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Trump’s Trade Deal with China Might Not Tackle Industrial Subsidies

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

We’ve been closely monitoring trade talks between the United States and China, and we’ve gone on record to note that there are a couple of ways things could go. The two countries will either reach a historic deal that requires China to play by the rules of global competition — or the agreement will be a dud, making a few superficial changes but mostly maintaining the status quo.

Well, score one for the status quo.

Reuters reports that “U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing.”

Instead, negotiators are focusing on issues they see as more achievable, including ending forced technology transfers, strengthening protection of intellectual property and opening up China’s markets.

Look, addressing technology transfers and intellectual property is vital, and U.S. negotiators are right to focus on them. Ditto for further opening up China’s market.

But by abandoning the issue of industrial subsidies in these talks, the United States is giving a green light to China to continue to cheat the global trading system and put countries and companies that play by the rules at a disadvantage.

Case in point: Steel.

President Trump put a 25% tariff on steel imports in April 2018 in response to surging foreign imports. Now, you’ve probably heard about those "Section 232" tariffs — they’ve garnered a lot of criticism from the Acela Corridor set — but what is often missing from the conversation is that despite Trump’s bluster, there was a very legitimate reason why he issued those tariffs.

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Members of Congress Want Natural Gas Exported to China to Travel on U.S. Ships

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin arrived in China on Thursday for continued trade talks.

There’s a lot the two nations are expected to discuss this time around – intellectual property, state-owned enterprises, forced technology transfers – and while it remains unclear whether any meaningful progress will be made, it does appear the two nations are inching toward a deal.

Meanwhile, two lawmakers are turning their attention to an issue that hasn’t been getting a lot of press, but could have big implications for U.S. job growth and competitiveness when a deal is finally reached.

Rep. John Garamendi (D-Calif.) and Sen. Roger Wicker (R-Miss.) wrote to Lighthizer, Mnuchin and Commerce Secretary Wilbur Ross this week asking the three to ensure that U.S.-flagged and crewed vessels “play a key role” in the transportation of liquefied natural gas (LNG) exports to China.

There’s growing speculation that China will agree to purchase $18 billion worth of natural gas from the United States as part of the eventual U.S.-China trade agreement. While that is good news for the domestic natural gas industry, Garamendi and Wicker also point out that unless U.S. officials step in, those LNG exports will “almost certainly be on foreign-flag vessels operated by foreign crews.”

The U.S.-flag international fleet has declined by nearly 60 percent since 1991 to just 80 vessels. Considering the fleet’s importance to U.S. national and economic security, this certainly does seem like something that needs to be addressed.

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Things are Better for the Steel Industry Thanks to Recent Trade Action — But China Still Looms

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

It’s been about a year since the Trump administration implemented its “Section 232” trade action, and steel industry officials told Congress on Wednesday they are seeing the positive effects — investments in facilities across the country, thousands of new jobs, raising wages, and even small business growth in local communities.

But nobody is breaking out the champagne quite yet.

“Right now, the steel industry is in what I would call recovery. Times are better than they’ve been in a long time,” said Leo Gerard, international president of the United Steelworkers. “But let me just say this: Chinese overcapacity still exists… We can’t sit idly by and think that just because things appear to be good they’re going to be good forever. We’ve got to make the recognition that the cheaters still exist.”

The labor leader’s message was echoed by steel executives who also testified at the annual Congressional Steel Caucus hearing. Officials from steel companies and associations noted that tariffs placed on steel imports have allowed the industry to finally begin to stabilize after facing an onslaught of unfairly traded imports, mainly from China.

The 232 tariffs have led to a decrease in imports and an uptick in domestic production. More than 12,000 new jobs have been announced across the steel and aluminum industries since the 232 investigation launched; $18.2 billion in investments also have been announced. Recent bargaining agreements between the Steelworkers union and several companies have led to raises and even bonuses for tens of thousands of workers.

U.S. Steel, for example, is investing at in several facilities across the country. In Granite City, Ill., the company restarted two blast furnaces that had sat idle since 2015, creating 800 jobs. In Lone Star, Texas, 140 new workers will soon be making products at a tubular mill that shut down in 2016. In Fairfield, Ala., the company is resuming construction of an electric arc furnace, a project placed on hold in 2015. About 600 workers will help build it, and 150 new employees will run it.

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Trump Budget Would Slash Funding for Manufacturing Extension Partnerships

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

It seems like a thousand news cycles ago now, but President Trump unveiled his proposed 2020 budget on Monday.

The $4.75 trillion budget includes major cuts to federal spending for domestic programs while increasing funding for defense and border security. Lots of people are fired up about it, but it’s important to keep in mind that Congress has the ultimate say over the budget — and lawmakers have rejected many of Trump’s budget requests in the past.

