Posts from Matthew McMullan

Trump’s China Plans Are Muddy, but IP Tariffs Are Still the Right Call

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

The Trump administration today announced a 25 percent tariff on $50 billion worth of Chinese goods, which it has identified as having profited from intellectual property (IP) theft.

This has been an expensive problem for years. The Obama administration went to work on it; President Obama and President Xi Jinping agreed in 2015 that “their governments would refrain from computer-enabled theft of intellectual property for commercial gain,” a year after it indicted Chinese military officers for engaging in industrial espionage against American companies.

With all due respect to that administration, it hasn’t worked. Chinese-sanctioned cyber-theft, either by hacking or of the "legal" variety – when foreign firms that want Chinese market access are forced to partner with a domestic company and share IP, for example – continues.

In comes the Trump administration, making good on a tariff threat it had telegraphed for months.

While that threat has been clear, Trump’s wider approach to his China trade policy has been muddy. Many observers focus on the erstwhile steak salesman’s preference for unilateralism, but what’s more concerning is his willing confluence of trade and security.

And it’s hard to say what we’re getting out of it. Remember a couple of weeks ago? When Trump went out of his way to bail out a Chinese telecom giant his administration had just banned from purchasing American technology? A telecom giant that repeatedly broke U.S. law and is considered by the American intelligence community to be a passthrough for China’s spies? That was an enormous bone thrown to President Xi (still around, now probably president for life) and it hasn’t resulted in anything useful – and increased soybean exports don’t count.

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President Trump Is Officially Reviving ZTE

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

The Trump administration said on Thursday that it cut a deal with the Chinese government to rescue ZTE, the giant telecommunications firm that has become an important sideshow in the ongoing trade dispute between Washington and Beijing.

Commerce Secretary Wilbur Ross announced its details: A $1 billion fine (with another $400 million held in escrow). A team of export-control compliance officers chosen by the U.S. government will embed in the company (at ZTE’s expense), and ZTE’s entire board of directors and senior leadership must be replaced within a month.

Does this sound good? Not everyone in America is so sure!

As of this morning, the Alliance for American Manufacturing (AAM) is on the record: We don’t think this is a good idea. AAM President Scott Paul said, “A Chinese state-owned firm that has repeatedly violated sanctions protocols shouldn't be part of the telecommunications architecture of the United States, period.”

Kinda hard to argue with that. Lawmakers on Capitol Hill, including Sen. Marco Rubio (R-Fla.) and Minority Leader Chuck Schumer (D-N.Y.) are making similar observations. (Schumer said the president is "shooting blanks." Ouch!) And media observers are having a hard time wrapping their heads around this move too – because it’s not exactly clear what the payoff is here for the United States:

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On Capitol Hill, a Discussion of Unfair Chinese Trade

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

EPI president: U.S. must "develop and articulate its own long-term economic development strategy."

A Senate Finance subcommittee convened a hearing today to talk about barriers to market entry in China for foreign firms. Its guest list was ideologically diverse – some question President Trump’s tariff policies – but were still remarkably consistent about the need to respond to China's state-directed mercantilism.

“You cannot be a global company and ignore one fifth of the world’s population,” said Dean Garfield, president of the Information Technology Industry Council.

Linda Dempsey of the National Association of Manufacturers called for a bilateral trade agreement between Washington and Beijing.  

Thea Lee, president of the Economic Policy Institute, pointed out that China makes no secrets about pursuing an aggressive long-term industrial policy to boost its economy, often at the expense of its trading partners.

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Pentagon Report: A Comprehensive Response Needed to Counter Chinese Economic Rise

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

President Trump is really opening it up on China. His administration announced $50 billion in tariffs targeted at industries the U.S. government argues have unfairly advanced with the help of stolen American intellectual property (and then he threatened an extra $100 billion after China responded with politically targeted tariffs of its own).

