Matthew McMullan Archive

You might think Congress is entirely tied up in the impeachment hearings. But no!

On Monday, House and Senate negotiators agreed to a compromise version of the massive National Defense Authorization Act (NDAA), which sets in place policy and spending for Department of Defense. Tucked in this huge conference report is legislation modeled on the Transportation Infrastructure Vehicle Security Act (TIVSA) that would bar federal dollars from being used to purchase rolling stock – rail cars or buses – from state-owned or -controlled companies. In effect this meant big Chinese companies, whose presence in the American bus and rail car markets has grown significantly in recent years.

Both the House and Senate versions of the NDAA included TIVSA language, and while the Senate’s TIVSA was comprehensive the House’s carved out electric buses from this legislation. In the end, though, the TIVSA language on which the negotiators agreed leaned toward the Senate version; it was more comprehensive.

The Alliance for American Manufacturing (AAM) thinks this is a good outcome. Detailed reports have shown CRRC and BYD – a Chinese state-owned rail car manufacturer and a state-supported bus manufacturer, respectively, that have growing footprints in the American market – maintain close ties to the Chinese Communist Party, the Chinese military, and huge telecom companies like Huawei, which currently sits on a Commerce Department export blacklist because of national security concerns.

AAM President Scott Paul applauded Congress for recognizing that such companies “operate as extensions of China’s government.” Said Paul:

“By moving forward with this legislation, Congress is defending our transportation infrastructure against deeply subsidized Chinese companies that threaten to disrupt our manufacturing capabilities and displace tens of thousands of American jobs throughout our supply chain of parts and components.”

Read the reports on BYD and CRRC here.

***

Reposted from AAM

The Wall Street Journal has published a lengthy look at Amazon’s years-long effort to bring products directly from Chinese factories to me and you, the American consumer. How has this effort turned out?

Well, the title of the article is “Amazon’s Heavy Recruitment of Chinese Sellers Puts Consumers at Risk.” So … maybe good for The House That Jeff Built, but kinda bad for consumers!

This is another example of the Journal giving Amazon the business recently. Only a few weeks ago it reported that the company stubbornly lists for sale lots of clothing produced in Bangladeshi factories that even competitors like Walmart shun because of chronic violations of basic safety standards. And in August, the Journal detailed how little oversight the company has over the products sold on its platform, which results in “thousands of banned, unsafe or mislabeled products” floating around on there. The paper itself found more than 10,000 such items on the site between June and August.

And now comes today’s story. The paper reports that out of nearly 2,000 sellers of problematic items (whose addresses could be determined), more than half were based in China.

That’s the result of Amazon’s effort to “cut out the middleman” between Chinese manufacturers and America’s online shoppers.

That was the sales pitch an Amazon representative made this year at a trade event in Hong Kong … but it’s not an accurate description of what the company has been selling to the Chinese manufacturers it’s recruiting. The Journal cites another Amazonian who was much more on the nose in 2017 when she told a conference audience of Chinese business people: “We help factories directly open accounts on Amazon and sell to U.S. consumers directly. This is our value.”

These pitches appear to have been effective. Amazon doesn’t require its sellers to list where they’re located (or share that information), but the Journal cites an outside analysis of the 10,000 most-reviewed Amazon sellers that found approximately 38% of them are now located in China … a percentage that has increased steadily since Amazon began recruiting Chinese sellers in 2013.

Last week we noted how an international group of steel industry associations had released a statement, calling on their governments to figure out a way to reduce steel production overcapacity – the difference between an industry’s potential output and current production.

They released it ahead of a meeting of the G20 Global Forum on Steel Excess Capacity, which convened in Japan over the weekend. That forum was created in 2016 to find some international consensus on how to fix the overcapacity problem, which is (not entirely but) mostly a problem created by China’s massive steel industry.

The Chinese government might dismiss that as an outsider’s biased opinion, but consider the context in which China’s steel industry grew. In the early 90s it became a “strategic” industry in government planning documents. According to an analysis of the industry produced a few years ago at AAM’s behest by Duke University, “state direction, supplemented by state subsidies, incentives, and strong internal demand for steel, had an important role in developing China’s steelmaking capacity.”

And so it went from responsible for a fraction of global production in 2000, when it produced 129 million metric tons (MMT), to approximately half of production in 2015, when it produced 804 MMT. While most of that Chinese steel was consumed in China – the country spends a lot on infrastructure as a form of economic stimulus, and infrastructure requires steel – its considerable excess spilled out into the international market, depressing prices and triggering bankruptcies and layoffs. This was essentially the preamble to the import tariffs the Trump administration finally raised on steel in 2018.

So back to this weekend’s G20 steel forum: Was any news created during this meeting? Anything of note?

Amid an enormous trade war between the U.S. and Chinese governments, China’s trying to get $2.4 billion from the United States for its non-compliance with a World Trade Organization (WTO) ruling over the legitimacy of tariffs from the Obama era.

