From Alliance for American Manufacturing 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.

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Reposted from AAM

The “phase one” trade deal between the United States and China is… probably done?

President Trump on Friday took to Twitter to announce the deal, which he called “very large” and “an amazing deal for all.” But specific details about the agreement remain unclear — and what is out about it doesn’t seem to be all that great.

But while political pundits are laser-focused on how the deal will impact things like tariff rates and agricultural purchases, evidence is mounting that China is adding “a sickening new dimension” to one of the world’s most serious human rights crises.

And although U.S. trade negotiators have strategically stayed quiet about China’s human rights abuses in an effort to get a trade deal done — and although China really does not like to talk about them — given that these abuses impact the global supply chain and overall trade flows… maybe it’s time to start talking about them?

It’s long been reported that China has placed at least 1 million Uighurs and other Muslim ethnic minorities from the Xinjiang region into concentration camps, which China says are “vocational training centers.”

But in November, The New York Times published a bombshell report that included 400+ pages of internal Chinese Communist Party documents that showcased just how orchestrated this effort is — even Chinese leader Xi Jinping is implicated. Other leaks from inside the camps provide a glimpse into life inside, describing how China uses physical and psychological torture in an attempt to rid the Uighurs and other detainees of their language, religion and culture.

Sadly, it doesn’t appear that things improve for these prisoners once they leave the camps, either. A new paper from Adrian Zenz, a senior fellow in China Studies at the Victims of Communism Memorial Foundation, finds that China is placing “limited but apparently growing numbers of detainees… into different forms of forced labor.” Zenz writes:

“19 cities and provinces from the nation’s most developed regions are pouring billions of Chinese Yuan (RMB) into the establishment of factories in minority regions. Some of them directly involve the use of internment camp labor, while others use Uyghur women who must then leave their children in educational or day care facilities in order to engage in full time factory labor. Another aspect of Beijing’s labor schemes in the region involve the essentially mandatory relocation of large numbers of minority workers from Xinjiang to participating companies in eastern China.

“Soon, many or most products made in China that rely at least in part on low-skilled, labor-intensive manufacturing, may contain elements of involuntary ethnic minority labor from Xinjiang.”

Zenz’s entire paper is worth a read, as it makes clear the extent to which China is using forced labor in many of its factories. But Zenz isn’t the first to highlight this problem — there long has been evidence that China is using forced labor to make many of the products that line our store shelves, particularly in textiles.

The New York Times reported on these forced labor factories about a year ago, and around that time the Associated Press even connected one of the factories to a U.S. sportswear supplier. Companies from Kraft Heinz and Coca-Cola to Adidas and Gap also run supply chains through Xinjiang, meaning that it is plausible, if not certain, that at least some of their products have been made in these factories.  

We’ve been so lost in the hustle and bustle of the holiday season that we didn’t get a chance to talk about an important bipartisan bill introduced last month that aims to improve a key piece of America’s infrastructure — and create good-paying jobs, too.

Reps. Cheri Bustos (D-Ill.) and David McKinley (R-W. Va.) put forth the “Buy America for Drinking Water Extension Act” on Nov. 20. The legislation would permanently ensure that all iron and steel products used for projects in the Drinking Water State Revolving Fund are “made entirely in the United States.”

The revolving fund is a federal-state partnership that is used to finance projects to improve drinking water systems nationwide. Between 1997 and 2018, the fund has given more than $38.2 billion in low-interest loans to more than 14,500 projects, helping provide safe drinking water to millions of Americans.

Still, more needs to be done. Like most of America’s infrastructure, our nation’s drinking water infrastructure is in terrible shape. The American Society of Civil Engineers gave it a “D” rating in 2017, noting that the 1 million miles of pipes that deliver water to our homes in businesses were laid in the early-to-mid 20th century.

Given that these pipes have a lifespan of 75 to 100 years, it’s time to get to work modernizing these systems. And when we do, it’s important to also make sure our tax dollars are reinvested back into our communities, creating jobs and boosting the local economy, which is the goal of the new legislation.