This all followed the administration’s Section 232 investigations into steel and aluminum imports that resulted in significant tariffs on those metals. After exemptions to key trading partners were handed out, these tariffs are widely regarded to target China.

There has been significant criticism of the way all this stuff has been announced – some, like representatives of the agriculture industry, even feigned surprise it rolled out all – and the overall strategy hasn't been crystal clear. But it's certainly clear that Washington, Trump’s China-focused tariffs or not, now considers economic competition with China a big deal.

Case in point: A Pentagon white paper urging a comprehensive government response to counter Beijing’s own long-term plans. The report’s authors downplayed its role in the Trump tariff debate in an interview with Defense One, but the paper has been read among key lawmakers on Capitol Hill. One senator even cited it while arguing for new legislation “to allow the Committee on Foreign Investment in the United States, or CFIUS, to restrict Chinese investment into U.S. tech companies, particularly startups,” Defense One noted.

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U.S. Aluminum Manufacturers at the ITC: Maintain Duties on Chinese Imports

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

Domestic aluminum producers petitioned the Commerce Department in 2017, claiming certain Chinese aluminum products (like foil) were being sold below cost. Commerce investigated and in its preliminary finding imposed countervailing duties ranging from 16.56 percent to 80.97 percent.

Flash forward to Thursday, when both the petitioners and their Chinese competitors made their cases at a U.S. International Trade Commission (ITC) hearing in Washington. Unless Commerce’s preliminary duties were made permanent, the domestic producers argued, any gains they hope to make in this market won’t last.

Reuters reports:

At Thursday’s hearing, U.S. aluminum executives ran through a list of numerous plants that have closed in the last few years as low-priced Chinese imports grew, including a Reynolds Aluminum plant in Richmond, Virginia, with the loss of 725 jobs and a Novelis plant in Louisville, Kentucky.

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The White House’s Infrastructure Plan Leaks!

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

On Monday afternoon a (short) draft of the Trump administration’s plans for a federal infrastructure package leaked from the White House.

It’s important to remember, this is a draft. Only six pages long! The administration has reportedly been working on its plan for months, and the full thing is supposed to be, like, 70 pages. That makes it difficult to judge what was released on Monday in full.

Still, some have noticed some interesting inclusions and omissions.

Axios, for instance, saw that there isn’t any mention of a gas tax increase, which the White House had previously floated as a funding idea.

The Hill noted some of the financing mechanisms included put the bill at odds with the recent Republican tax code overhaul.

Here’s what we noticed: There’s no mention of Buy America procurement policies in there. Go look! Control-F it, and search for the term. They aren’t in there.

In fact, it appears to do the opposite of what Buy America rules are meant to do: According to this draft, the infrastructure plan would create loopholes so taxpayer-funded projects could be built with imported steel.

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While Trump Weighs Tariffs, Solar and Washer Imports Soar

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

We got a new year going! Happy New Year. The president is back and back at it. Seems really refreshed. We’ve already outlined a bunch of stuff we hope to see the White House tackle in 2018, including meaningful action on the deluge of steel and aluminum imports. Hey, the Republicans got their tax bill across the finish line, and the administration said that’s what the hold-up was! Time for action on steel. Workers are waiting.

In the meantime, though, there are other trade kettles boiling, like possible (separate) tariffs on imported washing machines and solar panels.

Here’s what's up: Manufacturers in each industry – Whirlpool for washers, and Suniva and SolarWorld for solar panel producers – brought cases to the U.S. International Trade Commission (ITC), and had to show evidence they had been injured by unfairly traded imports.  

The ITC, according to the Wall Street Journal, agreed with the plaintiffs in both cases, and sent its recommendations to the White House – where it’s up to the president to decide what to do next. Apply tariffs a little? A lot? Not at all? He’s got a lot of leeway.

Whether he does or not, imports of washers and solar panels have skyrocketed. Notes the Journal:

Trade data offer a limited window into companies’ export decisions, which can be influenced by seasonality, demand and trade. But Panjiva trade analyst Christopher Rogers said manufacturers expecting new trade barriers often boost shipments. Their attitude, he said, is: “Let’s get while the getting is good.”