Yes, that’s right: In 2012 China disputed the application of a bunch of tariffs on solar panels, wind turbines, and certain steel and aluminum products, and a WTO appeals court agreed that some of the U.S. tariffs were unfair. From Reuters:

China’s request appears on the agenda of the (Dispute Settlement Body) set for Oct. 28. The United States could challenge the amount of retaliatory sanctions sought, which could send the long-running dispute to arbitration.

The office of U.S. Trade Representative (USTR) Robert Lighthizer has said the WTO ruling recognized that the United States had proved that China used state-owned enterprises to subsidize and distort its economy.

But the ruling also said the United States must accept Chinese prices to measure subsidies, even though USTR viewed those prices as “distorted”.

Without having read the text of the WTO ruling, that ruling seems kinda odd ... despite being in a vein similar to previous WTO rulings against the U.S. It’s well documented that China has for years subsidized the friggin’ heck out of these industries, saturating some of them so much that they caused global overcapacity problems. And accepting Chinese prices to measure subsidies would seem to fly in the face of the fact that China remains a non-market economy.

The lawyers are gonna wrestle this one out, and we’ll keep an eye on it. This case is illustrative, though, of a larger point: The trade policies pushed by the Chinese government were a problem before Donald Trump became president. And although negotiations toward a comprehensive deal continue, and although it’s a good thing that this guy has (however ham-handedly) squared off with China over its unfair trade practices, these problems are almost guaranteed to continue after him.

This is a long game. Whatever deal the USTR is able to reach with his Chinese counterparts needs to be a comprehensive as possible. No settling for soybeans!

***

Reposted from AAM

Remember when the Chinese government was beating the drum hard to gain “market economy” status in the eyes of the World Trade Organization (WTO)?

It’s been a little while since this last came up. A lot of trade politics has happened since we last wrote about it. Namely; the Trump administration has hit China with a raft of tariffs on Chinese goods, and the Chinese government has responded in kind. Billions of dollars in tariffs tend to distract from questions like “is China a market economy?”

But it really is a fundamental question in the context of WTO decisions. Because China is considered a non-market economy (NME), WTO-approved anti-dumping tariffs on Chinese products suspected of being sold at an unfair price can be based on the price of the same product from a third country – where the product is manufactured at a market rate.  

China had argued that the terms of the WTO accession deal it made in 2001 granted it automatic market economy status after 15 years (the terms made it clear that other WTO members could treat China as a NME because it was clearly a NME). And as soon as those 15 years were up in December 2016, it took the European Union to the WTO’s dispute settlement – basically, to trade court – over “the method Brussels applied for calculating anti-dumping duties on states seen as non-market economies,” writes Politico. Back then we called this a “divide and conquer strategy.”

Well, Politico got its hands on a confidential WTO report on that case. It was was issued earlier this year, and only to the parties involved. China, Politico reports, “conceded that parts of the ruling would have been so detrimental that it suspended the case and asked for the report to not be published, keeping the panel's reasoning locked away.”

Another hours-long primary debate is in the books. There were 12 candidates on stage last night! For another three hours! Not a great format for TV!

That said: One of these people could be in the White House in a little over a year from now, so we should probably pay a little attention, even if we're still months away from voting. So let’s boil it down. What did we notice in last night's debate?  

Elizabeth Warren on trade vs. automation 

Moderator: “Senator Warren, you wrote that blaming job loss on automation is, quote, ‘a good story, except it's not really true.’ So should workers here in Ohio not be worried about losing their jobs to automation?”

Warren: “So the data show that we have had a lot of problems with losing jobs, but the principal reason has been bad trade policy. The principal reason has been a bunch of corporations, giant multinational corporations who've been calling the shots on trade, giant multinational corporations that have no loyalty to America. They have no loyalty to American workers. They have no loyalty to American consumers. They have no loyalty to American communities. They are loyal only to their own bottom line.”

“I have a plan to fix that, and it's accountable capitalism. It says, you want to have one of the giant corporations in America? Then, by golly, 40 percent of your board of directors should be elected by your employees.”

Insta-Analysis: That is indeed Sen. Warren’s plan. Requiring 40 percent of all corporate boards to worker-elected is not the only part of it, but it’s a real big part. You can read about the rest here.

Is she right, though, that trade’s a bigger job-loss culprit than automation? It depends on which jobs you’re talking about. Manufacturing jobs have definitely been lost as we’ve run up trade deficits with China over the years. There’s a plausible argument to be made that import competition killed off factory employment in the United States.  

So check it out, we’ve got another economic indicator out. And this one – unlike another recent one – is good!