Although they might at first seem like separate issues, jobs and infrastructure are closely linked. It’s no secret, after all, that the places that were hit hardest by manufacturing job loss and industrial flight in the late 20th century also watched their infrastructure crumble.

Perhaps the most famous example of this is Flint, Michigan.

Sens. Tammy Baldwin (D-Wis.), Shelley Moore Capito (R-W. Va.), Debbie Stabenow (D-Mich.) and Bill Cassidy (R-La.) introduced a new bill on Tuesday to “crack down on unfair trade cheating from nonmarket economies like China.”

O.K., we know: We need to be more specific here.

The Senators want to give the Commerce Department more power to hold China and other countries accountable when they evade anti-dumping (AD) and countervailing duties (CVD).

For those unfamiliar with this area of U.S. trade law, the United States issues AD/CVD duties when imported products are found to be sold below market value or to have received significant government subsidies when being produced. The idea is to level the playing field a bit for American workers and companies, who operate in a free and open market.

As the Senators note, AD/CVD rules are pretty common, and most countries follow them without issue. But nonmarket economies — especially China — work overtime to dodge these duties, engaging in “a sophisticated and government-backed effort to avoid the duties required.”

For example, China “alters their products slightly to get around the rules, violating the spirit of the law, if not the letter.” It isn’t individual Chinese companies doing this, remember: China uses “its vast government resources” to ensure these firms are able to evade U.S. trade laws and avoid the duties.

We're putting the finishing touches on the 2019 Made in America Holiday Gift Guide, our annual assortment of American-made gift ideas from every state, the District of Columbia, and Puerto Rico. We work hard every year to pick new items, and the vast majority come from companies that never have been on the list before. We also try to include an eclectic mix of ideas at a range of price points — there's something for everyone on your list!

The 2019 guide is scheduled to be released on Monday, Nov. 25. But in the meantime, we've been reminising about our favorite items from past gift guides, and thought we'd share some of them below. You can also check out the full guides from previous years below.

2018 | 2017 | 2016 | 2015 | 2014 | 2013

Staff Picks

AMERICAN ROOTS 

With the cold blast of air blanketing most of the U.S. this week, all I can think about is something warm to wear to brave the sub-freezing temperatures. My choice to stay warm is fleece. American Roots is a Made in Maine company that offers a full line of custom-made fleece products, including jackets, vests, pullovers, hoodies, blankets, and even hats. I particularly like the fleece vests, which are unencumbering when worn with layers of garments underneath and do not feel or appear bulky when paired with a heavy winter coat. Like the hoodies, the vests are an added layer of protection that can comfortably be worn around the house if you feel a draft of cold air coming through the windows. Owners Ben Waxman and Whitney Reynolds launched American Roots in 2015 — the company made the 2016 gift guide — with the specific goal of manufacturing clothing in America again. Also worth noting? The employees are represented by the United Steelworkers union. Now, all I need is a fireplace and some hot chocolate. —Jeff Bonior

DEARBORN DENIM

A good pair of denim jeans is hard to find, and I used to go through too many of them. I commute by bike, and five days a week on a bike seat will wear through your imported Levi’s pretty fast! That’s why I switched over to buying Dearborn Denim, which made the 2016 guide. They’re tough and won’t rip on you. The company’s website has a nifty feature that will tell you which size jeans you should buy (just enter your height and weight). And lastly, as a Chicagoland expat, I’m very proud to be able to buy jeans that are made in the Windy City. We will win the Super Bowl someday. —Matthew McMullan

GREEN TOYS

AAM first put Green Toys on our gift guide list way back in 2013, and the California company continues to be a kid-friendly favorite.  I have two young children of my own, so I can personally vouch that these eco-friendly, BPA-free toys are always a hit with babies and young kids. The stacking cups and First Keys are great options for infants and the line of bath toys provide plenty of bathtub fun. My kids also have enjoyed the Dump Truck, Shape Sorter, House Playset, Sandwich Shop, and Build-a-Bouquet — and for the past two springs, we've planted a little garden with the Abby's Garden Planting Activity Set, a collaboration with Sesame Street. Another great thing about the company? Green Toys are made from recycled milk jugs, and everything is packaged in recycled cardboard, cutting down on the plastic waste typically associated with toys. —Elizabeth Brotherton-Bunch

As Congress continues to work on legislation to ban China’s government-owned, controlled or subsidized companies from receiving U.S. tax money to build rail cars and buses, local lawmakers are taking on the issue in their own states.