Still, the budget does offer a glimpse into the Trump administration’s priorities for the upcoming year, and as such we spent some time digging through the document for items that may impact manufacturing. One thing in particular caught our eye: Trump’s proposal to severely cut — and eventually phase out — federal funding for the Manufacturing Extension Partnership (MEP) program.

This is a terrible idea. Just terrible.

MEP runs a network of centers in all 50 states and Puerto Rico designed to help small and medium-sized manufacturers improve their businesses, including through things like product development, worker training programs, and business continuity planning.

MEP punches above its weight when it comes to achieving results. The $128 million invested in MEP during fiscal year 2017 generated almost $1.9 billion in returns to the federal treasury, according to a study by the Upjohn Institute.

Meanwhile, MEP has helped create 985,117 jobs since its founding in 1988. That’s nearly a million jobs!

That’s not all, either. When MEP celebrated its 30th anniversary last year, it noted it has worked with 94,033 manufacturers, helping generate $111.3 billion in sales and $18.8 billion in cost savings for its clients.

That is why it strikes us as foolhardy for the Trump administration to try to gut the program. Trump proposes cutting current funding levels by $125 million for fiscal 2019 — which would leave just $5 million left for the program. Eventually, the federal government would cut off all funding, according to the proposal.

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Lumber Liquidators Agrees to $33 Million Penalty for Dangerous Made in China Flooring

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

You might remember that back in 2015, the television news program 60 Minutes aired an investigative report finding that national chain Lumber Liquidators was selling Made in China laminate flooring containing dangerously high levels of formaldehyde, a substance known to cause cancer.

The segment – if you feel like getting angry today, just watch it below –  prompted the government to investigate, and a class action lawsuit was filed on behalf of the 760,000 customers who had purchased the poisonous flooring.

In 2018, Lumber Liquidators was ordered to pay a $36 million settlement as a result of the class action lawsuit. And on Tuesday, the company agreed to pay a $33 million penalty to settle federal charges that it misled its investors about the flooring. Reuters reports:

The Justice Department settlement includes a deferred prosecution agreement, under which the government agreed not to prosecute Lumber Liquidators for securities fraud so long as the company upgrades oversight and cooperates with its ongoing probe for three years. … The amount the company will pay represents Lumber Liquidator’s net profits from the sale of 100 percent of its Chinese laminate from January through May 2015, U.S Attorney’s office said.

The company also has completely replaced its senior executive team, and “installed experienced executives who have displayed a commitment to building an ethical corporate culture,” according to U.S. Attorney G. Zachary Terwilliger.

As 60 Minutes reported, the Chinese-made laminate flooring sold by Lumber Liquidators contained astonishingly high levels of formaldehyde. When a team of investigators featured in the report tested 150 boxes of the flooring, they found every single piece of it exceeded California emissions standards, some 20 times above acceptable levels. A 2016 federal investigation confirmed much of those findings.

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Are February’s Disappointing Jobs Numbers the Start of a New Trend or Just a Blip?

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

The Labor Department released its monthly jobs report on Friday, and it was a… good one? Bad one? O.K. one?

Manufacturing gained 4,000 new jobs in February, while 20,000 new jobs were created across the economy. That was well below expectations of around 180,000 new jobs.

Over at the White House, President Trump shrugged off the report, and some economists also said they weren’t all that concerned. After all, wages are on the rise, suggesting things are still strong. Unemployment rates for workers who didn’t graduate high school fell 5.3 percent, a sign that the economy is still doing just fine.

Meanwhile, the weather was pretty brutal across the country in February, which probably slowed hiring down quite a bit.

But not everybody is so confident. After all, 20,000 jobs isn’t great, especially when you consider that factory jobs alone had grown by an average of 22,000 new jobs per month over the past 12 months.

“This is a disappointing report. I don’t think there’s any way to sugarcoat it,” Carl Tannenbaum, chief economist of Northern Trust in Chicago, told the New York Times.

So who has it right?

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Lopsided Trade with China Continues to Cost Americans Millions of Jobs, Study Confirms

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

America’s trade deficit with China has cost 3.4 million U.S. jobs since 2001 and is a major contributor to widening economic inequality, according to a study released Tuesday by the Economic Policy Institute.

Not surprisingly, the manufacturing sector has suffered the most because of America’s lopsided trade relationship with China, losing 2.5 million jobs between 2001 and 2017. But every state and every congressional district has seen job loss as a direct result of the growing China trade deficit, and the study shows that the wider economy continues to be dragged down by the growing deficit.

“Some regions are devastated by layoffs and factory closings, while others are surviving but not growing the way they could be if new factories were opening and existing plants were hiring more workers,” authors Robert E. Scott and Zane Mokhiber write. “This slowdown in manufacturing job generation also is contributing to stagnating wages… and widening income inequality.”

