Teamsters: U.S. Proposal Fudges Trade Figures to Make Pacts Look Good

The Obama administration's Office of Management and Budget is floating a technical reclassification of billions of dollars of imported goods as “factoryless” to lessen the U.S. trade deficit , thus making future “free trade” pacts financially look good, the Teamsters say.       

And Teamsters President James Hoffa isn't the only union leader concerned about the scheme.  The Society of Professional Engineering Employees in Aerospace – the Professional and Technical Engineers local that represents 25,000 engineers at Boeing – is objecting, too.   So are the AFL-CIO Industrial Unions Council and a top union ally on trade issues, Public Citizen's Trade Watch.

“The only reason you would classify an iPhone made in China as a U.S. export is to hide the size of our massive trade deficit,” Hoffa said.

“The only reason you would classify an iPhone made in China as a U.S. export is to hide the size of our massive trade deficit,” Hoffa said.

The controversy over how to classify imports and exports, especially in the context of multi-national supply chains, is important.  Reclassifying them to remove them from the trade deficit figures would let advocates of so-called “free trade” treaties deny that the pacts drive up the trade deficit and cost U.S. workers jobs.

“To revive American manufacturing jobs and production, we need to change our policies, not cook the data,” added Brad Markell, the Industrial Union Council's executive director.  “We need to reform the trade policies that incentivized off-shoring and resulted in decades of trade deficits and millions of U.S. manufacturing jobs off-shored, not cover up the evidence that our current trade policy is not working.”

“Where the production function looked at how goods were made, the new principle would be who controls how goods are made,” said SPEEA President Ryan Rule. 

“The proposed change would count foreign manufacturing as a service, not a manufactured good.  It has no connection to sound public policy,” he added.

The Commerce Department's economic policy committee is considering an Office of Management and Budget proposal to change the origin of various goods – say aircraft wings – from the country where the goods are produced to the country that has “entrepreneurial risk, ownership and control of the production process.”  It put the idea out for comment on May 22.

If goods pass from one nation to another or components of them go through several nations, they would be considered “factory-less” and their value would be subtracted from all trade data, the proposal adds.

That could make trade pacts look good by artificially reducing imports, Hoffa says.

“The factory-less goods proposal also would, overnight, falsely increase the reported number of U.S. manufacturing jobs as white-collar employees in firms like Apple – now re-branded as factory-less goods producers – would suddenly be counted as manufacturing workers,” the Teamsters added in their comments opposing the scheme.

“This shift also would create a false increase in U.S. manufacturing wages and output.”

Using the iPhone as an example, the Teamsters said the reclassification plan would call it a “services” import to the U.S. even though workers at a Chinese firm, Foxconn, actually manufacture the iPhones, which are goods, not services. 

“And if Foxconn exported iPhones to other countries, the proposed reclassifications would count the iPhones manufactured in China as U.S. manufactured goods exports, further belying the real U.S. manufacturing trade deficit,” the Teamsters said.

“The economic data reclassification initiative, if implemented, could further undermine efforts to bolster U.S. manufacturing by producing a fabricated reduction of the U.S. manufacturing trade deficit.”

“These Orwellian data re-branding proposals would hide the damage wrought by past trade pacts like the North American Free Trade Agreement, greasing the way for more-of-the-same, job-killing, deficit-boosting trade deals,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.  Some 20,000 individuals also protested the scheme in letters to the feds.

“Reclassifying jobs that have been and continue to be shipped overseas under the euphemism ‘factory-less goods’ is an insult to the citizens of the United States who want real manufacturing jobs, and know that the TPP and other NAFTA-style trade deals are not in our best interest,” Susan Marie Frontczak of Boulder, Colo., said in a letter the Teamsters included.

“Put the tricks aside. It's time to address the bad trade policies that have led to incentivized off-shoring, rather than play with re-branding.”  added Merrill Cole of Macomb, Ill.

“NAFTA and GATT were a really bad idea.  TPP is worse,” wrote Aaron McGee of Madison, Wis.  Changing trade data “as a cover-up for unfair trade policies is just ridiculous.”

Rule added that the terms “factory-less goods producers” and “manufacturing service providers,” which OMB's proposal uses to reclassify where goods come from, intentionally cloud the issue.  Better descriptions, he said, would be the plain English words “suppliers” and “outsourcers.”  He also said OMB would let firms count goods exported from their own foreign factories to a third country as U.S.-made exports, since the firms control the export process.

And by making the goods factory-less or even U.S. exports, Rule said, the goods involved could qualify for “Buy American” rules.

“The problem is ill-posed, the public policy interest is poorly defined and the solution is likely to create significant real problems.  The proposed changes should be abandoned,” Rule concluded.     

Posted In: Allied Approaches