The latest instance is in New York, where state Assemblymember Michael Cusick (D) is teaming up with state Sen. Diane Savino (D) on a bill to prevent foreign state-owned enterprises, including the China Railway Rolling Stock Corporation (CRRC), from using New York tax money on mass transportation projects.

Like federal lawmakers who have championed this issue, Cusick and Savino say they are worried about the security threats posed by allowing a firm with direct ties to the Chinese state apparatus to build critical infrastructure systems.

They point to recent testimony from former Department of Homeland Security Secretaries Michael Chertoff, Janet Napolitano and Jeh Johnson, who all specifically mentioned critical infrastructure when discussing cyber security threats at a Senate Homeland Security and Governmental Affairs committee field hearing in New York.

“There is wide consensus that allowing CRRC and other state-owned enterprises to have open access to our critical rail infrastructure and mass transportation systems is ill-advised,” Cusick said in a statement. “These contracts create major cybersecurity vulnerabilities in the U.S. The goal should be risk avoidance, not mitigation.”

There’s little doubt about China’s intentions with CRRC.

New research from Radarlock examined the company’s deep ties to China’s government, communist party and military, concluding that CRRC is a key part of China’s plan to dominate global industry. But it’s more than that – CRRC also obtains technology for potentially nefarious purposes, handing everything it gathers from its work abroad to the Chinese state and military.

Cusick and Savino say they are also worried about CRRC’s economic impact, noting that CRRC has nabbed contracts in major cities like Chicago and Los Angeles by “drastically underbidding other railcar manufacturers and using non-market tactics.”

The issue is of critical importance in the Empire State because New York City is looking to upgrade its iconic subway system. CRRC won a 2018 Metropolitan Transit Authority (MTA) contest to design new subway cars – a development that quickly drew the ire of Democratic Senate Leader Sen. Chuck Schumer, who hails from New York.

It’s been a big year in U.S.-China relations, and the conclusion of 2019 may or may not see the end of a trade war between the nations. The U.S.-China Economic and Security Review Commission, charged with monitoring and investigating the national security implications of this bilateral economic relationship, has had plenty to keep an eye on.

Among a number of recommendations for congressional action in the Commission’s just-released annual report, several stand out in particular.

The Commission calls for Congress to address U.S. dependence on Chinese pharmaceuticals – an issue to which we’ve been paying close attention to for some time. Just this past month, Michael Wessel, who sits on the U.S.-China Commission, laid out in testimony before a House committee China’s plans to dominate America’s drug supply as a means of securing economic supremacy but also to potentially “weaponize its supply chain should it so choose.”   

The Commission’s 2019 report recommends that Congress continue to hold hearings exploring U.S. dependence on China’s pharmaceuticals. However, the commission is clear on the goal of these hearings: Legislation that requires the Food and Drug Administration to identify pharmaceuticals that are manufactured exclusively in China or formulated with the active pharmaceutical ingredients made in China, as well as an investigation to determine whether those drugs are manufactured with as much regulation as pharmaceuticals produced in America.

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.

The artisans and craftsmen at Wendell August Forge have been making holiday-ready hand-hammered metal gifts and ornaments in Mercer, Pa., for nearly 100 years.

But in 2010, it all went up in flames.

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Located about 40 miles north of downtown Pittsburgh — the capital of the American steel industry — America’s largest and oldest forge sits tucked away in an industrial part of Pennsylvania.

Forging is one of the oldest working techniques of artisans. It involves heating, hammering and shaping metal objects. Every Wendell August Forge piece follows this old school tradition, hand-shaped one at a time by the company’s craftsmen (who also are members of the United Steelworkers).

