The Price Tag on Junk 'Made in China'... Thousands of Jobs!

Submitted by SadInAmerica on Mon, 06/30/2008 - 10:18pm.



In the past decade, U.S. trade and investment with China has increased dramatically. Today, China has become the U.S.'s fourth-largest trading partner, following Canada, Mexico, and Japan. Foreign direct investment in China by U.S. firms has increased from only $200 million in 1989 to more than $7.8 billion in 2000.

Contrary to once-high expectations that China's 1.2 billion population would provide an ever-expanding market for U.S. goods, by 2000 the value of goods imported to the U.S. from China exceeded the value of U.S. goods exported to China by a factor of more than 6:1—resulting in a bilateral trade deficit of $84 billion.

Today, the trade deficit with China comprises almost 20% of the total U.S. trade deficit and is the largest trade deficit the U.S. has with any single nation.

Since the enactment of Permanent Normal Trade Relations (PNTR) legislation with China, production shifts out of the U.S. and into China have escalated. According to [the researchers'] media-tracking data, between 1 Oct. 2000 and 30 April 2001, more than 80 corporations announced intentions to shift production to China, with the number of production shifts increasing from two per month in October 2000 to 19 per month by April 2001.

More Than 70,000 Jobs Lost

The estimated number of jobs lost through these production shifts to China was as high as 34,900, compared with 29,267 jobs lost to Mexico, 9,061 jobs lost to other Asian countries, and fewer than 1,000 jobs lost to other Latin American countries. However, because media tracking captures fewer than half of all production shifts out of the U.S. to China and other countries during this period, the actual number of jobs lost through production shifts to China and Mexico can average between 70,000 and 100,000 jobs each year for each country.

Production shifts out of the U.S. into China are concentrated in certain industries: electronics and electrical equipment (37%), chemicals and petroleum products (17%), household goods (11%), toys (8%), textiles (6%), plastics (6%), sporting goods (5%), and wood and paper products (5%).

Production shifts to China were also concentrated in certain regions and states: the Southeast and West Coast. California was hardest hit, accounting for 14% of all production shifts to China, followed by North Carolina (11%) and Texas (10%).

Mostly U.S. Multinationals

U.S. companies shutting down and moving to China and other countries tend to be large, profitable, well-established companies—
primarily subsidiaries of publicly held, U.S.-based multinationals, including such familiar names as Mattel, International Paper, General Electric, Motorola, and Rubbermaid.

The media-tracking data also suggests the majority of the U.S.-based multinational corporations shifting production to China are not simply targeting a Chinese market. Companies such as La Crosse Footwear (winter boots), Lexmark (printers), Motorola (cell phones), Rubbermaid (cookware and storage products), Raleigh (bicycles), Cooper Tools (wrenches), Mattel Murray (Barbie doll playhouses), and Samsonite (luggage) may have moved their production to China, but they still intend to serve a U.S. and global market.

The media-tracking data also suggests an increasing percentage of jobs leaving the U.S. are in higher-paying industries producing goods such as bicycles, furniture, motors, compressors, generators, fiber optics, clocks, injection molding, and computer components. As the data shows, it is these higher-end jobs that are most likely to be unionized and therefore more likely to have a much larger wage and benefit package.

Many of those who lost their jobs were high seniority, top-of-the-pay-scale employees who have a great deal invested in their jobs and in their communities.

The employment effects of these production shifts go well beyond the individual workers whose jobs were lost. Each time another company shuts down operations and moves work to China, Mexico, or any other country, it has a ripple effect on the wages of every other worker in that industry and that community, through lowering wages, restraining union organizing and bargaining power, reducing the tax base, and reducing or eliminating hundreds of jobs in related businesses.

Policies Based on Faulty Data

Our research suggests the U.S. and other countries have moved ahead with trade policies and global economic integration based on faulty arguments and incomplete information. The findings from this pilot study are a first step toward better informing the U.S.-China trade policy process.

In 1992, the U.S. government signed a Memorandum of Understanding with China under which China agreed to enforce U.S. intellectual property rights and open its markets to U.S. goods. Experts hailed the new agreement as a breakthrough for U.S. trade relations that would provide "American businesses, farmers, and workers with unprecedented access to a rapidly growing market."

This expansion of China's role in the global economy came before the U.S. Congress enacted legislation granting PNTR to China in the fall of 2000, clearing the way for China to enter the World Trade Organization (WTO) later in 2001.

Those actively lobbying for PNTR, such as National Association of Manufacturers' president Jerry Janinowski, argued that PNTR would "increase opportunities for American manufacturers and their workers." Those opposing PNTR had a very different view on possible effects on the U.S. economy. Ohio Republican Rep. Bob Ney warned of the impact of the bill on American jobs. "This is a greed agreement. . . . It only helps a few at the top," said Ney. "We're going to lose hundreds of thousands of jobs here in America."