The Federal Reserve said Tuesday that U.S. manufacturing output rose by 0.6% in August on the back of machinery and primary metals production. That may sound like only a little, but it beats a forecast returned by a poll of economists conducted by Reuters. From the story:

Motor vehicles and parts production fell 1.0% last month after increasing 0.5% in July. Excluding motor vehicles and parts, manufacturing output increased 0.6% in August after declining 0.5% in the prior month. Machinery output rebounded 1.6% after dropping 1.7% in July.

The jump in manufacturing output in August together with a 1.4% rebound in mining, lead to a 0.6% increase in industrial production last month. That was the largest gain in industrial output since August 2018 and followed a 0.1% dip July. Industrial production rose 0.4% on year-on-year basis in August.

Capacity utilization rates were up too. It’s a nice rebound in fortunes from the recently released ISM Manufacturing index, which signaled a further slowdown in economic activity.

So while its numbers aren’t astounding, manufacturing isn’t completely tanking. But the longer-term forecasts aren’t great, either. MarketWatch asked around, and those it spoke to said that the negative trend is likely to continue.

We’ve said it before and we’ve said it again: Infrastructure spending is the right way to turn this around.

***

Reposted from AAM

There was new ISM data released today. And it wasn’t good. Oh no!

The Institute for Supply Management (ISM)’s monthly index is considered a pretty good gauge of activity in the U.S. manufacturing sector. ISM goes around, asks a bunch of folks whether they’re buying supplies or not, and averages them (and their comments) out. A score above 50% is good. Below is bad – it suggests a contraction in manufacturing activity. Anyway, it’s now at 49.1%.

This is no guarantee the manufacturing sector is about to slip. Somebody on the Internet who is paid to do economic analysis pointed out:

From 1970 until 2009, the ISM manufacturing PMI fell below 50 on 17 instances during economic expansions.

11 of those 17 instances were in the “middle” on expansions (more than 12 months after the last recessions, but more than 12 months before the economy peaked).

— Callie Cox (@callieabost) September 3, 2019

Meanwhile, another important gauge of the manufacturing sector’s health – employment data – will be out this Friday when the jobs report comes out.

But look, let's say this is fraying your nerves. The trade fight with China is dragging a little bit, the fight seems to be a drag on manufacutirng, and President Trump seems to be trying to influence it all by tweet.

Is there something Congress could do … that polls well … that Trump himself says (or at least implies) he wants … and is incredibly overdue … that could help improve the fortunes of the American manufacturing sector?

Infra … infrastruct … I can’t think of the word!

***

Reposted from AAM

There was a really interesting story published Monday morning in Politico about the U.S. intelligence community’s assessment of Huawei, the Chinese telecom giant it largely sees as a security threat because of its ties to the Chinese military. They spent the weekend gaming out what it would look like if Huawei indeed emerges over its competitors as the dominant force in 5G technology – basically, the computer infrastructure that will underpin the economy for the foreseeable future.

It’s an interesting thought experiment! It’s a complicated issue, made more complex by the fact that President Trump …

… has politicized the living heck out of the Huawei issue by essentially making it a chit in trade talks with the Chinese government. Not good!

The president’s Commerce Department blacklisted Huawei a few months ago on national security grounds because of fears the company will use “back doors” in its tech to facilitate espionage. What’s more:

“Trump has also signed an executive order that would block Huawei from selling equipment in the U.S. and Congress passed a law last year that would ban procurement of Huawei products by federal agencies.”

And yet:

“One person involved in last week’s exercise said it’s clear the meeting was focused on the long term and not meant to offer an immediate policy solution in the context of Trump’s trade fight.

“‘The timeline of this is not consistent with the way the president looks at the world,’ the person said.”

Today, Commerce announced a 90-day reprieve on its Huawei ban, so the many rural telecom companies in the States that rely on Huawei equipment will have more time to decouple. The New York Times reports that the administration is keeping up an appearance of pressure by adding nearly 50 Huawei affiliates to that blacklist.

Around here the best stuff is $16 an hour, an hour, hour and a half from my house. Anything else is nine to 11 dollars, and that just doesn’t cut it. When I was working that before I started at GM, my credit cards just kept getting fuller and fuller just trying to make it.”

So Lincoln Fegley, a northeast Ohio native who worked at General Motors’ Lordstown plant until the company mothballed it a few months ago, took the forced transfer notice he was handed and moved his family to Wentzville, Missouri where GM makes vans.  

That’s like 600 miles from his friends and family, and not an easy decision to make. But decisions like these are being made a lot. GM says it will provide positions for the 2,800 affected workers who want one, and says 1,700 of them have already done so.

Of course, though, it’s even more complicated than that: GM’s contract with the United Auto Workers (UAW) union is up, and negotiations on the next one begin in September. Reopening some of the plants GM closed in this round of restructuring is expected to be on the bargaining table.

So, if you’re an affected worker … what do you do? Volunteer to move?

Do sell your house, pack up your family, and move to a different time zone?