Wendell August Forge makes a variety of items, including holiday gifts — the company is well-known for its one-of-a-kind Christmas tree ornaments — and just launched a new line of NFL-themed coasters and keychains. The company also creates home décor items including bowls, dishes, cutting boards, glassware, and other tabletop pieces. Wendell August Forge has a gift for nearly every special occasion, including wedding gifts, commemorative gifts, baby gifts, Mother’s and Father’s days gifts and patriotic holidays. 

Will Knecht owns Wendell August Forge with his sister. His mother and father bought the company in 1978, and Knecht continues to take pride in the time-tested traditions of its past.

“We really believe in this thing called American craftsmanship. We get calls two or three times a quarter with people saying there is this factory in China that you guys should really consider, and it is no way,” Knecht said. “We were Made in America before it was cool to be Made in America, and we will continue to be Made in America.”

But the future of the tough-as-metal company looked grim in 2010, when a fire caused the factory, corporate offices and flagship retail store to burn to the ground. This was just after the company had gotten its largest order ever from the Pittsburgh Penguins National Hockey League team.

Steel industry associations in the Americas, Europe, Africa and Asia are urging their governments to intensify efforts to confront and solve the issue of excess capacity in the global steel sector.

Apparently, current methods just don’t seem to be working effectively!

The 19 associations involved released a statement, urging their various governments into action including implementing “strong rules and remedies that reduce excess capacity, its impact and causes.”

Just get some strong rules going! Sounds like a simple fix, right?

The solution becomes more complicated as the unexpected growth of new steelmaking facilities have contributed to trade tensions and have aroused some concern. Wherever could those be? The steel industries concurrently agree that the systems in place aren’t working and that “efforts by the governments to eliminate practices that lead to excess capacity should be doubled.” And they also praised a September statement from the Organization for Economic Cooperation and Development that expressed concern over the recent capacity expansions.

In the statement the associations said they’re “hopeful that the diligent efforts of Japan, the current G20 Chair, are successful in extending the G20 Global Forum on Steel Excess Capacity beyond 2019.” That means these industries want these global organizations to keep talking about fixes to the overcapacity problem.

But let’s be clear about where the overcapacity problem starts and stops: In China.  

***

Steel industry associations in the Americas, Europe, Africa and Asia are urging their governments to intensify efforts to confront and solve the issue of excess capacity in the global steel sector.

Apparently, current methods just don’t seem to be working effectively!

The 19 associations involved released a statement, urging their various governments into action including implementing “strong rules and remedies that reduce excess capacity, its impact and causes.”

Just get some strong rules going! Sounds like a simple fix, right?

The solution becomes more complicated as the unexpected growth of new steelmaking facilities have contributed to trade tensions and have aroused some concern. Wherever could those be? The steel industries concurrently agree that the systems in place aren’t working and that “efforts by the governments to eliminate practices that lead to excess capacity should be doubled.” And they also praised a September statement from the Organization for Economic Cooperation and Development that expressed concern over the recent capacity expansions.

In the statement the associations said they’re “hopeful that the diligent efforts of Japan, the current G20 Chair, are successful in extending the G20 Global Forum on Steel Excess Capacity beyond 2019.” That means these industries want these global organizations to keep talking about fixes to the overcapacity problem.

But let’s be clear about where the overcapacity problem starts and stops: In China.  

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?

People seem especially skeptical of China these days.

South Park put together a whole episode about China (and saw its existence in China vanish). The NBA spent the week stumbling over itself to appease the Chinese government, and then on Oct. 9, at least three fans in Philadelphia and in Washington, D.C. were removed from NBA exhibition games at U.S. arenas for holding up signs in support of pro-democracy protests in Hong Kong. 

That same day, New York Times opinion columnist Farhad Manjoo penned this:

“The People’s Republic of China is the largest, most powerful and arguably most brutal totalitarian state in the world. … Yet unlike the way we once talked about pariah nations — say East Germany or North Korea or apartheid South Africa — American and European lawmakers, Western media and the world’s largest corporations rarely treat China as what it plainly is: a growing and existential threat to human freedom across the world.”

A lot of people are finally waking up to the shuddering effects China’s model of state-led capitalism is having around the world. But many in the United States are still willing to overlook these concerns (and others, like say China’s abysmal record on human rights) so long as they can turn a profit by accessing the Chinese market.

