipe or corrosion-resistant steel, to name a tiny number of cases from recent years.

That’s part of what made the special investigations into steel and aluminum imports so attractive. If the U.S. Commerce Department determined under Section 232 of the Trade Expansion Act of 1962 that imports of steel and aluminum jeopardized national security, then the president could impose penalties broadly to ensure the country could meet its own needs. The effort might also spur allies to join the United States in finally pressuring China sufficiently to actually reduce capacity.

Although Section 232 allows for nine months of investigation, after which the President would have three months to determine a remedy, the administration promised quick action when it announced the inquiries in April. The steel report was to be completed by June 30, with a speedy decision by the president after that.

That suggested the administration understood this was urgent.

But June 30 came and went. Now there’s an official delay. The administration told the Wall Street Journal that the steel investigation is on hold until after health care reform, tax changes and infrastructure spending are accomplished.  “We don’t want to do it at this moment,” the president said last week of the steel case.

That’s devastating. Especially because steel imports have jumped 22 percent since Jan. 1, placing additional pressure on the American industry.

The delay occurs as efforts are made by a new company to reopen at least one potline at an aluminum smelter in New Madrid, Mo., that the now-bankrupt Noranda company idled last year. Postponing the Section 232 decision makes for uncertainty for these investors.

It also occurs as a Chinese company is trying to buy Aleris, an Ohio-based manufacturer that supplies aluminum for use in vital infrastructure and military applications. That Asian firm, China Zhongwang, is accused of dodging tariffs and is under civil and criminal investigation for possible smuggling, conspiracy and wire fraud by the Justice Department, Department of Homeland Security and Commerce Department.

Maybe the Aleris smelters would keep operating if China Zhongwang bought them, but at what risk to national security?

The delay occurs as companies that buy steel fear monger that tariffs or quotas would raise prices.

An expert, Stephen Koplan, chairman of the U.S. ITC under Presidents Bill Clinton and George W. Bush, says that’s hogwash. “Predictions of disaster were wrong 15 years ago when I chaired the ITC, and they are wrong again today,” he wrote in an op-ed in The Hill newspaper last week.

When President George W. Bush imposed tariffs and quotas on steel imports under Section 201 of the Trade Act of 1974, there was no price shock afterward, according to a study by the nonpartisan U.S. ITC.  Here is what Koplan, who also served as an attorney at the Small Business Administration, wrote:

“Downstream industries were not devastated by higher steel prices. Nor was the U.S. economy thrown into depression. The U.S. steel industry, however, earned a much-needed relief as the result of action taken by the president that allowed it to restructure and reinvest for the long term. In other words, the Section 201 measures worked as intended.

“We are facing similar challenges again today. . .Now, however, U.S. national security is at great risk if firm action is not taken immediately. The U.S. primary aluminum industry is on the verge of disappearing entirely, and the U.S. steel industry is not far behind.”

AK Steel Corp. CEO Roger Newport agreed with Koplan’s assessment that this is not a time for dawdling, telling the Commerce Department in his testimony on the steel case:

“High-end electrical steel is an incredibly difficult product to manufacture, as it requires a significant amount of dedicated, capital equipment and a sophisticated, well-trained workforce.

Therefore, if AK Steel were to exit the market, there would be no operational electrical steel manufacturing equipment in the United States, the specialized labor and related expertise in operations would be lost, and many of AK Steel’s talented operators and researchers would either relocate to other businesses, industries and/or foreign countries, or become unemployed.”

Workers’ and companies’ economic security is at risk. The nation’s security is at risk. Resolution of these cases should be speeded, not delayed.

This blog was originally published at OurFuture.org on July 31, 2017. Reprinted with permission.

About the Author: Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO

Make American Jobs

Monday, February 13th, 2017

President Donald Trump had Harley-Davidson executives and employees over to lunch at the White House last week and reiterated his promise to end wrong-headed trade policies that enable foreign countries to eat American workers’ lunch.

Trump reassured the Harley workers from the United Steelworkers (USW) union and the International Association of Machinists (IAM) that he would renegotiate NAFTA and other trade deals.

“A lot of people [have been] taking advantage of us, a lot of countries [have been] taking advantage of us, really terribly taking advantage of us,” he said as news cameras clicked. “We have to be treated fairly.”

No promise could be more heartening to workers as corporations like Carrier and Rexnord continue to move jobs to Mexico. No news could be better in the same week that the Economic Policy Institute (EPI) released research showing that since 2001, the United States’ massive trade deficit with China cost 3.4 million Americans their jobs.

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Workers, families and communities have suffered as trade and tax policy over the past quarter century encouraged corporations to off-shore factories and jobs. Flipping that philosophy to favor American workers and domestic manufacturing is exactly what labor organizations like the USW have long fought for. If Trump actually achieves that, all Americans will benefit.

