American Labor Numb to Trade-Related Job Losses

http://www.reuters.com/article/domesticNews/idUSTRE5AG30Y20091117

Just at the very time when it is finally dawning on American leadership that our enormous trade deficit lies at the heart of our economic problems, American labor, numbed by decades of brow-beating about the supposed benefits of free trade and globalization, seems to have given up the fight.  Just when President Obama most needs for American workers to rally behind his efforts to restore a balance of trade – while meeting with the Chinese premier in an effort to stop Chinese manipulation of the currency exchange rate – the labor movement has fallen silent.  America’s most powerful labor union prepares for a summit on job creation without one mention of correcting our trade imbalances. 

As reported in the above-linked Reuters article, AFL-CIO President Richard Trumka is preparing for a December 3rd White House Summit on job creation, focusing on such things as steering government stimulus spending toward small businesses.  His plan doesn’t include a single mention of trade. 

In a preview of labor’s contribution to Obama’s December jobs summit, AFL-CIO President Richard Trumka said money from the Troubled Asset Relief Program could be lent directly to small- and medium-sized businesses at commercial rates.

He said TARP money could also help small community banks that were ignored during the financial rescue effort by having them manage the loans.

… The AFL-CIO jobs plan also calls for extended unemployment benefits, food assistance and healthcare for the unemployed, more money for infrastructure projects and state and local governments, and job creation aimed at distressed communities.

Never mind the fact that the President’s emphasis on currency exchange rates will have little effect on the trade deficit with China, or that his whole approach to trade has been far too timid.  Without the support of American labor on this issue, he has virtually no chance of softening foreign opposition to trade policy inititatives. 

I suppose that labor leaders like Trumka can hardly be blamed for giving up the fight after decades of being ignored on the trade issue by their own party and mocked by business leaders and economists as being unwilling to “compete” in the global economy.  For decades, labor complained bitterly about the effects of trade policy while administrations and both political parties remained enamored with the false promises of a doomed model of free trade and globalization.  But the climate on trade policy is changing rapidly in the wake of the global economic collapse and this is exactly the wrong time to give up the fight and become dependent on government largesse.  The very moment in history when you were proven to be right all along is not the time to admit defeat.

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6 Responses to American Labor Numb to Trade-Related Job Losses

  1. Mark A. Hall says:

    Pete:

    You retired folks are all the same.

    COMPLAIN! COMPLAIN! COMPLAIN!

    Poor Mr. Trumpka was probably still in a daze upon learing that our great American Stimulus Package actually created more jobs in China than it did in the U.S.

    *************************************************

    Pete:

    Do you know if we are even measuring our “exports” accurately?

    Are Ford cars produced in China factored into our export totals?

    If a (1) person operation imported a $200 wash machine from Mexico, tacked on $150 for Admin. and profit, then exported the wash machine to Canada declaring a value of $350, would our exports and our GDP reflect the $350?

    What if you did this for a truckload of 1000 wash machines without even taking them off of the truck?

    $350,000 in exports and only (1)part time job.

    Can you imagine the inflated exports and GDP vs. actual jobs.

    • Pete Murphy says:

      Good question, Mark. I suspect it would work exactly as you described, though the washing machines may fall into a category called “re-exports.” I suspect that there isn’t a whole lot of this going on. Seems like Canada would just import them from Mexico and save themselves the mark-up.

  2. Mark A. Hall says:

    Pete:

    I’m not quite sure that Canada has many appliance factories. When conducting some other studies, it appeared that Canada was about the ONLY place where the U.S. actually experienced an increase in appliance exports.

    32.16% of total U.S. appliance exports in 1996.
    46.85% of total U.S. appliance exports in 2008.

    Do you know the answer to my Ford question?

    Thanks, Mark

    A

  3. Mark A. Hall says:

    Food For Thought……

    Since Diamond brand toothpicks are now also made in China, just think, the next time your at a party and you spear a pickle from the relish tray, you are “saving” or “creating” a Chinese job!

  4. Bill Parks says:

    When imported products are exported, the value is as stated in both directions. The company exporting a previously imported item can apply for a rebate of tariffs paid when the product is imported. This is called a drawback.

    These import and export of products are calculated at the listed price or cost. Another factor is the importing in bond. For instance if Toyota has a plant in Tijuana it probably brings in many parts through LA and ships them to Tijuana in bond in sealed containers.

    One of the anomalies is that the tariff is calculated on the so called first sale. So, if a village in China produces fireworks in hundreds of small huts the price is the price the wholesaler pays to the little family for the firework. Then it sold and resold all the way to the port in China where it is purchased by an American company. The tariff is calculated on the first sale which might be for a couple of pennies though the product is sold to the American company at many times that amount.

    • Pete Murphy says:

      Thanks for that valuable insight, Bill. Regarding the example you provided in the last paragraph, is it not up to the American government to determine the value of the product and then set the tariff accordingly? I believe that this is how it was done until Smoot-Hawley was passed in 1930. Prior to that, a lot of time and effort was spent by American regulators in determining the value of products for the purpose of setting the tariffs. Smoot-Hawley was then an attempt to streamline that process by setting tariffs in fixed dollar terms instead of “ad valorem” rates. The problem was that no one anticipated a severe downward spiral of deflation, which then effectively boosted the tariff rates. The lesson of Smoot-Hawley was not that protectionism is bad, but that tariffs should always be set in ad valorem terms (that is, as a percentage of the product’s value). Of course, free trade cheerleaders don’t want us to know that.

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