That part of the story has gotten a lot of attention (watch that South Park episode for more). What garners less notice is that many Americans are also willing to welcome China’s heavily subsidized state-owned enterprises (SOEs) to set up shop in their communities. This is a mistake.

American Jobs At Risk

We already have seen the destructive impacts of China’s model of state-led capitalism on our domestic manufacturing sector, and the damaging ripple effects on thousands of communities across our nation. Between 2001 and 2017, 3.4 million U.S. jobs were lost or displaced because of our massive bilateral trade deficit with China.   

Most of those jobs went away because American companies offshored production to China following its entry into the World Trade Organization, which was supposed to move China toward a market-based economy (spoiler: the opposite happened).

But now China’s government-owned, controlled and subsidized companies are setting up assembly operations right here in the United States.

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

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.  

From the AAM

Manufacturing employment dropped in September, with the sector losing 2,000 jobs, the Bureau of Labor Statistics reported on Friday. Motor vehicles and parts saw 4,100 lost jobs, while computer and electronic products gained 3,800 jobs.   

Meanwhile, new trade figures showed that the overall goods and services deficit hit $54.9 billion in August, up $0.9 billion from July, while the goods deficit with China reached $28.9 billion.

Alliance for American Manufacturing President Scott Paul said:

September was a lousy month for factory jobs. While many pressures may have contributed to this month's employment decline, one thing is becoming more clear: Manufacturing is weak right now.

There are a couple of policy shifts that could help strengthen the sector. First, passing a robust new investment in our nation’s infrastructure. Second, reconsidering the merits of an overvalued dollar, which is hampering our exports. Third, a final trade agreement with China that will rein in its massive industrial overcapacity and subsidies, and provide our businesses and workers with more certainty and a better playing field.

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We cover a lot of ground here at the Alliance for American Manufacturing — Trade! Infrastructure! Tom Cruise! — but there’s nothing that gets us more excited than learning about an American-made product. Whether it’s a small piece of jewelry or a big piece of steel, we love highlighting the amazing workers and companies who manufacture their products in the United States.

After all, a lot of hard work — and often extra expense — goes into that “Made in USA” label. U.S. companies and workers must take care to ensure that “all or virtually all” of their products are made in the United States.

When something is labeled as “Made in USA,” many consumers recognize the effort that is behind it, along with the millions of jobs that American-made products support. The label can be a deciding factor when someone is deciding on what product to buy.

Made in USA means something.

And while nothing gets us more excited than a Made in USA product, nothing gets us more fired up than when a company knowingly mislabels its product as Made in USA. What’s worse is that these cheaters have been getting away with it.

It happens more than you think. In 2018, the Federal Trade Commission (FTC) caught some pretty brazen Made in USA cheats:

• One company sold military-themed backpacks – including on military bases! – with an “American-made” label.  The FTC found that the vast majority of that company’s products were made in China or Mexico.
• Another company made hockey pucks, and even positioned itself as “the all-American alternative to imported pucks.” All of the company’s pucks were imported from China.
• A direct-to-consumer mattress firm advertised its mattresses as assembled in the United States. The mattresses were made in China.

But in all three of these blatant cases of Made in USA cheating, the FTC politely asked these bad actors to stop this deceitful behavior.

The cheaters paid zero fines — they kept every penny they made deliberately deceiving consumers. No notices to consumers were issued. The companies didn’t even have to admit any wrongdoing!

What’s the point in even having a strong “Made in USA” standard if it isn’t enforced?

The International Brotherhood of Teamsters weighed in on the National Defense Authorization Act (NDAA) last week, sending the chairpersons and ranking members of the Senate and House Armed Services Committees a letter outlining their priorities for the legislation.

First thing on the list? Make sure that the final legislation includes language from the Senate version of the bill that would prohibit “the use of tax dollars from supporting Chinese rail car and bus companies.” Here’s General President James P. Hoffa with more:

“As the proud representatives of American workers who both manufacture and operate thousands of American-made buses, we believe that American companies must be allowed to compete on an even playing field, free from Chinese interference into our transit system and manufacturing base.”