In the meantime, Rexnord Corp. has finalized plans to uproot its bearings manufacturing machines in Indianapolis, transport the equipment to Mexico and throw 300 skilled and dedicated workers, members of my union, the USW, into the street. Terminations begin Feb. 13.

Automation did not take these workers’ jobs. The lure of dirt-cheap wages in Mexico and tax breaks awarded for the costs of moving jobs and machinery stole them.

Trump talked to the Harley workers and executives about changing tax policy. Ending all special tax deals and loopholes that corporations like Rexnord and Carrier use for shuttering American factories and shipping them to other countries would be a good first step. U.S. policy shouldn’t reward corporations like Rexnord and Carrier that profit from exploiting the international wage race to the bottom and the wretched environmental regulation of emerging nations.

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Caption: Photo by Vlad/Flickr

The next logical step would be establishing consequences for those corporations — like requiring them to pay substantial economic penalties if they want access to the U.S. market for their once-domestic and now foreign-made products.

In addition, American policy must be —  just as Trump promised in his campaign — to stop trade law violators who are trampling all over American workers.

The EPI study detailed the devastation caused by the worst violator — China. American workers and companies can compete on a level playing field with any counterpart in the world. But the EPI study shows just how much American workers and their employers suffer when the United States fails to strictly enforce international trade law.

Of the 3.4 million jobs lost between 2001 and 2015 because of the U.S. trade deficit with China, EPI found that nearly three-quarters of them, 2.6 million, were manufacturing jobs. Every state and every congressional district was hit. These are jobs fabricating computer and electronic parts, textiles, apparel and furniture.

Manufacturing jobs such as these provide family-supporting wages and benefits such as health insurance and pensions. As these jobs went overseas, American workers’ income stagnated while those at the top — executives, 1 percenters and corporate stockholders — benefited.

As the rich got richer, the EPI researchers found, all non-college educated workers lost a total of $180 billion a year in income.

When the United States agreed to allow China into the World Trade Organization (WTO) in 2001, former President Bill Clinton said the access that the deal provided American companies to the gigantic Chinese market would create jobs. Promises, promises.

It’s possible no one guessed just how massively China would violate the trade rules it agreed to abide by under the WTO pact. Numerous investigations by the Department of Commerce have found China improperly subsidizes its exports by providing artificially cheap loans, free land, and discounted raw materials and utilities. To keep its workers employed, China helps finance overproduction in industries like steel and aluminum, then dumps the excess at below-market prices in the United States, bankrupting mills and factories here.

China pirates innovation, software and technology from foreign producers. To steal trade secrets, its military hacked into the computers of American corporations and the USW. In addition, China has manipulated the value of its currency so that its exports are artificially cheap and imports from the United States are artificially expensive.

Even if the scale of violation was underestimated, when it occurred, the American government had a responsibility to take action, to file trade cases, to take issues before the WTO, to negotiate to bring China in line with international standards and protect American jobs and preserve domestic manufacturing, which is crucial to national defense.

Precious little of that occurred. The trade deficit with China exploded, obliterating American jobs — a quarter million on average every year since China joined the WTO in 2001. China exports to the United States its overproduced aluminum, steel and other commodities, but also its unemployment.

After that lunch, Trump thanked Harley-Davidson for assembling its iconic motorcycles in America. He extended his hand in aid, saying, “We are going to help you, too. We are going to make it really great for business, not just for you, but for everybody. We are going to be competitive with anybody in the world.”

American workers and domestic manufacturers already are competitive. What they need is a government that doesn’t require them to compete with a handicap so huge that it’s like asking Evel Knievel to jump his Harley-Davidson XR 750 over 19 cars without a ramp. What they need is tough action against corporations that renounce their birthplace for profit and against flagrant, job-stealing trade violators like China.

This post originally appeared on ourfuture.org on February 7, 2017. Reprinted with Permission.

Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco’s nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.

New Rules Needed to Solve Steel Crisis

Friday, September 9th, 2016

China is gorging itself on steelmaking. It is forging so much steel that the entire world doesn’t need that much steel.

Companies in the United States and Europe, and unions like mine, the United Steelworkers, have spent untold millions of dollars to secure tariffs on imports of this improperly government-subsidized steel. Still China won’t stop. Diplomats have elicited promises from Chinese officials that no new mills will be constructed. Still they are. Chinese federal officials have written repeated five-year plans in which new mills are banned. Yet they are built.

All of the dog-eared methods for dealing with this global crisis in steel have failed. So American steel executives and steelworkers and hundreds of thousands of other workers whose jobs depend on steel must hope that President Barack Obama used his private meeting with China’s President XI Jinping Saturday to press for a novel solution. Because on this Labor Day, 14,500 American steelworkers and approximately 91,000 workers whose jobs depend on steel are out of work because China won’t stop making too much steel.

A new report on the crisis, titled “Overcapacity in Steel, China’s Role in a Global Problem,” by the Duke University Center on Globalization, Governance & Competitiveness flatly concludes that existing policies to stop China from building excessive steel capacity have failed.