Or do you hope you don’t get a forced transfer notice (like the one Lincoln Fegley got)? Turn it down when it arrives and lose your unemployment benefits and the right to transfer to another GM plant closer to home?

These days there’s enough happening on the Trump administration’s trade agenda that it warrants a weekly update. It’s Tuesday! And we’re gonna talk about trade!

It’s Trade Tuesday!

Last week President Trump, on the advice of his trade negotiator, further raised tariffs on Chinese imports after Chinese negotiators made sweeping revisions to agreements the U.S. side believed were settled.

Those Chinese negotiators still arrived in Washington for talks a few days later, apparently just to keep the talks going. The U.S. tariffs went up while they were still in town, and China has since retaliated with more tariffs against American imports of its own – and its state-run media outlets, which have until now been relatively quiet on the topic of the American trade dispute, are now getting involved. This editorial was featured in the Xinhua News Agency and the People’s Daily:

“The most important thing is that in the Sino-U.S. trade war, the American side fights because of greed and arrogance. If it does not brag and make up stories, the country’s morale will break. China is fighting back to protect its legitimate rights and interests.”

“… The trade war in the United States is the creation of one person and his administration who have swept along the entire population of the country. Whereas, the entire country and all the people of China are being threatened. For us, this is a real ‘people's war.’”

You’d think that President Trump and Congressional Democrats would be loathe to work together to get any kind of legislation enacted in Washington, especially as a presidential election cycle heats up. Right? That’s what I’d think, and I’m a very smart politics-knower.

But it looks like they’re going to give it a shot, though! Good on ’em!

Trump shared white tic-tacs with Pelosi during infrastructure meeting — apparently his go-to move with the Speaker, since he did the same thing during the St. Patrick’s Day reception!

— Melanie Zanona (@MZanona) April 30, 2019

No word from the president, who was busy after the meeting trying to influence policy at the Federal Reserve via Twitter. But that Tic-tac is a good sign. And, according to House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, it was a “productive” meeting. And White House Press Secretary Sarah Sanders said as much, too.

Pelosi told reporters that they and the president agreed on two things. First, the entire package should be total $2 trillion, which is no small increase from the $200 billion Trump earmarked for infrastructure spending in his last budget proposal (the administration, for what it’s worth, claimed that $200 billion would seed an additional $800 billion in private spending).

Second, they agreed to meet again in three weeks to hear the president’s proposals for funding such a package – because, as Schumer pointed out, without Trump already on board it will be hard to move anything through the Senate.

The Democrats, in advance of their White House visit, sent a letter to the president saying any infrastructure package they would support must account for climate change, which is a priority on the left; and it must include “Buy America” provisions to keep all of this spending in the 50 states and create American manufacturing jobs, which polling shows is a priority for everybody.

You’ll recall that President Trump has signed more than one executive order regarding Buy America, which reveals that the administration understands just how popular these kinds of rules are, but does little else; the orders are more or less superficial.

“In terms of legislative policy and regulatory impact, there was none whatsoever,” Alliance for American Manufacturing President Scott Paul recently told the American Prospect. “The practical effect of what the administration has done is virtually nothing.”

Maybe it’ll be in an honest-to-god, humongous and long-overdue infrastructure package that the president finally gets serious about Buy America? Time will tell. 

***

Reposted from AAM

What do Americans agree on?

Not much, man! They don’t agree on what’s the best place to get a sandwich or where to live (to settle this debate: the best place to get a sandwich is actually here, everybody). But they doagree that it’s a good idea to avoid talking politics over Thanksgiving dinner.

They also agree on this: A new poll shows that basically everybody, regardless of political affiliation, thinks the federal government should put a boatload of money into infrastructure projects and they should attach Buy America procurement policies to those dollars. Buy America rules get the support of 80 percent of us, the poll found, while only 15 percent of respondents oppose them.

It’s true. While President Trump – the same guy from this commercial – and congressional Democrats wrestle over the release of his tax returns the rest of us, according to the bipartisan poll conducted by Mark Mellman and Bill McInturff, would rather they prioritize infrastructure spending. According to the poll, we want it more than a lot of other policy proposals.

It’s pretty remarkable, and it isn’t anything new; every year polling returns similar results. Here's 2018, 2017, 2016, and 2015. And this consistent popularity isn’t lost on politicians. The president, for example, is down in Texas today to show off a couple of executive orders that are meant to fast-track energy infrastructure development.

O.K., Mr. President, that’s some good politicking … But voters want that infrastructure to be American-made, by American workers, so that the economic benefits from federal spending stay in American communities. And the last couple of executive orders the president has already rolled around on these very topics – building out energy infrastructure and making more federal spending American-made – have been all bark and no bite. They haven’t gone anywhere!

A couple of weeks ago President Trump offered a helpful tweet to the autoworkers in Lordstown, Ohio, who had just lost their jobs after GM shut down their plant.