The Teamsters’ support for banning both rail cars and buses is significant. The Senate’s version of the NDAA included language prohibiting China’s state-owned, controlled or subsidized companies from receiving taxpayer dollars to build rail cars and buses, but the House version of the bill only applies to rail cars.

If Congress moves forth with the House version, it would be a huge oversight, to say the least. As we’ve discussed in this space before, there’s widespread bipartisan economic and national security concern about China’s role in building both.

First, there’s the threat to 750 companies and 90,000 jobs up and down the transportation supply chain, as China is aiming to dominate rail car and bus manufacturing via its “Made in China 2025” plan. China heavily subsidizes its state-owned and controlled companies, allowing them to severely underbid on government contracts to build these systems. The point isn’t to make money — China’s ultimate goal is to put competitors out of business and monopolize the global industry.

If you don’t think that’s realistic, just look at what has happened to the pharmaceutical industry.

“When you can subsidize, when you can wholly own an enterprise like China does, you can create a wholly unlevel playing field,” Sen. Tammy Baldwin (D-Wis.) recently told the New York Times. “We’re used to that unlevel playing field existing between the U.S. and China, but now it’s happening in our own backyard.”

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

A little over a year ago, AAM President Scott Paul chatted with health care expert Rosemary Gibson for an episode of The Manufacturing Report podcast. Gibson had just co-authored a new book examining an overlooked part of America’s trade relationship with China.

The book’s title says it all. In “China Rx: Exposing the Risks of America’s Dependence on China for Medicine,” Gibson and co-author Janardan Prasad Singh outline how China now dominates pharmaceutical manufacturing — and why that is such a big problem for the United States.

Along with making a significant amount of medication, China also has a virtual monopoly on many of the essential ingredients that go into the pharmaceuticals that Americans depend on, including everything from over-the-counter vitamins to cancer meds to almost every antibiotic and blood pressure medication.

China’s dominance of the pharmaceutical supply chain means it has the power to cut off access to many of the medications Americans need to, um, live.

Think tariffs on cotton sweaters and bed linens are bad? Think about what would happen If China decided to cut off our medicine.

Pharmacy shelves would sit empty. Hospitals would close. People would die.

“Children and adults with cancer will suffer without vital medicines,” Gibson recently told the U.S.-China Economic and Security Review Commission. “For people on kidney dialysis, treatment would cease, a veritable death sentence.”

It’s all very scary stuff. Keep you awake at night kind of stuff.

New York City held its annual Labor Day Parade on Saturday, and Gov. Andrew M. Cuomo used the occasion to announce he will advance legislation to make the New York Buy American Act permanent. 

Originally passed in December 2017, the act requires all state-funded road and bridge projects worth more than $1 million to use iron and steel made in the United States. It is set to expire in April 2020, but Cuomo told the crowd that he is making the issue a top priority for next year’s budget session.

“What Buy America has shown, and what Buy America says, is the steel that we buy, the concrete that we buy, the iron we buy, must be American-made,” Cuomo said. “That does two things. No. 1, it protects American jobs and it grows New York jobs — manufacturing is now 5 percent of the New York economy — and it makes sure we have the best quality steel and concrete and iron going into our infrastructure projects.”

Since going into effect, the law has assured that several of the state’s largest infrastructure projects have used American-made iron and steel. This includes 110,000 tons of steel for the Mario M. Cuomo Bridge — also known as the new Tappan Zee Bridge — along with 6,580 tons of steel for the first two phases of the Kosciuszko Bridge and 11,500 tons of steel for the Kew Gardens Interchange. 

Using high-quality, safer steel made by workers here in the United States instead of lower-quality imports not only helps create and sustain thousands of union jobs, it assures the structures will last long into the future.

“We are building more than any state in the United States in America. No state is building what we are building here, over $250 billion in infrastructure, and we want to make sure that these projects last 100 years,” Cuomo said. “To do that, you have to know that steel, that concrete, that iron is top-quality material. And you only know that if that is made right here in the good ol’ USA, and that’s what we’re doing.”