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Since 2007, China has added 552 million metric tons of steel capacity – an amount that is equivalent to seven times the total U.S. steel production in 2015. China did this while repeatedly promising to cut production. China did this while the United States actually did cut production, partly because China exported to the United States illegitimately subsidized, and therefore underpriced, steel.

That forced the closure or partial closure of U.S. mills, the layoffs of thousands of skilled American workers, the destruction of communities’ tax bases and the threat to national security as U.S. steelmaking capacity contracted.

Although China, the world’s largest net exporter of steel, knows it makes too much steel and has repeatedly pledged to cut back, it plans to add another 41 million metric tons of capacity by 2017, with mills that will provide 28 million metric tons already under construction.

None of this would make sense in a capitalist, market-driven system. But that’s not the system Chinese steel companies operate in. Chinese mills don’t have to make a profit. Many are small, inefficient and highly polluting. They receive massive subsidies from the federal and local governments in the form of low or no-interest loans, free land, cash grants, tax reductions and exemptions and preferential access to raw materials including below market prices.

That’s all fine if the steel is sold within China. But those subsidies violate international trade rules when the steel is exported.

These are the kinds of improper subsidies that enable American and European companies to get tariffs imposed. But securing those penalties requires companies and unions to pay millions to trade law experts and to provide proof that companies have lost profits and workers have lost jobs. So Americans must bleed both red and green before they might see limited relief.

The Duke report suggests that part of the problem is that market economies like those in the United States and Europe are dealing with a massive non-market economy like China and expecting the rules to be the same. They just aren’t.

Simply declaring that China is a market economy, which is what China wants, would weaken America’s and Europe’s ability to combat the problems of overcapacity. For example, the declaration would complicate securing tariffs, the tool American steel companies need to continue to compete when Chinese companies receive improper subsidies.

The Duke report authors recommend instead delaying action on China’s request for market economy status until China’s economic behavior is demonstrably consistent with market principles.

The authors of the Duke report also suggest international trade officials consider new tools for dealing with trade disputes because the old ones have proved futile in resolving the global conflict with China over its unrelenting overcapacity in steel, aluminum and other commodities.

For example, under the current regime, steel companies or unions must prove serious injury to receive relief. The report suggests: “changing the burden of proof upon a finding by the World Trade Organization (WTO) dispute settlement panel of a prohibited trade-related practice, or non-compliance with previous rulings by the WTO.”

It also proposes multilateral environmental agreements with strict pollution limits. Under these deals, companies in places like the United States and Europe that must comply with strong pollution standards would not be placed at an international disadvantage as a result, and the environment would benefit as well.

In addition to the family-supporting steelworker jobs across this country that would be saved by innovative intervention to solve this crisis, at stake as well are many other jobs and the quality of jobs.

The Congressional Steel Caucus wrote President Obama before he left last week on his trip to Hangzhou for the G-20 Summit asking that he secure the cooperation of China and pointing out the large number of downstream jobs that are dependent on steel.

Also last week, the Economic Policy Institute issued a report titled “Union Decline Lowers Wages of Nonunion Workers.” It explained that the ability of union workers to boost nonunion workers’ pay weakened as the percentage of private-sector workers in unions fell from about 33 percent in the 1950s to about 5 percent today.steel-overcapacity-table-2

The EPI researchers found that nonunion private sector men with a high school diploma or less education would receive weekly wages approximately 9 percent higher if union density had remained at 1979 levels. That’s an extra $3,172 a year.

Many steelworkers are union workers. If those jobs disappear, that would mean fewer family-supporting private sector union jobs. And that would mean an even weaker lift to everyone else’s wages.

America has always been innovative. Now it must innovate on trade rules to save its steel industry, its steel jobs and all those jobs that are dependent on steel jobs.

This post originally appeared on ourfuture.org on August 25, 2016. Reprinted with Permission.

Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco’s nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.

When Too Much is Terrible

Tuesday, March 1st, 2016

Leo Gerard

It’s lights out in Lorain on March 31. The town’s steel mill, site of a new electric arc furnace and $120 million investment, had given 1,200 Ohioans good middle-class jobs this time last year.

But by April, a relentless avalanche of underpriced Chinese steel will have shoved all but a fewof those workers into the street.

The same is true of steelworkers in Granite City, Ill., Lone Star, Texas, and Gary, Ind., and aluminum workers in New Madrid, Mo., Hannibal, Ohio, and Hawesville, Ky. It’s true of glass workers and paper workers in small towns across America.

The same catastrophe is slamming small towns across Europe. ArcelorMittal cited the Chinese avalanche when it closed its steel mill near Bilbao in northern Spain last month. Tata Steel cut 1,050 jobs earlier this month from its Port Talbot plant in South Wales. Two weeks ago, 5,000 steel and other workers and managers from 17 European nations gathered in Brussels to protest overwhelming, underpriced Chinese imports.