April Fools! It wasn’t helpful at all. The president just told the United Autoworkers local president, who represents a bunch of Ohio residents who are now weighing uprooting their lives and moving to a new GM facility against unemployment, to stop complaining:

Democrat UAW Local 1112 President David Green ought to get his act together and produce. G.M. let our Country down, but other much better car companies are coming into the U.S. in droves. I want action on Lordstown fast. Stop complaining and get the job done! 3.8% Unemployment!

— Donald J. Trump (@realDonaldTrump) March 17, 2019

Way to go, Mr. President! He’s just tellin’ it like it is, on Twitter. He tends to say stuff like thisabout unions whenever he catches heat (on a TV channel he watches) from a union leader for not following through on his specific promises to save American manufacturing jobs. A common suggestion is to “lower dues,” as if organized labor hasn’t done anything to keep production in unionized plants.   

Well, organized labor isn’t a monolith and not all unions operate in the same way, but the United Autoworkers in Lordstown were very accommodating to GM in their last round of contract negotiations before the company shuttered the plant. They were agreeing to what the company called a “super competitive operating agreement” in an attempt to ward off layoffs … which came anyway.

Seriously, just read some of this stuff from Bloomberg:

To cut costs, the UAW merged Locals 1112 and 1714, which saved the company $3 million a year in administrative costs. Then the union agreed to outsource non-assembly jobs like handling of parts and materials to lower-wage workers employed by a subsidiary called GM Subsystems LLC, according to a document reviewed by Bloomberg.

Next, they allowed GM to cut the number of skilled tradesmen including electricians, pipe fitters, mechanics and die makers in half to 130 by letting the company contract out for overtime skilled-trade work and by changing job classifications, said Scott Brubaker, who was chairman of Local 1714.

The union allowed outside firms to send in contractors to repair supplier parts and assembled vehicles at the plant. It also agreed to drop the number of extra workers employed to cover absentee workers to 60, from 150.

The USMCA – the United States-Canada-Mexico Agreement, the trade deal that will serve as an update to NAFTA – has been signed by the heads of government of those three countries.  

But the deal was negotiated before the U.S. midterm elections in November when Democrats took control of the House. And Congress has to ratify trade deals that the United States will be a party to before they can take effect. And the president and congressional Democrats don’t often get along! This could become a problem for the White House.

Enter President Trump, most famous before winning the 2016 U.S. presidential election for his supporting role in the 2002 romantic comedy Two Weeks Notice, who is now getting involvedin whipping votes for the deal. The president is gonna rely heavily on his boys, the House Republicans, to move it. But even if he gets every GOP vote, it will still require Democratic support to gain a majority.

And yet that Democratic support is no sure thing. To begin, the deal will only get a vote in the House if Speaker Nancy Pelosi allows one. Bloomberg reports:

Pelosi is expected to only move the deal through the House if she can find a critical mass of her caucus supporting it and if she extracts concessions unrelated to trade from the White House in return, senior congressional aides say.

The administration is trying to build that critical mass. U.S. Trade Representative Robert Lighthizer, President Trump’s chief trade negotiator, has spent time on Capitol Hill meeting with House Democrats to try to assuage their concerns about the deal – particularly its provisions on the environment, pharmaceutical drug prices, enforcement and labor.

The General Motors plant in Lordstown, Ohio closed a few weeks ago. This has put a lot of American autoworkers out of a job, and – should the plant remain shuttered – it’ll have a serious effect on economy in northeast Ohio no matter what President Trump tweets about it.

And oh, was he tweeting about it in the last 24 hours. To be fair, he also tweeted about the Mueller investigation, and did some light scaremongering about MS-13, but on Sunday the president clearly had Lordstown on his mind.

This is, after all, an issue near and dear to his heart. He was elected in states like Ohio largely on his promises to bring manufacturing jobs back, and he often got very specific about it. In Youngstown (just up the road from Lordstown) during the 2016 presidential campaign, he basically promised to save local industry:

The U.S.-China trade talks continue. There’s a deadline coming up on March 1, when the trade-war timeout is due to end, and U.S. tariffs are to shoot up from 10 percent to 25 percent on $200 billion worth of Chinese products.

President Trump, meanwhile, is starting to float the idea that March 1 isn’t a hard date … which suggests there’s progress being made toward a larger deal. It could also be problematic; the president’s chief negotiator, for instance, doesn’t think giving up this key piece of leverage is a great idea.

But! Another bit of news has leaked out: The two sides are working out an agreement that would govern currency manipulation. Bloomberg reports:

The U.S. is asking China to keep the value of the yuan stable as part of trade negotiations between the world’s two largest economies, a move aimed at neutralizing any effort by Beijing to devalue its currency to counter American tariffs, people familiar with the ongoing talks said.