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

An interesting little story from Europe popped up in our news alerts on Tuesday morning.

It seems that Vossloh, a German rail technology company, is divesting its locomotives business so it can focus on rail infrastructure.

Normally, we here at the Alliance for American Manufacturing wouldn’t pay much attention to the business dealings of a German manufacturer like Vossloh. But what caught our eye was who ended up buying Vossloh’s locomotives unit: China Railway Rolling Stock Corporation Ltd (CRRC).

Nikkei Asian Review reports:

“CRRC, the Chinese state company that is the world’s largest train maker, is set to gain a key foothold in Europe by acquiring its first factory on the continent… Vossloh announced Monday that it would sell a locomotive factory it opened last year to CRRC Zhuzhou Locomotive, a subsidiary of Hong Kong-listed CRRC.”

If you aren't familar with CRRC, it is a massive Chinese government-owned conglomerate with deep ties to the Chinese communist party. CRRC is a key player in the government’s “Made in China 2025” initiative, in which China is aiming to dominate sectors of the global industrial economy, including rail manufacturing.

We’ve been sounding the alarm about the risks that come with allowing Chinese government-owned or controlled companies to build U.S. transit systems like rail cars and buses (and with U.S. taxpayer dollars, natch). 

But hey, don’t take it from us. How about you take the word of four Admirals? And 10 Generals? Oh, and also a former Secretary of the Navy?

Fifteen military leaders wrote to the House and Senate armed services committees this week to urge Members to back legislation to ban companies owned or controlled by the Chinese government from building taxpayer-funded rail cars or buses.

The leaders are particularly concerned about China’s growing dominance in the electric vehicle (EV) sector, writing that China “seeks to gain strategic advantages… by providing aggressive government subsidies to Chinese corporations to lower prices to win business, undermining principles of fair competition and competitive markets.”

They continue:

“If China captures the EV market, the United States’ opportunity to enhance energy security by divorcing itself from an unstable global market merely swaps our reliance on one volatile oil market for a dependence on Beijing for our EVs. Moreover, the infiltration of Chinese technology into the EV sector raises substantial cybersecurity risks that may be difficult to assess and address.”

There’s growing concern on Capitol Hill about China’s role in building U.S. transit, and legislation included in the Defense authorization bill (NDAA) passed by both the Senate and the House before the August recess aims to tackle it.

During the 1960s, at the height of the Cold War, many Americans were concerned about the nuclear threat posed by communist nations like the Soviet Union (along with the emerging People's Republic of China).

Thankfully, cooler heads prevailed. The Cold War ended with the fall of the Soviet Union, and the United States largely avoided a similar adversarial relationship with China... perhaps until now.

Military might has given way to a more contemporary type of war – economics – and there is growing consensus that China is emerging as the most serious threat to the United States.

A majority of Americans seem to agree with that assessment.

New data released by the Pew Research Center on Tuesday finds that unfavorable opinions of China have reached a 14-year high. Americans have a 60 percent unfavorable opinion of China, an increase of 13 percent since 2018.

While ongoing trade disputes between the U.S. and China dominate the headlines, it is China's military that has Americans most concerned, as a whopping 81 percent of Americans think China’s growing military power is bad for the United States.

More Americans now view China as an ever-increasing threat the way Russia was feared in the 1960s. Approximately 24 percent of Americans named China as the country that poses the greatest threat to the U.S. in the future, which is double the amount of people who said they were most concerned about China in 2007. China is tied with Russian as the country most cited as a threat to the United States.

Interestingly, Americans aren't opposed to China's economic rise, as more Americans say China's growing economy is more good for the U.S. than bad (50 percent to 41 percent). 

When Texas entrepreneur Jack Clark created a durable, lightweight utility cart in 1994, he built his first 1,000 carts in Houston.

By 1997, Clark moved production of his all-purpose movable carts to China. After all, isn’t this what most businesses were doing to increase profit margins?

After 11 years of dealing with the frustrations of manufacturing halfway around the world, Clark obtained a new set of plastic molds for the carts and moved production back to the United States.

Welcome home Jack.