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China makes too much steel. And many other commodities. By providing government subsidies and other supports like currency manipulation that are illegal under international trade regulations, China sells those products overseas at prices below production cost, undercutting fair market manufacturers like U.S. Steel and Republic Steel in Lorain. Too much has been good for China until now. Now it wants “market economy” status in the World Trade Organization. So, suddenly, it has announced it will reduce its excessive steel production. That will cost 400,000 Chinese steelworkers their jobs. It turns out that too much is terrible for Chinese workers and Chinese towns as well.

To put this in perspective, last year, as American and European mills closed, workers lost their jobs, and prices for some steel products fell by 50 percent because of massive oversupply from China, China continued steelmaking full tilt. It made half the steel in the world. And itsexports rose by 50 percent.

Chinese steel firms could accomplish that only with subsidies such as “loans” that don’t have to be paid back, free land and free utilities. These are not companies operating in a market economy. These are government-subsidized entities. And that’s fine if all of the products are sold domestically. But these subsidies are illegal when the products are sold overseas because the falsely underpriced products distort what is supposed to be a fair market.

Chinese government interference in the international market is damaging corporations like U.S. Steel and ArcelorMittal, the largest steel company in the world.  It reported a staggeringloss of nearly $8 billion for 2015. U.S. Steel’s 2015 loss was $1.5 billion.

That’s what Chinese steel overcapacity looks like on Wall Street. What it did to Lorain is more visceral.

“You could see the concern in our members’ faces,” Louise Zimmerman, President of United Steelworkers (USW) Local Union 2354, told me. After Republic Steel announced the layoffs, she said these workers as well as members of USW Local 1104 at the plant wondered, “What am I going to do? How am I going to pay my bills when my unemployment runs out?”

The steel mill is split, with Republic and U.S. Steel using parts of it. Both firms have furloughed workers over the past year. In March, U.S. Steel sent 600 home and Republic 200.In July, Republic furloughed another 125 when it had to shut down its brand new electric arc furnace.

Then, on Jan. 7, Republic announced it would idle its side of the plant and lay off 200. The next day, U.S. Steel said it would virtually shut its end, laying off 261. Lights out.

For Lorain workers laid off last year, unemployment benefits already have run out.

“Driving around the city of Lorain is pretty heartbreaking,” Louise told me the other day. “You see people with signs saying, ‘Please help me with food for my family.’”

“When I go to the grocery store or stop at a Kmart, normally, there would be a lot of traffic in those stores. Now it is incredibly quiet. Some clerks were folding spring clothes, and they told me they had no place to put the stuff because no one was buying the stuff from the racks from last season. No one is even going to the discount stores,” she said.

As the two big employers began shuttering operations, they paid less taxes to the city and the school district. Now the city faces a huge deficit and may have to cut services and lay off workers. That would be more people without jobs. And even less taxes paid. And less clothes sold at Kmart. Then fewer people employed there.

Louise’s brother owns a used car lot, and normally at this time of year, when workers get their income tax refunds, his business picks up. But he told his sister he has barely sold a car since the first of the year. In Lorain, people can’t even afford a cheap car now.

And public transit isn’t going to help, she said. The USW represents Lorain’s bus drivers, so she knows the situation well. Because of the town’s budget problems, the transit system is unable to add routes. So there may be no way for a person without a car to get to a job.

“I grew up here in Lorain. And I am very afraid of what is going to happen to this town and to the members of my union,” Louise said.

“And all of this,” she said, “is because of overcapacity and dumping and currency manipulation thousands of miles away in China.”

All of it is devastating lives in Gary, Granite City, Lone Star, New Madrid, Hannibal, Hawesville, Port Talbot, Bilbao, and myriad places across the United States and Europe. And now China too.

National leaders, who closed their eyes, clicked their heels and wished China were a market economy, gave workers and communities and commodity producers – not just steel companies – this disastrous result.

While they kept their eyes shut, China massively overbuilt its steel capacity. China is throwing unemployed workers and bankrupted communities a bone now, saying it will reduce capacity by up to 150 million tons. That’s not nothing. And it will certainly be painful to the 400,000 Chinese steelworkers who will lose their jobs.

But China’s overcapacity is 2.26 times that – 340 million tons.  After 150 million tons is cut, the remaining 190 million tons of overcapacity is still way too much. The remaining overcapacity is nearly 2.5 times the 78.9 million tons produced in 2015 in the United States, the world’s fourth largest steel producer.

China maintains that overcapacity with government supports and currency manipulation. Otherwise it wouldn’t exist. And those interventions in the steel industry and other industries mean that China is not a market economy.

Granting China that status would make it even harder for workers and corporations to get the tariffs that are the only measures keeping some industries alive now. American and European workers have known for a long time that Chinese overcapacity is terrible. Now, unfortunately, Chinese workers also will soon find out that too much is terrible. But that limited and calculated ploy by China does not justify granting market economy status to a clearly non-market economy.

This blog was originally posted on ourfuture.org on March 1, 2016. Reprinted with permission.

Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco’s nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.

China Protects its Workers; America Doesn’t Bother

Wednesday, August 19th, 2015

Leo GerardConfronted with a dire situation, a world power last week took strong action to secure its domestic jobs and manufacturing.

That was China. Not the United States.

China diminished the value of its currency.  This gave its exporting industries a boost while simultaneously blocking imports. The move protected the Asian giant’s manufacturers and its workers’ jobs.

Currency manipulation violates free market principles, but for China, doing it makes sense. The nation’s economy is cooling. Its stock market just crashed, and its economic powerhouse – exports – declined a substantial 8.3 percent in July ­– down to $195 billion from $213 billionthe previous July. This potent action by a major economic competitor raises the question of when the United States government is going to stop pretending currency manipulation doesn’t exist. When will the United States take the necessary action to protect its industry, including manufacturing essential to national defense, as well as the good, family-supporting jobs of millions of manufacturing workers?

While China lowered the value of its currency on three consecutive days last week, for a total of 4.4 percent, the largest decline in two decades, a respected Washington think tank, theEconomic Policy Institute, released a report detailing exactly how the United States lost 5 million manufacturing jobs since 2000.

The report, “Manufacturing Job Loss: Trade, Not Productivity is the Culprit,” clearly links massive trade deficits to closed American factories and killed American jobs. U.S. manufacturers lost ground to foreign competitors whose nations facilitated violation of international trade rules. China is a particular culprit. My union, the United Steelworkers, has won trade case after trade case over the past decade, securing sanctions called duties that are charged on imported goods to counteract the economic effect of violations.

In the most recent case the USW won, the U.S. International Trade Commission (ITC) finalized duties in July on illegally subsidized Chinese tires dumped into the U.S. market. The recent history of such sanctions on tires illustrates how relentless the Chinese government is in protecting its workers.

Shortly after President Obama took office, the USW filed a complaint about illegally-subsidized, Chinese-made tires dumped into the U.S. market. The Obama administration imposed duties on Chinese tire imports from September 2009 to September 2012.

Immediately after the tariffs ended, Chinese companies flooded the U.S. market with improperly subsidized tires again, threatening U.S. tire plants and jobs. So the USW filed the second complaint.

Though the USW workers won the second case as well, the process is too costly and too time consuming. Sometimes factories and thousands of jobs are permanently lost before a case is decided in workers’ favor. This has happened to U.S. tire, paper, auto parts and steel workers.

In addition, the process is flawed because it forbids consideration of currency manipulation – the device China used last week to support its export industries.

By reducing the value of its currency, China, in effect, gave its export industries discount coupons, enabling them to sell goods more cheaply overseas without doing anything differently or better. Simultaneously, China marked up the price of all imports into the country. American and European exporters did nothing bad or wrong, but now their products will cost more in China.

Chinese officials have contended that the devaluation, which came on the heels of the bad news about its July exports, wasn’t deliberate. They say it reflected bad market conditions and note that groups like the International Monetary Fund have been pushing China to make its currency more market based.

Right. Sure. And it was nothing more than a coincidence that it occurred just as China wanted to increase exports. And it was simply serendipity that in just three days, “market conditions” wiped out four years of tiny, painfully incremental increases in the currency’s value.

If the value of the currency truly is market based and not controlled by the government, then as Chinese exports rise, the value should increase. That would eliminate the artificial discount China just awarded its exported goods. Based on past history, that is not likely to happen. So what China really is saying is that its currency is market based when the value is declining but not when it rises.

China did what it felt was right for its people, its industry and its economy. The country hit a rough spot this year. Though its economy is expected to grow by 7 percent, that would be theslowest rate in six years. Its housing prices fell 9.8 percent in June. Car sales dropped 7 percent in July, the largest decline since the Great Recession. Over the past several months, the Chinese government has intervened repeatedly to try to stop a massive stock market crash that began in June.

In the meantime, the nation’s factories that make products like tires, auto parts, steel and paper continue to operate full speed ahead and ship the excess overseas. As a result, for example, the international market is flooded with underpriced Chinese steel, threatening American steel mills and tens of thousands of American steelworkers’ jobs.

This is bad for the U.S. economy. The U.S. trade deficit in manufactured goods rose 15.7 percent ­– by $25.7 billion ­– in the first quarter as imports increased and exports slipped. In the first half of this year, the trade deficit with China rose 9.8 percent, a total of $15 billion.

As EPI points out, that means more U.S. factories closed and U.S. jobs lost. If China had bombed thousands of U.S. factories over the past decade, America would respond. But the nation has done virtually nothing about thousands of factories closed by trade violations.

The United States could take two steps immediately to counter the ill-effects of currency manipulation. Congress could pass and President Obama could sign a proposed customs enforcement bill. It would classify deliberate currency undervaluation as an illegal export subsidy. Then the manipulation could be countered with duties on the imported products.