Currency manipulation has been an American trade complaint against China for years, and some have argued that a deal that doesn’t include a currency rule will ultimately prove to be a disappointment.

Well, it looks like it's still on the table. So I guess it's just like the most talkative president in decades says:

"We are asking for everything that anyone has ever suggested. These are not just 'let's sell corn or let's do this' – it's going to be selling corn but a lot of it – a lot more than anyone thought possible."

 

***

Reposted from AAM

Big news outta Atlanta: They had a Super Bowl and the New England Patriots won, again.

Maybe you tuned in for the defensive gamesmanship, but come on: I know you didn’t. You weren’t at that Super Bowl party to watch Bill Belichick raise another trophy. You were there for the food …

… and the commercials. That’s what I tuned in for, at least. But not one of those weird, creepy ones, like that ad from Turbo Tax. I really focused in on this one from Kia.

The Trump administration is hosting a high-level delegation from the Chinese government for trade negotiations this week. The administration, acting on the results of a U.S. Trade Representative report into widespread allegations of intellectual property theft, has leveled 10 percent tariffs on a broad list of imports from China, and 25 percent tariffs on imports of machinery, semiconductors, and other tech products. And if substantial progress isn’t made during these talks, more tariffs will go up on March 2. As Reuters describes it, those additional tariffs will essentially cover all of China’s exports to the United States.

That’s a big deal if they do – but so is IP theft, which American companies complain is a chronic problem when doing business with or in China. A lot of money gets sunk into R&D, and losing your proprietary information to a rival vying for dominance in your industry sticks in the craws of a lot of American business executives.

There was a big, public example of this that unspooled last year, just as the Trump administration was laying out its IP case against China: the case of Micron, an Idaho-based semiconductor manufacturer that in June sued a state-owned (SOE) Chinese competitor and a Taiwanese company. Micron claims the former hired the latter to poach Micron engineers working in Taiwan and encouraged them to take Micron’s IP with them on their way out the door. It would then be passed to the Chinese SOE.

In 2017, Congressional Republicans passed and President Trump signed what the Washington Post described as “the most significant overhaul of the U.S. tax code in 30 years.”

Less than a year later, a flagship American corporation, General Motors -- proud recipent of approximately $50 billion in federal assistance after the Great Recession -- took its reduced corporate tax rate and announced plant closures in Ohio, Michigan and Maryland. Lots of layoffs. If only we had seen it coming! 

Oh man! Maybe the president should have read that tax bill he signed a little more closely.

Anyway: After GM caught a ton of heat for its downsizing plans it deigned to offer laid-off workers the opportunity to move into other positions at factories elsewhere.

But the United Autoworkers, which represents workers in GM factories, is claiming the company is instead filling those positions with temps. That's a savvy business move by GM; you don’t have to extend to temps benefits like health insurance.

GM has caught a lot of heat in the last few weeks after announcing its plans to shut down five facilities in North America (four in the United States and one in Canada) and shed approximately 14,800 workers. The company claims it’s a restructuring effort to preserve cash and accelerate investment in electric and autonomous vehicles.  

In Detroit, where the Detroit-Hamtramck Assembly plant’s closure will leave the Motor City with only one auto factory left within its borders, the economic hit – especially to the enclave municipality of Hamtramck – will be severe. Some Michiganders don’t seem too sad to see them go ...

... while some residents are even openly wondering if the neighborhood that was razed in the early 80's to build GM’s facility can now be revived.

In Lordstown, Ohio, home to a facility that currently makes the Chevy Cruze, the community is laying out to keep auto manufacturing in town. Schoolkids are writing letters. Elon Musk (the guy in the middle) is musing about buying the plant. State lawmakers are bending GM CEO Mary Barra’s well-compensated ear (she says she’ll keep an “open mind”), and some federal representatives are at odds with President Trump about whether the company deserves to lose the benefits of tax credits pulled.

All in all, It’s not a good look for General Motors, which took $49.5 billion from the governmentjust a decade ago to avoid bankruptcy, and saved approximately $150 million through its third fiscal quarter off this year's Republican tax cut, to now lay off almost 15,000 American employees.

But, there’s a bit of good news for the company! The ongoing trade negotiations between the Trump administration and the Chinese government have reportedly produced lower Chinese import tariffs on automobiles. That has caused GM’s stock to rise.

Good thing, I guess, that those who own GM stock aren’t being harmed by this, unlike the thousands of American workers who will likely soon be out of work.

***

Reposted from AAM

The Chinese government is very mad that an executive at its homegrown telecommunications giant, Huawei, is being held in Canada at the request of the United States for her alleged role in helping the company evade sanctions around doing business with Iran.

How mad? We’re talking Summon-The-Ambassador mad.

