Los Angeles, CA
America's manufacturing industry is in a deep and long-lasting crisis that threatens the future of American prosperity. This crisis is not the result of a failure of American manufacturing; it is the result of a failure of economic and trade policy.
Manufacturing is the engine of productivity growth for the American economy, and its higher paying jobs have been the ladder to the middle class for millions of Americans. But policy-makers have fallen into the trap of thinking that a job is just a job, and have shown complete and total neglect for manufacturing. Worse than that, they have actively undermined manufacturing by encouraging imports and the transfer of manufacturing jobs offshore. The result has been massive loss of manufacturing jobs, stagnation of wages, a worsening of income distribution, destruction of a vital avenue to prosperity for millions of working Americans, and creation of a record trade deficit that exposes our economy to the destructive forces of international financial turbulence.
In January of this year, manufacturing lost 65,000 jobs, and it has now lost 254,000 jobs in the last six months alone. Manufacturing employment during the current economic expansion peaked in March 1998 at 18.9 million, but since then it has lost 640,000 jobs and fallen to 18.2 million jobs in January 2001.
This will be the first economic expansion in modern times in which manufacturing employment does not grow. At the end of the last recession, in July 1991, there were 18.4 million manufacturing jobs; today there are 18.2 million manufacturing jobs. Over the same period, total employment rose by 24 million from 108.1 million to 132.1 million.
For the last 20 years, policy-makers have failed to put adequate priority on manufacturing so that we have persistently lost manufacturing jobs and manufacturing has shrunk as a share of our economy. Policy-makers have negotiated unequal trade agreements that have left our markets open to foreign predation while foreign markets have remained closed to American exports. The Federal Reserve and the Treasury have persistently neglected the dollar, allowing it to appreciate massively against the currencies of all our trading partners. American manufacturing is the most efficient in the world, but even it cannot compete when hobbled by an over-valued dollar that puts it at a 30 percent cost disadvantage. Manufacturing companies have also been given an added incentive to shift production offshore to take advantage of depreciated foreign currencies. And this incentive has been further amplified by trade agreements that have failed to incorporate workers' rights and environment and labor standards, thereby fostering a race to the bottom that has business chasing the most exploitable workers and degradable environment to gain competitive advantage.
Last year more than a quarter of the U.S. trade deficit was in automotive products, and automobile employment fell by nearly 50,000 despite a record year for vehicle sales. Since 1993, the U.S. deficit in automotive trade with Mexico has soared from $3.6 billion to $20 billion. During the five years of the auto agreement with Japan that expired last year, the trade deficit grew from $33 billion to $40 billion. A similar auto agreement with Korea has had similar outcomes, resulting in a deficit of about $5 billion last year.
For the last decade, the U.S. aerospace industry has been increasingly injured by the transfer of production and technology to offshore locations. Boeing recently transferred assets of the world's largest aircraft machining center in St. Louis to the GKN Corporation of Great Britain. Thousands of U.S. defense manufacturing jobs will now be moved to facilities in Asia, Europe, and former Soviet bloc countries. Boeing has also transferred production of critical components, such as wings, rudders and fuselage panels, to mainland China as "offsets" for future aircraft purchases by China. This new Chinese production uses technology supplied by the former North American Rockwell Corporation. Other major aerospace suppliers, such General Electric, Lockheed Martin, and United Technology Corporation, are all sending high-skill, high-wage jobs offshore to take advantage of weak trade laws and quality compliance loopholes. Boeing proudly proclaims itself a "global" production company in its sales promotions, while also pressing the U.S. government for tax and tariff relief for these sales. American workers are therefore asked to finance destruction of their jobs.
The American steel industry is facing an enormous crisis. In the 1980s, the American steel industry revitalized itself through the efforts of the USWA, coupled with more than $50 billion in capital spending. The transformation resulted in American steel being the most productive in the world. But on the heels of the Asian economic crisis and the continuing predatory trade practices of our competitors, our steel industry is in crisis. The sector is hemorrhaging steel-making capacity and jobs, putting in jeopardy the futures of tens of thousands of workers, retirees, their families and their communities. The delay in responding to this crisis compounds the problem: 16 steel companies have been driven into bankruptcy with many others on the brink. At the end of 2000, the steel industry was operating at its lowest capacity utilization level in more than a decade, and no relief is in sight.
In the paper industry, there has been chronic dumping of paper in U.S. markets by East Asian producers following the financial crisis of 1997. This has caused as many as 40 pulp and paper facilities to close, resulting in the loss of 30,000 jobs. The paper converting sector has lost jobs as these have shifted to Mexico and East Asia, owing to favorable tariff treatment granted by NAFTA and the WTO agreement. In the solid wood industry, lumber and sawmill workers have lost jobs owing to unfair subsidized competition by Canadian interests which has only been partially ameliorated by the U.S.-Canada Softwood Lumber Agreement of 1995. This agreement is set to expire on March 31, 2001, posing the real danger that Canadian producers will push even more subsidized timber and sawn wood into the U.S. market.
In apparel and textiles, hundreds of thousands of workers in the United States have lost their jobs over the last decade. A handful of larger retailers have moved these jobs into offshore sweatshops where workers are denied their most fundamental rights, conditions are abusive and dangerous, and young women and children are most often the victims. Twenty years ago, most clothing sold in the United States was produced here. Today, approximately 80 percent of all apparel sold here is produced outside the country. Flawed trade agreements have opened the way for dominant retailers to force a shift of production to countries where workers are paid pennies an hour and have virtually no legal rights.
It is vital that Congress and the Bush Administration act forcefully and rapidly to maintain manufacturing jobs.
- They must vigorously enforce all U.S. trade laws, and where necessary, amend them to ensure fair trade.
- Our huge trade deficit is entirely in manufactured goods. Our trade policy must address the concerns and interests of manufacturing workers rather than the interests of U.S.-based and foreign-based multinational corporations.
- The negotiation of auto trade agreements must focus on the trade balance as the measure of success, setting firm targets to reduce the deficit.
- Offsets, which are especially prevalent in aircraft trade, are a form of unfair competition. The United States must take forceful action to stop this unfair trading practice.
- The U.S.-Canada Softwood Lumber Agreement, which is due to expire on March 31, 2001, must be extended and strengthened.
- There must be aggressive and consistent enforcement of worker rights provisions in current trade law, particularly under the Generalized System of Preferences (GSP).
- The U.S. government can and should self-initiate trade cases where appropriate under the law. For example, it should bring Section 201 safeguard cases in sectors like steel when import surges injure domestic industries. And it should bring 301 cases where workers' rights violations cause injurious competition.
- We must renegotiate NAFTA in many areas, including cross-border trucking, auto trade, apparel import surges, and investment rules, and we must strengthen the labor and environmental side-agreements.
- We must devote more resources to enforcement of trade agreements.
- We must repeal provisions of the tax code, such as the foreign tax credit and the deferral of taxes on foreign profits, that provide corporations with incentives to shift jobs and grow manufacturing offshore.
All of this must be done in the context of domestic and international economic policy that is focused on growth. The Federal Reserve and the Treasury must bring down the value of the dollar to remove the price disadvantage that this imposes on American manufacturers. And the governments of the G-7 must work together to create a climate of global growth fueled by rising demand.