The second step would be to include sanctions for currency manipulation in the Trans-Pacific Partnership trade deal that the administration is negotiating with 11 other Pacific Rim countries. The deal doesn’t include China, but it could join later. The deal does, however, include other countries notorious for currency interventions.

American manufacturers and American workers demand rightful protection from predatory international trade practices.

This blog originally appeared at OurFuture.org on August 18, 2015. Reprinted with permission.

Leo W. Gerard, International President of the United Steelworkers (USW), took office in 2001 after the retirement of former president George Becker.

New Report: End China Currency Manipulation, Create Jobs

Saturday, February 9th, 2013

Image: Mike HallIf the United States implemented trade policies to end currency manipulation—especially by China—not only would that reduce the U.S. trade deficit by $190 billion to $400 billion over three years, it would be a major first step in reviving the nation’s manufacturing sector and creating up to 4.7 million jobs, according to a new report from the Economic Policy Institute (EPI).

The report, Reducing U.S. Trade Deficits Will Generate a Manufacturing-Based Recovery for the United States and Ohio: Ending Currency Manipulation by China and Others Is the Place to Start, finds that:

Reviving U.S. manufacturing requires eliminating a jobs-destroying U.S. trade deficit in goods by ending currency manipulation and investing in a series of coordinated manufacturing policies.

Currency manipulation is the largest single cause of the U.S. trade deficit and the Chinese government is the world’s biggest currency manipulator. It deliberately keeps the value of its currency artificially low and that artificially raises the price of U.S. exports to China and suppresses the price of Chinese imports into the United States. This artificial price advantage is one of many pull factors that encourages U.S. businesses to shut down operations here and manufacture in China instead.

Manufacturing jobs have been the hardest hit as a result of the nation’s trade deficit, and the EPI report says that the reduction in the trade deficit engineered through new trade policies would over three years:

  • Create between 2.2 million and 4.7 million U.S. jobs (equal to between 1.4% and 3% of total nonfarm employment).
  • Reduce the national unemployment rate by between 1.0 and 2.1 percentage points.
  • Create some 620,000 to 1.3 million manufacturing jobs (27.5% of all jobs created by eliminating currency manipulation).
  • Increase U.S. GDP by between $225.0 billion and $473.7 billion (an increase of between 1.4% and 3.1%).3
  • Shrink the federal budget deficit by between $78.8 billion and $165.8 billion (reductions that would continue as long as the trade balance remained stable), as growth in output expands tax receipts and reduces safety net payments.

But even then the United States would still face a sizeable trade deficit and that’s why, according to the report, “Fully eliminating the goods trade deficit requires implementing policies that will help restore demand for U.S. goods.” The report’s co-author Robert Scott says:

These reforms, coupled with massive investments in infrastructure, clean technologies and renewable energy, would reduce or eliminate the U.S. trade deficit, while supporting millions of additional good jobs, adding hundreds of billions of dollars to U.S. GDP, and reducing unemployment and federal budget deficits.

In 2011, the Senate passed legislation giving the U.S. Treasury Department more tools to enforce rules against currency manipulation, but House Republicans blocked a vote on the bill. According to the EPI report:

Although many legal and regulatory tools are available or have been proposed to reduce or eliminate currency manipulation, currency manipulation could be ended by the U.S. president with a mere stroke of a pen. The president could simply declare that the United States will no longer sell Treasury bills and other government assets to China and other countries that refuse to allow the United States to purchase their government assets (currency manipulators generally refuse to sell their government assets to the United States, effectively closing their capital markets)….Refusing to sell assets to currency manipulators would eliminate the principal tool used by foreign central banks to manipulate their currencies: purchases of Treasury bills and other government securities (U.S. government securities constitute approximately 70% of all such foreign exchange reserves).

Read the full report.

This article was originally posted by AFL-CIO on February 8, 2013. Reprinted with Permission.

About the Author: Mike Hall is a former West Virginia newspaper reporter, staff writer for the United Mine Workers Journal and managing editor of the Seafarers Log. He came to the AFL- CIO in 1989 and has written for several federation publications, focusing on legislation and politics, especially grassroots mobilization and workplace safety.

Striking SoCal Port Clerical Workers Win Outsourcing Controls in Tentative Pact

Thursday, December 6th, 2012

Some 450 office clerical workers—members of the International Longshore and Warehouse Union (ILWU) Local 63—are back on the job this morning in the ports of Los Angeles and Long Beach, Calif., after the ILWU and port employers reached a tentative agreement Tuesday night that will prevent the outsourcing of jobs.

ILWU International President Robert McEllrath said the unity and solidarity of the workers, members, their families and thousands of community supporters played a major role in the workers’ win. When the workers struck Nov. 27, ILWU dockworkers and other port workers refused to cross the picket lines.

“This victory was accomplished because of support from the entire ILWU family of 10,000 members in the harbor community.”