Clark now builds his Mighty Max Carts in Dallas, where he was born and raised. A lifelong Texan, Clark rediscovered the Longhorn State mantra that you “Don’t Mess with Texas.”

“I’ve been doing this for 20-something years, and we sold about 50,000 to 60,000 of the Chinese carts, but we couldn’t replace the parts fast enough,” Clark recalled. “The carts would just finally collapse. This new American-made cart is awesome.

“In China, the first two or three thousand carts they made were fine, and then they just kept getting cheaper and cheaper in quality. I would be standing on the cart just showing someone how it works, and the handle would crack off in my hand.”

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?

Well, we made it.

The second night of the second Democratic presidential debates is in the books, and some key manufacturing issues did make it into the spotlight on Wednesday night in Detroit, including trade.

Although this go-around lacked some of the passion featured on the first night — Sens. Bernie Sanders (Vt.) and Elizabeth Warren (Mass.) are the two candidates who have made trade one of their top issues, after all — nearly everybody did mention it at some point. 

But it was frontrunner Joe Biden who got the most attention. The former vice president and longtime senator has the most substantial policy record of anybody in the race, and his rivals on Wednesday didn't hesitate to attack him on it on all fronts, including trade. And Biden made news, announcing he would "renegotiate" the Trans-Pacific Partnership (TPP) trade deal, which President Trump pulled the United States out of on his first day in office. You'll recall, of course, that the TPP was negotiated under the Obama administration — which was when Biden served as vice president. So, Biden's flip-flop is a big f—ing deal.

Read on for more on what Biden said about trade and other manufacturing issues, as well as the remarks from all the other candidates who took part in Wednesday's debate.

Sen. Michael Bennet (Colo.): Moderator Dana Bash asked the Centennial State senator about technology's role in job displacement, and Bennet responded that the real issue is "how are we going to remain competitive? It's not just about trade... it's about whether we're going to invest in this country anymore." He then argued against the recent tax cuts and trillions of dollars spent in the Middle East, noting that "for all the money I've just described, we could have fixed every road and bridge in this country. We could have fixed every airport... We could have fixed not just Flint, but every water system in this country."

Former Vice President Joe Biden: On trade, Biden's record is mixed. As former President Barack Obama's vice president, he was a vocal supporter of the Trans-Pacific Partnership (TPP), but on Wednesday he said the deal must be renegotiated. And in 1993, he voted for the passage of NAFTA. But Wednesday night, Biden dodged a question about the Trump administration's efforts toward a NAFTA renegotiation, and backtracked on his earlier advocacy for the TPP. That flip-flopping aside, it is clear Biden thinks the United States should remain open to trade.

On Tuesday night, 10 of the 24 Democratic candidates—Montana Gov. Steve Bullock; South Bend, Ind., Mayor Pete Buttigieg; former Rep. John Delaney (Md.); former Colorado Gov. John Hickenlooper; Sen. Amy Klobuchar (Minn.); former Rep. Beto O'Rourke (Texas); Rep. Tim Ryan (Ohio); Sen. Bernie Sanders (Vt.); Sen. Elizabeth Warren (Mass.); and author Marianne Williamson—faced off in the third of many Democratic primary debates to come of the 2020 cycle.

The first debate saw sparse mentions of manufacturing, trade or China. The second? A little better, but not enough. With Motown as the backdrop last night, though, things were a little different.

Leading candidates Warren and Sanders both hit hard on trade, with Warren arguing that “for decades we have had a trade policy that has been written by giant multinational corporations to help giant multinational corporations. They have no loyalty to America.” She also came out against the U.S.-Mexico-Canada Agreement (USMCA), arguing it will lead to higher drug prices.

For his part, Sanders pointed out he voted against the original NAFTA agreement and Permanent Normalized Trade Relations with China (PNTR), and said as president he would stop giving military contracts to companies that do not employ U.S. workers to manufacture their products.

“If anybody here thinks that corporate America gives one damn about the average American worker, you're mistaken,” he said. “If they can save 5 cents to Mexico or China or Vietnam, that's what they'll do.”

We have a few ideas for what moderators should ask the candidates during this week's debates.