That’s putting it mildly. Workers directly impacted by job loss saw their incomes dwindle by $37 billion per year between 2001 and 2011 alone, the study finds. But the wages of all non-college graduates dropped by $180 billion per year, as import competition from China led to job loss and shifted company profits to those at the top of the economic ladder.

While the data might conjure up images of rundown factories in the industrial midwest, it’s a high-tech sector — the computer and electronic parts industry — that suffered the most job loss, shedding 1.2 million jobs from 2001 to 2017. And tech-friendly California saw the most total jobs lost because of the trade deficit: 562,500. Texas followed close behind, losing 314,000 jobs, followed by New York (183,500), Illinois (148,200) and Pennsylvania (136,100).

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White House Puts Out Its Plan for American Leadership in Advanced Manufacturing

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

I know we say this a lot, but there’s a lot going on these days.

So, we wouldn’t blame you if you missed this piece of news: Earlier this month, the Trump administration officially unveiled its strategy for strengthening American leadership in advanced manufacturing.

Put together by the National Science and Technology Council Subcommittee on Advanced Manufacturing, the 40-page strategy document focuses on three key goals: the development and transition of new manufacturing technologies, the education and training of the manufacturing workforce, and the expansion of domestic manufacturing across the supply chain.

Strategic objectives for achieving each goal are included in the report, along with specific outcomes that are designed to be accomplished within four years. The plan received input from across the federal government, and many federal agencies are tasked with helping to achieve the objectives.

For example, the strategy includes priorities like expanding apprenticeships and career and technical education pathways; properly enforcing Buy American policies; and recognizing the role of programs like Manufacturing USA and the Manufacturing Extension Partnership in stimulating innovation and supporting small and mid-sized manufacturers.

And although it’s a product of the Trump administration, the new strategy began long before The Donald even came on the D.C. scene, when Congress passed the American Manufacturing Competitiveness Act back in 2014.

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Senators Tell the Federal Trade Commission to Get Tougher on “Made in the USA” Cheats

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

Nearly 4,000 people signed onto our action last week urging the Federal Trade Commission (FTC) to impose tougher penalties on companies that falsely label their imported products as “Made in USA.”

It turns out a few Senators also sent a similar message of their own to the agency.

Democratic Sens. Tammy Baldwin (Wis.), Sherrod Brown (Ohio), and Chris Murphy (Conn.) sent a letter to the FTC on Oct. 12 to “express our concerns with ‘no-fault, no-money’ settlements for ‘Made in the USA’ labeling violations” and “urge the Commission to take all steps necessary to protect the integrity of the label.” The trio continue:

“Consumers view American-made goods more positively and are often willing to pay a higher price for them. In addition, consumers may be less likely to have health or quality concerns about a product when its true country of origin is concealed. If the consequences of misusing the “Made in the USA” label do not include paying fines or admitting wrongdoing, it is unlikely that these and other companies will be deterred from using the same deceptive tactics to sell their products in the future.” 

The senators specifically were responding to recent rulings by the FTC that found three individual companies labeled their products as “Made in USA” but actually imported them from countries like China.

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We Have a NAFTA — Er, USMCA — Deal!

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

The North American Free Trade Agreement (NAFTA) lives — under a new name, anyway.

Leaders from the United States, Canada, and Mexico announced on late Sunday night that they reached an agreement to update NAFTA, the trilateral trade deal that President Trump long has wanted to overhaul. The announcement came just before a self-imposed midnight deadline to get the deal done, and literally at the 11th hour: The White House held a conference call with reporters at 11 p.m. Eastern time.

In typical Trump fashion, the new NAFTA has new branding: It’s now called the United States-Mexico-Canada Agreement, or USMCA.

It’s an exciting development, and one that many astute observers didn’t expect was possible just a few days ago. But don’t break out the champagne quite yet.

While all three USMCA leaders are expected to sign the accord within 60 days — including, crucially, the outgoing Mexican president —Congress also needs to approve the new pact, as do legislative bodies in Mexico and Canada. In the United States, congressional approval isn’t a guarantee, especially if Democrats regain control of the House of Representatives following the midterm elections in November.

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Union Matters

Higher Taxes & Broken Promises

From the AFL-CIO

While many Americans are frustrated by smaller refunds this Tax Day, major corporations like AT&T are celebrating billions in massive giveaways, courtesy of the Tax Cuts and Jobs Act.  

The tax bill, which was signed into law in 2017, dramatically cut the corporate rate tax from 35% to 21%. This led AT&T’s CEO to vow that the company would create at least 7,000 jobs.

Instead, AT&T has eliminated more than 12,000 jobs since the law took effect.

At the same time, the corporation’s annual report shows the company increased executive pay and suggests that after refunds, it paid no cash income taxes in 2018.

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A Moral Imperative

A Moral Imperative