The key elements in the tentative agreement are new protections that will help prevent jobs from being outsourced to Texas, Taiwan and beyond. Union spokesman Craig Merrilees said:

“Really, it was getting control on the outsourcing…ensuring that the jobs are here today, tomorrow and for the future.”

The port workers had been without contract for more than two years and employers were threatening to outsource jobs from the nation’s busiest port complex—some 40 percent of all containerized cargo is handled in the Los Angeles and Long Beach ports.

Details of the agreement that still must be ratified have not been released, but news reports say it is a six-year deal that is retroactive to June 30, 2010.

The workers don’t have ordinary clerk and secretarial jobs. The Los Angeles Times describes them as “logistics experts who process a massive flow of information on the content of ships’ cargo containers and their destinations….They are responsible for booking cargo, filing customs documentation and monitoring and tracking cargo movements.”

This post was originally posted on AFL-CIO NOW on November 6, 2012. Reprinted with Permission.

About the Author: Mike Hall is a a former West Virginia newspaper reporter, staff writer for the United Mine Workers Journal and managing editor of the Seafarers Log. He came to the AFL- CIO in 1989 and has written for several federation publications, focusing on legislation and politics, especially grassroots mobilization and workplace safety. When his collar was “still blue,” he carried union cards from the Oil, Chemical and Atomic Workers, American Flint Glass Workers and Teamsters for jobs in a chemical plant, a mining equipment manufacturing plant and a warehouse.

Notoriously Abusive Chinese Company Foxconn Looking To Open Plants In The U.S.

Friday, November 9th, 2012

During the last stages of the campaign, Mitt Romney falsely tried to claim that American manufacturers like Chrysler were moving production to China. As it turns out, at least one company is planning the opposite move: Foxconn Electronics, the notoriously exploitative Apple Inc. manufacturer, is reportedly testing the waters to open new plants in US cities. Foxconn attracted scrutiny earlier this year when its abusive labor practices in Chinese and Taiwanese factories were exposed in a series of New York Times articles.

According to Chinese newspaper DigiTimes, Foxconn is conducting evaluations in Detroit, Los Angeles, and other cities to possibly open plants focused on LCD television production. The company is also discussing a partnership with Massachusetts Institute of Technology that would bring American engineers to China and Taiwan to learn Chinese and study product design processes.

Foxconn became a household name in the US after a mostly exaggerated and false This American Life segment detailed its mistreatment of workers. Despite the mythology presented in the episode, certain core facts were verified. Foxconn workers live in overcrowded company dorms, working shifts of 12 or more hours, and risk serious injury in appallingly dangerous working conditions. As many as 137 employees fell ill after being forced to clean iPads with toxic chemicals, and 17 Foxconn workers committed suicide in the past five years. The company has also been accused of forcing student interns to assemble iPhones.

Under pressure, Foxconn raised wages for employees and reduced hours, but its still far from meeting basic labor standards. After the company admitted it was struggling to meet demand for the iPhone 5, rumors of a strike over “overly strict demands” emerged.

While the company’s US factories would need to comply with American labor regulations, Foxconn continues to ignore Apple’s health and safety standards abroad with little consequence.

This article was originally posted on Think Progress on November 8, 2012. Reprinted with permission. 

About the Author: Aviva Shen is a Reporter/Blogger for ThinkProgress. Before joining CAP, Aviva interned and wrote for Smithsonian Magazine, Salon, and New York Magazine. She also worked for the Slate Political Gabfest, a weekly politics podcast from Slate Magazine. Previously, she was part of the new media team in Ohio for the 2008 Obama campaign. Aviva received a B.A. from Barnard College.

China Drops Some Wind Power Subsidies After USW Complaint

Wednesday, June 8th, 2011

Image: James ParksHere’s some good news on the trade front: U.S. Trade Representative (USTR) Ron Kirk announced today that China has ended certain wind power equipment subsidies that gave its companies an unfair advantage in the global market.

The action came after the United Steelworkers (USW) filed a Section 301 trade complaint last October charging that China’s government uses hundreds of billions of dollars in subsidies, performance requirements, preferential practices and other illegal trade activities to dominate the renewable energy market.

The subsidies take the form of grants to Chinese wind turbine manufacturers that agreed to use key parts and components made in China rather than purchasing imports. The size of the individual grants range between $6.7 million and $22.5 million, according to the USTR.

AFL-CIO President Richard Trumka said:

Today’s news is a significant move in the right direction.  But much more must still be done to enforce our trade laws consistently and create good jobs here at home…  We must work to end unfair trade practices, including currency manipulation, export subsidies and the suppression of workers’ rights both here and abroad.

USW President Leo Gerard said in a statement that the union’s complaint and the Obama administration’s pursuit of the complaint brought China’s government to the table with a commitment to end this program. He adds:

That’s good news for our members, U.S. companies and American workers. It needs to be followed up with continued vigilance to ensure the Chinese keep their commitments.

America’s workers and our nation face many more clear World Trade Organization (WTO) violations of obligations by China’s government, Gerard said.

