Voters are going to the polls this year with economic worries uppermost in their minds. Although the “headline” unemployment rate has fallen to 5.0 percent, the labor force participation rate remains near historic lows, indicating that many people who might work are not doing so. Discouraged workers have given up looking for work, and middle-class jobs with benefits are scarce. One issue ties these troubles together — manufacturing.
America’s factories are struggling. In spite of economic growth, U.S. manufacturing is in a recession. The sector has now contracted for five straight months, with exports lower due to a weak global economy and a strong dollar. But competition from illegally subsidized foreign producers is the main culprit.
Federal data shows the United States has lost roughly 5 million manufacturing jobs since 2000, including roughly 65,000 jobs in Kentucky alone. The loss of so many skilled, high-paying jobs has profoundly hurt America’s middle class, with formerly well-paid workers forced into unemployment, early retirement, or lower-paying service jobs. No wonder voters are angry. To restore the viability of domestic manufacturing, voters need to choose candidates who will tackle the big problem facing the nation’s factories, namely, bad U.S. trade policies.
When Americans are asked why U.S factories are moving overseas, they usually think “cheap labor.” But labor is only a small part of the picture. What really hurts America’s factories is the massive subsidies that foreign governments provide to their industrial sectors. China, Japan, Malaysia, Singapore, South Korea, and some EU countries deliberately intervene in currency markets to weaken their currencies, making their goods artificially cheap against American-made products. That’s why the annual U.S. trade deficit with China has exploded over the past 15 years, jumping from $83 billion in 2000 to $366 billion in 2015.
That’s a lot of lost jobs, and both the Bush and Obama administrations failed to take action. Voters should be asking, “Who will stop this hemorrhaging of our manufacturing base?”
In 2013, bipartisan majorities in both houses of Congress urged President Obama to include strong, enforceable currency measures in the Trans-Pacific Partnership (TPP.) Congress did so again in 2015 when they passed negotiating objectives for the TPP. Inexplicably, the Obama Administration ignored Congress, and there are no penalties for currency manipulation in the TPP. That means the deal, if passed, will allow even more artificially cheap goods to enter the U.S. market, further weakening domestic industry.
America’s manufacturers are beset by a host of other unfair trade practices. China massively subsidizes its energy sector, and props up key industries like autos, steel, glass, paper, rubber, and electronics. These subsidies are actionable under world trade law, and could be countered if only a U.S. president enforced existing trade laws.
Most countries have cohesive industrial strategies to grow their manufacturing sectors — but not the United States. That’s why Germany, and not America, enjoys a trade surplus with China and the world, successfully exporting its products while restraining imports.
A strong manufacturing base is critical to America’s economic future. Manufacturing jobs pay better than service jobs, and provide better benefits. They support related jobs throughout the economy. And manufacturing undertakes 70 percent of private sector R&D, spawning future industries.
Voters must help rebuild manufacturing. Step one is to identify candidates who support action against currency manipulation and subsidies by China, Japan, and others, as well as candidates who reject outsourcing deals such as the TPP. When voters listen closely to candidates on trade issues, they’ll quickly find out who wants a robust future for America’s factories, jobs, and middle class.
Kevin L. Kearns is president of the U.S. Business & Industry Council (USBIC), a national business organization advocating for domestic U.S. manufacturers since 1933.
Kevin Kearns is the president of the U.S. Business and Industry Council (USBIC.)