Jobs Lost Soon After PNTR

The most striking finding from the media-tracking data is the high incidence of production shifts out of the U.S. to China shortly after the passage of PNTR and before China entered the WTO. Between October 2000 and April 2001, more than 80 companies announced plans to move production to China, and the number of production shifts increased each month of media searching.

Production shifts were not limited to one country. In many cases, U.S. companies would shift different parts of their operations to different countries, all at the same time, for a variety of reasons. Mexico and China provide labor cost savings, and both are working rapidly to expand the technical infrastructure to attract higher-end production.

Lexmark International, the world's second-largest computer printer manufacturer, shifted production simultaneously to Mexico and China. The Lexmark layoffs will affect about 900 workers, including 600 manufacturing workers in Lexington, Ky.

Given the much greater logistical challenges of relocating production to the other side of the world, compared with just south of the border, and the fact that NAFTA has been in effect for more than seven years—the total number of production shifts to Mexico during the seven-month period (148) was much larger than the total number of production shifts found for China (84).

However, because on average the number of workers affected by the production shifts was much larger for the China cases than for the Mexico cases, the total number of jobs lost through production shifts to China during the seven months was as high as 34,900, compared with 29,267 jobs lost to Mexico, 9,061 jobs lost to other Asian countries, and only 708 jobs lost to other Latin American countries.

Production shifts to China are not limited to low-wage production jobs on the margins of the U.S. economy. Instead, they cross a wide range of occupations at some of the nation's preeminent manufacturers, including bicycles produced by Raleigh; Hasbro and Mattel toys; polyester and nylon production by E. I. Du Pont de Nemours; Flextronics circuit boards; Lionel model trains; Johnson Electric Holdings auto parts; DVD components for Pioneer Video; Samsonite luggage; Matsushita air-conditioner compressors and microwaves; Motorola semiconductors; wrenches and halo lighting fixtures by Cooper Tools; Ametek generators; and Universal Furniture bedroom furniture sets.

Eighty-five percent of companies moving to China are U.S.-based multinationals, and 16% are foreign-based multinationals.

Japanese-based Matsushita moved production out of the U.S. to China specifically to capitalize on an export market. In February, Matsushita announced plans to close its Mooresville, N.C., production facility and move production to China and Malaysia, losing about 530 jobs.

Labor Costs 50 Times Lower

California Cedar Products announced 20 Jan. 2001 that it would be shifting most of its pencil-slat production to Tianjin, China, during the next 18 months, forcing most of its 325 unionized employees to lose their jobs. The company, which also manufactures Duraflame fireplace logs, has been operating out of its Stockton, Calif., plant more than 60 years.

While starting workers average $8.03 an hour, the top of the scale goes as high as $20.15 an hour. Teamsters Local 439, the union representing the workers, offered pay cuts averaging $1.00 an hour to try and persuade the company to keep the pencil-slat operation in Stockton. However, company officials argued they needed as much as
$6.5 million in labor cost cuts if they were going to remain in Stockton.

Company president Charles Berolzheimer told the workers the company could not remain in the U.S. because "a typical Chinese laborer, with full benefits, earns the equivalent of $60 to $80 a month." According to Berolzheimer, that would make labor costs 50 to 80 times lower than in the Stockton plant.

For some communities, the loss of jobs is only part of the story of how the pursuit of low-cost manufacturing has impacted their town. When cell phone manufacturer Ericcson decided to move production from Lynchburg, Va., to Mexico, Brazil, and eventually China, the city faced not only the loss of jobs but also a significant loss of tax revenue.

Three years after Ericcson gained $500,000 in state and local incentives to expand operations at its Candlers Mountain facility, the company announced it would relocate between $60 million and $80 million worth of equipment overseas. As a result, Lynchburg lost approximately $650,000 in machinery and tools tax revenue. The city cut back the fire department and sheriff's department and faced a significant shortfall in its school system budget.

The World Bank calculated that in the period from 1990 to 1998, China's output grew at an average annual rate of 11.2%—a pace fast enough to double the economy's size within seven years. For the same 1990-'98 period, the U.S. economy grew at an average annual rate of 3.2%.

The largest trade imbalances with China in 1999 on the industry level are in the industry groups of electrical machinery/equipment ($16.4 billion deficit), leather goods ($10.2 billion deficit), apparel and related products ($8.2 billion deficit), and machinery except electrical ($6.3 billion deficit).

Michael Vail - May 29, 2008 - source

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Submitted by SadInAmerica on Mon, 06/30/2008 - 10:18pm.


Anonymous (not verified) | Tue, 07/01/2008 - 5:01pm

Well just released there top 10 job boards list today - We should all study this intently in the coming weeks and months, we are going to need to know where the jobs are!