With this first green technology issue behind us, we encourage the administration to continue to work to level the playing field for clean technology companies and American workers to grow sustained employment and good job opportunities.

Read Kirk’s announcement here , Gerard’s full statement here and Trumka’s statement here.

This article originally appeared on the AFL-CIO blog on June 7, 2011. Reprinted with permission.

About the Author: James Parks’ first encounter with unions was at Gannett’s newspaper in Cincinnati when his colleagues in the newsroom tried to organize a unit of The Newspaper Guild. He saw firsthand how companies pull out all the stops to prevent workers from forming a union. He is a journalist by trade, and worked for newspapers in five different states before joining the AFL-CIO staff in 1990. He also has been a seminary student, drug counselor, community organizer, event planner, adjunct college professor and county bureaucrat. His proudest career moment, though, was when he served, along with other union members and staff, as an official observer for South Africa’s first multiracial elections.

Time to Wield the Foreign Policy Stick

Wednesday, January 26th, 2011

Leo GerardAmerica plays the role of abused partner in its relationship with China. Although the Asian giant repeatedly injures U.S. industry by violating international trade rules, America has responded, almost exclusively, by pleading and begging for China to stop.

China says it’s sorry. And continues to violate the rules. America respectfully beseeches China to discontinue manipulating its currency, and China says it will. Then it allows the value to increase a completely insignificant amount. Still America does nothing. Nothing. It simply accepts the abuse.

U.S. Sen. Bob Casey, D-Pa., and Michael Williams, senior vice president of U.S. Steel stood with me Wednesday at a press conference in Pittsburgh to urge President Obama in his meetings this week with Chinese President Hu Jintao to announce that America is done with soft talk. We want President Obama to tell President Hu that America has heard enough promises; the United States is bucking up and pulling out that big stick that Teddy Roosevelt carried in foreign policy negotiations.

This is a rare issue on which politicians, Republican and Democrat, manufacturers and organized labor all agree. Here’s what Sen. Casey said at the press conference, “In my estimation, and that of a lot of Americans, the time for talking is over. The time for action is now.” He, Sen. Sherrod Brown, D-Ohio, and Sen. Debbie Stabenow, D-Mich., plan to introduce legislation next week to force the federal government to hold China accountable, to enforce compliance with World Trade Organization (WTO) rules – rules that China agreed to comply with when WTO countries permitted it to join even though it is a non-market economy.

Mr. Williams described the effect of China’s unchallenged trade practices on American steel production:

“Our facilities in Pennsylvania and throughout the United States are among the most advanced in the world:

  • We make the highest quality steel for the most demanding applications;
  • Our technology is world competitive; and
  • Our workers are second to none in skill and know-how.

However, the more than 21,000 U.S. Steel employees nationwide, and the more than 4,700 employees here in Pennsylvania, know all too well that we do not always operate in a fair global marketplace. Instead, we are often faced with the reality of a distorted market – a market where we have to compete against job-stealing dumped and subsidized imports from countries that abuse the rules to gain a false competitive advantage.

No country more than China hurts all American manufacturing by the way it artificially undervalues its currency – making its exports artificially cheap and making competitive imports from the U.S. and elsewhere artificially expensive.”

Here are the facts: American industries have found that they can produce products, ship them to China and price them lower than Chinese competitors. But all too often, China prohibits sale of the American-made products on the mainland.

Sen. Casey gave an example, C.F. Martin & Co., which manufacturers its world-famous guitars in Eastern Pennsylvania. Martin tried to register its mark to sell its instruments in China. But it has been unable to do that because a Chinese manufacturer already registered the mark and is counterfeiting the guitars. “To say it is unlawful does not begin to describe the gravity of it,” the senator said.

In addition to countenancing counterfeiting, China provides illegal subsidies to its export industries, violates international regulations forbidding forced technology transfer when American companies seek to manufacture in China and deliberately undervalues its currency to falsely lower the price of its exports.

When Mr. Williams, Sen. Casey and I all said this must be stopped with enforcement of international regulations, someone in the audience asked if that would prompt a dreaded trade war. That won’t happen because we already are in a trade war. The United States simply is not fighting back. We are playing the passive partner in a perverted relationship, repeatedly allowing the abuser to pound us.

Mr. Williams said it best:

“U.S. Steel wants a strong America. To have a strong America, we need a strong manufacturing base. To have a strong manufacturing base, we need strong enforcement of international trade regulations.”

Sen. Casey agreed, “Our government must take every step necessary. It is not enough to say to the unemployed, ‘We are trying and we are asking.’”

Wield the stick, President Obama.

About The Author: Leo Gerard is the United Steelworkers International President. Under his leadership, the USW joined with Unite -the biggest union in the UK and Republic of Ireland – to create Workers Uniting, the first global union. He has also helped pass legislation, including the landmark Canadian Westray Bill, making corporations criminally liable when they kill or seriously injure their employees or members of the public.

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