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#TruthOnTheTrail: Trade Realities That Campaigns Need to Consider

By | Shopfloor Main, Shopfloor Policy, Trade | No Comments

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Trade continues to be a key topic in the campaigns of both major parties. Unfortunately, the most oft-repeated claims are flat-out wrong and portend a dangerous path of retreat from the strong trade approach that has long been a powerful positive force for American workers, consumers and families. With World Trade Week officially under way, let’s look again at how trade drives the U.S. economy, raises standards of living for American families and grows manufacturing in the United States by dispelling some of the top trade myths.

  1. Free Trade Agreements. If candidates want to take aim at free trade agreements (FTAs), why not go after the hundreds of trade agreements being negotiated without the United States that exclude and disadvantage manufacturers in the United States? U.S. exporters face higher tariffs and barriers than most of the world’s exporters in other countries (ranking 130 out of 132) because the United States has too few, not too many, trade agreements. FTAs are huge market boosters for manufacturing in the United States because they promote fair trade by leveling the playing field. That’s why moving forward on the Trans-Pacific Partnership (TPP) is so important to manufacturers in the United States.
  1. NAFTA. The criticism of the North American Free Trade Agreement (NAFTA) is an enduring but deeply flawed myth. The United States implemented NAFTA in 1994 and then experienced four years of economic growth and the creation of more than 800,000 manufacturing jobs. The recession in the late 1990s had a negative effect on the U.S. economy and jobs, but if anything, NAFTA helped the United States endure that downturn more successfully and has been critical to sustaining and growing the U.S. manufacturing sector, which then faced even stronger challenges from Asian emerging economies.
  1. China. It is easy for candidates to go after China as a major villain in the trade stories they like to tell. China is not easy, but it is not a one-sided picture. Yes, China has grown its manufacturing industry heavily over the past 20 years and is now the largest foreign supplier of manufactured goods to the United States. To reach this level, China engaged in a number of unfair trade practices, government subsidization and discriminatory policies. No debate there. At the same time, China also became the third-largest market for U.S.-manufactured goods, from the seventh-largest purchaser in 2002, the year after China joined the World Trade Organization, with U.S. exports growing more than 350 percent to $89 billion. There’s a long way to go in creating a fairer and more reciprocal U.S.China commercial relationship, but it’s a lot more complicated than the campaign promise of putting on new border taxes on Chinese imports, which we all know would be contrary to U.S. international commitments and would likely result in even stronger retaliation against U.S. exports to China. And just a reminder, the TPP does NOT include China.
  1. Trade Deficits. When we buy more imports than sell exports, that’s considered a trade deficit, which is used by candidates as a negative report card on U.S. trade. However, our economy is much more complicated than simple subtraction. Oftentimes, when the U.S. trade deficit is rising, the U.S. unemployment rate is declining and U.S. manufacturing production is growing. Also, the critics conveniently ignore when we do have a surplus, such as the fact that our country sells more manufactured goods overall to our FTA partners than we purchase from them. U.S. manufacturing output and exports have quadrupled over the past quarter century. Trade, boosted by trade agreements, is helping to fuel our economy.

Trade and manufacturing go hand in hand. The United States manufactures more today than we have in our entire history. Trade and trade agreements have opened the door to new global opportunities for manufacturers big and small throughout America, helping to sustain and grow jobs for millions of Americans. Let’s continue to make sure manufacturers and America can continue to grow.

China Agrees to End Export Subsidies in Win for U.S. Manufacturers and Global Trading Rules

By | Shopfloor Policy, Trade | No Comments

In a win for U.S. manufacturers, the Office of the U.S. Trade Representative (USTR) announced today a new bilateral agreement with China to dismantle a major government-funded export subsidy program that had boosted Chinese manufacturers at the expense of foreign companies. The new agreement eliminates more than 175 measures challenged by the United States in a February 2015 World Trade Organization (WTO) challenge and mandates follow-up consultation between the United States and China to ensure robust implementation of the agreement. Read More

Markit: China’s Manufacturing Sector Slowed Once More, Down to its Lowest Level Since March 2009

By | General | No Comments

The Caixin Flash China General Manufacturing PMI declined from 47.8 in July to 47.1 in August, its lowest level since March 2009. The Chinese manufacturing sector continues to struggle, with its PMI data contracting for the sixth consecutive month. Manufacturing activity was down across-the-board, including new orders (down from 47.2 to 46.3), output (down from 47.1 to 46.6), exports (down from 46.9 to 46.0) and employment (down from 47.2 to 46.0). The new orders figure was also at a post-recessionary low. Indeed, a number of economic statistics continue to reflect decelerating activity levels, particularly relative to the paces observed earlier in the year or last year. These include industrial production, fixed asset investments and retail sales. With that in mind, the Bank of China has devalued the yuan, down 2.9 percent in the past two weeks, and the Shanghai Composite Stock Market Index has plummeted more than 32 percent since June 12. Such sharp moves have prompted growth worries in financial markets around the world. Read More

Markit: Chinese Manufacturing Activity Slipped Further into Negative Territory in July