China's Foreign Ministry summoned the U.S. and Canadian ambassadors over the weekend to protest the detention of the chief financial officer of tech giant Huawei Technologies.https://t.co/fVXmqomJ4T

— NPR (@NPR) December 10, 2018

Dang, that’s pretty mad. But that said, Chinese media has taken pains to not link the arrest of Meng Wanzhou, Huawei’s chief financial officer, to the ongoing trade talks between Beijing and the Trump administration. This is significant because, as one expert observer told Reuters, “if you don’t see any discussions in Chinese media, that’s the intention of the (Chinese) government.”

The United States is doing its part to delink the stories, too. Trump administration officials were on television this weekend calling the Huawei arrest a separate “criminal justice matter.”

But it remains to be seen if the case will bleed into the talks. In China, for instance, outrage over the arrest has boiled into calls for a boycott of Apple products and some companies even announcing plans to use nothing but Huawei products. And no one really believes the arrest, which happened the same day President Trump and China’s President Xi Jinping sat down for trade discussions in Argentina, aren’t linked.

In the United States, meanwhile, Sen. Marco Rubio (R-FL) is pushing legislation that would ban Huawei from doing business in America. That would be, uh, quite the escalation; because of its murky links to the Chinese government the company is already more-or-less banned from the U.S. government procurement market, and other countries (Australia, New Zealand, and now Japan) are following suit. If Sen. Rubio’s effort are somehow successful, it certainly would raise the bad blood between the two governments trying to resolve a major trade dispute. 

The Ranger is coming back to United States, and it’s almost here.

The Detroit Free Press had the story a few days ago about how the Ford Motor Company and the United Autoworkers worked together to bring the iconic truck’s production to southwest Michigan:

In the spring of 2015, Joe Hinrichs (president of global operations at Ford) and then-UAW President Dennis Williams, and Williams' executive administrative assistant, Chuck Browning, met for a private lunch near the Detroit airport.

Hinrichs asked how labor might feel if Ford moved production of the Ford Focus sedan from Michigan to Mexico, and then retooled Wayne Assembly to build SUVs. The plan would need to be part of an upcoming labor contract, and Ford didn’t want to make the move without knowing if the UAW might support it.

“They were very supportive,” Hinrichs said. “They knew the workforce would love building the Ranger and Bronco again. So, we ended up making it part of the 2015 negotiations. This is a great story of collaboration between Ford and the UAW.”

That collaboration is about to pay off. After retooling its Michigan Assembly Plant and an afternoon of festivities in its parking lot …

President Trump’s trade fight with China continues on multiple fronts. This dispute the president is prosecuting against Beijing is a big deal that is regularly overtaken by other events in the news cycle, and it isn’t helped that the president himself is, ummm, an imperfect messenger to make sense of it all. Lord knows what he’s tweeting about today.

In spite of whatever faults one may find in the presidential rhetoric, though, manufacturing jobs have been on the uptick under this administration.  And stories of metals consuming businesses, in spite of tariffs on steel and aluminum, still pop up. Like this one out of Hillsborough County, Florida:

Concern is growing about increased Chinese investment in the American economy.

So much so that the Trump administration has recently stepped up oversight into transactions that might affect national security. After Congress signed off on this expansion, the New York Times earlier this month reported “the administration signaled that it would apply its new authority very broadly and would review any foreign transaction involving a business that designs or produces technology related to 27 industries, including telecom, semiconductors and computers.”

Into this climate comes a new report from Brig. Gen. John Adams, U.S. Army (Ret.), on the security threats facing the American freight rail network. (You remember Gen. Adams -- he prepared for the Alliance for American Manufacturing a 2013 study of military supply chain vulnerabilities.)

To illustrate the threats facing rail, Adams’ report focuses on China’s national rail company, its recent entry in the American rail market, and its tie-in to the much-discussed Chinese industrial policy – Made in China 2025, which identifies rail as a critical manufacturing sector to dominate.

What are America’s shifting politics around trade going to mean for the upcoming midterm elections? What lessons from the passage of NAFTA – and approximately 25 years of living with it – can advocates for American manufacturing and workers apply to its proposed replacement, the United States-Mexico-Canada Agreement?

Those were the among the topics of discussion today at the Economic Policy Institute in Washington, DC, where an expert panel unpacked the politics and policy influencing our dynamic nationwide trade debate.

Alliance for American Manufacturing President Scott Paul participated, and had this to say:

I don’t believe USMCA or trade are going to be major election issues. … I think an interesting question, though, is how does (USMCA) get passed? Because, ultimately, the congress has to approve it. And when you think about it, there’s not a good past reference to this. In ’93 (when NAFTA passed), you had a largely Democratic setup. Bill Clinton promised changes, it squeaks through with a number of deals and logrolling built into it. We were coming off a bad economy and into a better economy.

“Then in 2015-16, TPP gets done. You have a Republican Congress that should want to do this because they’re all-free traders, and a president (Barack Obama) who largely agrees with their agenda on this, and it doesn’t happen!

Time for another steel tariffs update!

