Hank Paulson on Manufacturing, Trade and China

By March 2, 2007General

Treasury Secretary Hank Paulson spoke to the Economic Club of Washington yesterday in a wide-ranging speech that touched on manufacturing, on China and on trade.

  • On Manufacturing:
  • “American manufacturing is a good case study in change. Not unlike the revolution in agriculture Americans lived through in the 19th century, we have been living through a revolution in manufacturing. Today we have about 14 million manufacturing jobs in this country – roughly the same number we had in 1950. Then manufacturing represented about 30% of the workforce. Today it represents just 10%. Some see this as a decline in U.S. manufacturing. On the contrary, America is the world’s number one manufacturer, accounting for more than 20% of worldwide manufacturing value-added – that’s more than Japan, twice as much as Germany, and more than 2.6 times as much as China. We manufacture more today than we ever have in our history – seven times as much real output as in 1950, with about the same number of workers. And a greater share of manufacturing jobs than ever before are high-skilled and high-paying. What’s happened? Competition has pushed businesses to invest in technological improvements that allow workers to be more productive and earn higher wages.”

  • On China
  • “Our exports to China, for the most part high value-added manufacturing products and agricultural products, totaled $55 billion in 2006, growing at a rate of 32% last year, and 360% over ten years, making China one of our fastest growing markets for U.S. exports.

    We are dissatisfied with the speed with which China is appreciating its currency, the value of which is not market determined, and with China’s intellectual property protections. We are addressing these issues in our Strategic Economic Dialogue with China, along with China’s need to accelerate the process of opening its economy to U.S. products and services. And in my judgment, the greatest risk to the economic well-being of our two nations is not that China will move too quickly, but that they will move too slowly in reforming their economy.

    We expect that as China moves forward with its economic reforms, increasingly opening its economy to competition, this will benefit both of our nations. Stronger growth in all of our trading partners will sustain our own growth and contribute to a narrower trade deficit.”

  • On Trade
  • “We are engaged in a wide range of bilateral and multilateral efforts to bring down barriers to U.S. exports – both by reducing tariffs and by urging our trading partners to undertake structural reforms. Under President Bush’s leadership, we have negotiated 10 new free trade agreements with 15 countries – and our exports to FTA partners are growing twice as fast as our exports to the rest of the world. We are also working to make sure that existing trade agreements are honored and that intellectual property rights are respected. Thanks to increased openness both here and abroad, our global exports are at an all-time high. The trade deficit will take some time to correct itself, but for the last four quarters, America’s exports have grown at a faster rate than our imports.

    The lesson is clear: If we want to improve our balance of trade, the answer does not involve more barriers, the answer involves more trade – with open markets here at home and more open markets abroad for our exports. My job is to fight for open markets and structural reforms that will benefit American manufacturers, farmers, and service providers. Along with my Cabinet colleagues, I am pursuing that vigorously.”

    All in all, a very thoughtful speech. Click here to read the full remarks.