By | Economy | No Comments

The Caixin Flash China General Manufacturing PMI dropped from 49.4 in June to 48.2 in July, its lowest level since April 2014. Chinese manufacturing activity has now contracted in 7 of the past 8 months, continuing a deceleration trend in that nation’s economy. Indeed, all of the PMI subcomponents were in negative territory in July, with most of them slipping further. This included new orders (down from 50.3 to 48.1), output (down from 49.7 to 47.3) and exports (down from 50.3 to 46.6), with domestic and foreign demand declining once again after stabilizing slightly in June. Employment (up from 46.6 to 47.4) fell at a slower pace for the month, and yet, hiring has now decreased in 27 of the past 28 months. These data are consistent with recent economic indicators from China, which have reflected slower growth, particularly relative to the rates experienced at the end of last year or earlier. Read More

Monday Economic Report – June 29, 2015

By | Economy, General | No Comments

Here is the summary for this week’s Monday Economic Report:

Last week, there were several reminders that the manufacturing sector has not recovered fully from economic weaknesses earlier in the year, even as business leaders remain cautiously optimistic about activity in the coming months. Durable goods orders declined 1.8 percent in May, extending April’s 1.5 percent decrease. Much of this softness stemmed from reduced aircraft sales, with orders excluding transportation modestly higher. Nonetheless, durable goods demand has been quite weak for much of the past year. On the positive side, we would expect stronger durable goods orders in the June data, with the recent Paris Air Show lifting aircraft sales, and the broader measure, which excludes transportation, has edged marginally higher over the past three months. We hope that this is the start of a rebound. Read More

Markit: Eurozone Manufacturers Report Fastest Growth since April 2014

By | Economy | No Comments

The Markit Flash Eurozone Manufacturing PMI increased from 52.2 in May to 52.5 in June, its fastest pace of growth since April 2014. (The composite measure, which adds in services, rose to a 49-month high.) For manufacturers, output (up from 53.3 to 53.5) and employment (up from 51.6 to 52.0) both edged higher, with each expanding modestly. At the same time, there were slight easings for new orders (down from 52.7 to 52.5) and exports (down from 53.2 to 52.6). Nonetheless, the underlying story is a positive one, with Europe making significant progress in recent months and brushing off possible risks from Greece. With that said, robust growth continues to be elusive, with real GDP up 0.4 percent in the first quarter and industrial production up just 0.1 percent in April. On a year-over-year basis, the Eurozone grew 1.0 percent, with industrial output up 0.8 percent. Read More

Monday Economic Report – May 26, 2015

By | Economy | No Comments

Here is the summary for this week’s Monday Economic Report:

The minutes of the April 28–29 Federal Open Market Committee (FOMC) meeting highlighted the nuance that many of us see in the economy right now. The Federal Reserve highlighted a number of challenges facing consumers and businesses in the early months of 2015, noting how these headwinds have dampened overall activity year-to-date. On the other hand, the FOMC felt that slowing economic growth was largely due to “transitory factors,” with its outlook mostly unchanged for the rest of this year. The Federal Reserve projects growth of 2.3 to 2.7 percent in 2015, and it expects the unemployment rate to fall to 5.0 to 5.2 percent.   Read More

Manufacturers Call on Congress to Renew Nuclear Deal with China

By | Trade | No Comments

Last week, the President transmitted to Congress the renewal agreement for the “U.S.-China Agreement for Cooperation on the Peaceful Uses of Nuclear Energy,” also known as the U.S.-China Section 123 agreement. Unless the renewal is brought into force before the current agreement expires in December, U.S. nuclear suppliers will lose their access to the world’s largest market for commercial nuclear goods and services – effectively forfeiting billions of dollars in U.S. exports and thousands of American jobs in a key sector. The NAM recently joined several other associations in urging Congress to act on a clean and expeditious approval of the renewal U.S.-China Section 123 agreement.

Section 123 of the U.S. Atomic Energy Act requires a specific agreement for significant transfers of nuclear material, equipment, or components from the United States to another nation. This primer from the Congressional Research Service (CRS) provides additional background on these “123 Agreements”, and CRS also has this new report on the China Section 123 agreement. Read More

Monday Economic Report – April 27, 2015

By | Economy | No Comments

Here is the summary for this week’s Monday Economic Report:

Durable goods orders jumped 4.0 percent in March, which should be a sign that the sector was growing strongly and rebounding from recent softness. Instead, strong aircraft and motor vehicle sales in the month masked broader weaknesses behind the surface. Excluding transportation equipment orders, durable goods sales dropped 0.2 percent for the month and have edged lower across the past six months. Durable goods shipments were somewhat more encouraging on a year-over-year basis, up 3.7 percent, but they have been essentially flat since September. Read More

Markit: Slower Manufacturing Data in China, Europe and the U.S. in April

By | Economy | No Comments

Manufacturing activity in China contracted for the fourth time in the past five months, according to preliminary data from Markit. The HSBC Flash China Manufacturing PMI dropped from 49.6 in March to 49.2 in April, its lowest level in 12 months. The decline stemmed largely from reduced domestic demand, with the new orders index down from 49.3 to 49.2. The employment index (up from 47.4 to 48.0) has now reflected contracting levels of hiring for 20 straight months. On the positive side, new export orders (up from 49.0 to 50.6) shifted to a slight expansion in April, and output (down from 50.8 to 50.4) expanded ever-so slightly, albeit at a slower pace this month. Read More