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U.S., E.U. and Japan Will Team Up to Take on China’s Overcapacity

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

China’s out-of-control industrial overcapacity is among the problems stemming from its state-run economy. And while the United States has been skeptical of the global trading system in addressing some areas, it doesn’t look like it is abandoning its trading partners in this particular fight.

The U.S., European Union and Japan will announce announced on Tuesday that they are forming a new alliance to take on China over trade issues such as steel overcapacity and forced intellectual property transfers, the Financial Times reports. Although China was not directly named in the statement, it is clear that it is the target of the new alliance — something E.U. Trade Commissioner Cecilia Malmstrom confirmed on Tuesday. “There’s no secret that we think that China is a big sinner here,” she said.

The statement isn’t out yet (we’ll post it when it becomes available). UPDATE: Here it is! But along with being another step to finally tackle industrial overcapacity, it also appears to be an effort to delay or halt national security investigations into steel and aluminum imports that were launched by the Trump administration earlier this year. The Financial Times explains:

“Mr. Trump and his aides have lashed out at China and revived US trade statutes to launch controversial investigations that could lead to punitive tariffs and other trade sanctions.

But the EU and Japan have been seeking to talk the administration out of unilateral action, arguing that co-operating with the EU and countries like Japan would better serve US interests and do more to raise pressure on Beijing.”

As we’ve outlined numerous times before, China is driving global overcapacity — it is subsidizing the production of its industrial industries, which make far more product than the world needs. All that steel, aluminum and more is dumped into the global market at rock-bottom prices. This has created a massive glut in sectors like steel and aluminum and led to major layoffs and plant closures in the United States and around the world

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President Trump Identifies the Competition in National Security Speech

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

Happy Holidays! President Donald Trump gave a speech last week in which he described (broadly) his administration’s national security strategy. Though he only mentioned them once and twice by name respectively, he called China and Russia “rival powers.” Okay.

The Chinese and Russian governments reacted predictably to the rhetoric, in the speech and the accompanying policy document. And some have noted the marked shift in rhetoric between the Trump and Obama administrations.

This language was closer to what Trump said on the campaign trail than what he’s said earlier this year – when he hosted Chinese President Xi Jinping at the fabulous Mar-a-Lago resort in Florida, and then during his visit to Beijing in November. The talk of economic rivalry, of competition in trade and jobs, is a return to campaign form after Monday’s speech.

But don’t get it twisted: So far, it’s still just talk.

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A Trump Administration Fun Fact: Offshoring Contractors Are Getting Paid

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

President Trump ...

... was out in Missouri last week, pitching the Republican tax reform package, feeling his oats. He talked about getting rid of the illegals, building the wall, how great the stock market is doing, jobs. This tax reform package is part and parcel with all that stuff! 

“We're going to cut taxes on American businesses so they will compete for workers, they'll raise salaries,” the president said. “The business is going to be happy and the workers are going to be happy and the country is going to be a happy place.”

Well that’s good! That’s where we are in early December 2017. A happy place.

But where was the president a year ago? Early December 2016?

Oh yeah: At Carrier, in Indianapolis.

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Union Matters

A Broken Immigration System

From the AFL-CIO

After a week of family separation, workplace raids and even more bad legislation, it is clearer than ever that we must fix our broken immigration system.

“The Trump administration is using enforcement overreach to terrify immigrant workers and is directly threatening our freedom to stand together and fight in unions for fair pay and treatment,” said AFL‑CIO President Richard Trumka.  

Trumka added: “Nothing embodies our broken immigration system more than the unnecessary pain and suffering of our immigrant brothers and sisters as families are torn apart at the border.”

America’s broken immigration system and threats of detention and deportation have been used as leverage to lower pay, worsen benefits and make workplaces less safe for decades.

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Concern of Concentration

Concern of Concentration