A few months ago, Canada was considering erecting safeguard tariffs against certain steel products after America’s broad steel tariffs caused a surge of dubiously cheap imports to wash up in the Canadian market.

It looks like Canada is done considering. Those safeguards are going up. Reports the Wall Street Journal:

The goal of the so-called safeguard measures is to prevent a surge of overseas steel imports from entering Canadian markets. Canada’s steel industry has complained in recent months that U.S. tariffs on steel and aluminum, imposed on national-security grounds and affecting most countries, have caused more shipments of cheap steel to be diverted to Canada from the U.S. …

The new measures could address concerns from the Trump administration that foreign companies are using Canada as a backdoor to move their metals into the U.S., trade watchers say. Canada is trying to convince the U.S. to lift tariffs on steel and aluminum imports from Canada, which it imposed earlier this year on national-security grounds. Canada is the largest foreign supplier to the U.S. of both metals.  

The national security tariffs on steel and aluminum were not lifted as a result of the renegotiated NAFTA, and have been received as an insult north of the border, according to Politico’s Alexander Panetta.   

The last time the United States labeled China a currency manipulator was 1994. It looks like it might be preparing to do so again.

U.S. Treasury Secretary Steven Mnuchin, whose department is responsible for the biannual report (due out next week) that identifies currency distortions around the globe, didn’t flat out say so in an interview with the Financial Times, instead saying Treasury was “very carefully” monitoring the Chinese renminbi, which has fallen significantly during the past year.

But there has been speculation for some time that the Trump administration might take the plunge and place China on this list as part of the larger trade dispute between Washington and Beijing. And now other senior (and anonymous) Treasury officials are worrying about the trading value of the renminbi, too, before Secretary Mnuchin travels to a meeting of finance ministers in Indonesia.  

Naming China (or any other country) a currency manipulator via this report doesn’t immediately do anything. It doesn’t trigger sanctions, but it would require the administration to enter into direct talks with the country it accuses. And it would likely further chill relations between the Trump administration and Xi Jinping’s government in the context of the ongoing trade dispute.

While it’s hard to see how relations could get icier, currency manipulation is a big deal. By keeping a currency undervalued, a country can make its exports less expensive and imports more so. That has directly contributed to the yawning U.S. goods trade deficit with China in years past and has cost the United States a substantial number of jobs.

A NAFTA renegotiation has been completed. Go put your transition shades on and head out to the Rose Garden to join President Trump for a victory lap!

It’s not a done deal, of course. Legislatures in all three countries will need to approve the United States-Mexico-Canada Agreement (USMCA), and, given the complicated politics of trade in this country, that is no sure thing.

But, as we said on Monday, there’s a lot that stands out in the text, including: stronger rules of origin for auto manufacturing, side letters on steel and auto tariffs, and improved labor protections for Mexican workers that could ultimately help workers in America. Vox explains:  

One of the biggest complaints against Mexico right now is that labor unions are largely controlled by employers, and workers are not even part of contract negotiations. So it’s no wonder why Mexican factory workers are earning so little. The average hourly wage for factory workers in Mexico is just over $2 an hour, and the country’s minimum wage is roughly $4.15 for a full day’s work. These low wages attract US companies to operate in Mexico.

The new labor rules in Trump’s pact with Mexico are supposed to remove the incentive to keep Mexican workers living in poverty. Under the new deal, the United States can use the same dispute system to resolve labor complaints that NAFTA previously allowed only for commercial trade violations (such as exceeding trade quotas).

So that’s cool. But there’s other interesting stuff in there, too. What’s this new clause all about?

Is this the "DON'T YOU DARE NEGOTIATE AN FTA WITH CHINA" clause? pic.twitter.com/h6GZw4Rm9q

— Soumaya Keynes (@SoumayaKeynes) October 1, 2018

An interesting story appeared in today’s Washington Post, about China’s shifting reaction to the burgeoning trade war with the United States. Reporter Anna Fifield spoke to Paul Haenle, a former Bush and Obama administration China policy adviser, who had this to say:

“Early on, the Chinese had a very simple narrative that all this trade stuff was about Trump's short-term political objectives, about getting a tweetable victory. … Now, they’re at the other end of the spectrum. Now it’s all about the U.S. trying to block China’s rise.”

Huh. The article lists the other evidence the Chinese state media has pointed to. The revival of the “Quad” dialogue. The possibility of U.S. sanctions over human rights abuses against Muslim Uighurs in China’s west. The suspicious date of the latest U.S. tariffs, which happened to line up with the anniversary of the 1931 Japanese invasion of Manchuria! It’s beginning to look downright conspiratorial, and it’s all right in front of their noses: The United States is out to get China.  

But we should cut them some slack. Though it may be easy to roll your eyes at such commentary coming from state organs in China, a lot of people have a hard time wrapping their heads around President Trump.