Manufacture This

The blog of the Alliance for American Manufacturing

Longtime supporters of the president say he should take action against currency cheating in the TPP.

Charlie Kelly is a lifelong Democrat who voted for President Obama twice.

But the retired steelworker says he’s disappointed in what he’s seen from Obama when it comes to the Trans-Pacific Partnership (TPP), a proposed trade agreement between the United States and 11 Asia-Pacific countries, including Japan. As it stands, the TPP currently lacks a provision to prevent countries from manipulating their currency, which has cost millions of American jobs in the last decade.

“I have thought a lot about this trade and the currency manipulation,” Kelly said. “Every time we seem to get a little jump start on that, they manipulate it where it puts us down and we can’t get our goods out of here and they can get their goods in here.”

Currency manipulation is a way to increase a country’s profits by devaluating its money to create uneven trade deals. China is considered the world’s foremost currency manipulator, but Japan also has manipulated its currency.

For many years, China has intentionally lowered the value of its currency relative to the U.S. dollar, putting U.S. workers and businesses at a disadvantage. By buying up and hoarding foreign exchange reserves, a foreign government can manipulate exchange rates to gain an export advantage. This market distortion acts as a subsidy for its own exports and as a hidden tax on U.S. exports - making it more difficult for U.S. businesses to compete.

If they’re manipulating their currency ... then we’ve got to stand up for not only our workers, but workers all around the world. — Barack Obama, 2007

Hundreds of Members of Congress from both parties and leading economists left and right support including a strong, enforceable currency rule in the TPP. Doing so would prevent this currency cheating in the future and create a level playing field for American workers and businesses.

But the Obama administration is against including such a provision.

This position is quite a departure for President Obama, who took a hardline stance against currency manipulation when he was seeking the presidency in 2008. Speaking about China, for example, then-Sen. Barack Obama told the editorial board of the Cleveland Plain Dealer:

“If they’re manipulating their currency or they are not respecting our intellectual property or other countries, are threatening union workers with arrest, or in some cases death, then we’ve got to stand up for not only our workers, but workers all around the world.”

Obama’s comments echoed those he made at other points on the campaign trail, including during a town hall sponsored by the Alliance for American Manufacturing, as well as a 2007 letter sent to then-Treasury Secretary Henry Paulson. And during a diplomatic trip to China, Obama told Chinese leaders that “currency, along with a host of other issues, will come up” during his presidency.

Seven years later, President Obama seems to have softened his stance to the point of embarrassment. During TPP negotiations, Senator Obama’s currency manipulation rhetoric has disappeared.

Why the change of heart?

The president has said he can vastly improve on previous trade agreements and bring countries into the fold that will play fair with their currency and reduce our $500 billion trade deficit that cost America nearly 5 million jobs since 2001, according to a report by the Peterson Institute for International Economics.

“Past trade deals haven’t always lived up to the hype,” Obama said in January’s State of the Union address. “I’m asking both parties to give me trade promotion authority to protect American workers with strong, new trade deals from Asia to Europe that aren’t just free but are also fair.”

American manufacturers, meanwhile, are seeking a level playing field in the TPP.

For example, U.S. automakers and the United Autoworkers have fought vigorously to convince the Obama administration to include provisions barring currency manipulation from trade agreements including the TPP. But potential TPP partner Japan is sensitive to currency manipulation issues because of its own auto industry. Japan imports just 20,000 American-made cars each year — while exporting 1.5 million vehicles to the United States.

I think in the last three years, he hasn’t lived up to the expectations that I was hoping he would. — Mike Miller

The musings of economists, talk of trade agreements, and complicated matters such as currency manipulation rarely fit into the daily conversations of hard-working, middle-class Americans. But they’d sure like to know why wages have stagnated and many new jobs offer such low pay.

And for answers, they look to the president.

Mike Miller of Cleveland has worked in the paper industry since graduating high school at the age of 18. Now 62, he’s been laid off from three paper mills in Ohio that found it more profitable to send the manufacturing to China. He twice voted for Obama, but is upset about the way the administration has handled trade.

“I’ve been a little disappointed. You know, the first four years you’re trying to turn the country around, the first four years are kind of like a loss,” Miller said. “But I think in the last three years, he hasn’t lived up to the expectations that I was hoping he would.”

Obama’s handling of trade is one of the things Miller is most disappointed in.

“Obama,  when he started running for president, one of the things he pushed that I really liked was about taxing these companies that moved out of the U.S., moved their facilities overseas,” Miller added. “You know, he was going to bring jobs back hopefully by inviting them to give them a tax break to bring these manufacturing jobs back. We’ve created jobs in the food industry and stuff, but actually I don’t think manufacturing has been revived at all since Obama’s been in there.”

Obama has been relentlessly promoting manufacturing the past two years, and recently embarked on a tour of sorts to promote his progress. But facts indicate he is making little headway.

During the 2012 campaign, Obama promised to create 1 million manufacturing jobs by the end of his second term. As of early February, there only have been 374,000 new manufacturing jobs — and that’s not the only struggle facing manufacturing, Miller noted.

“The wages have been stagnant,” Miller said. “Saving the auto industry was one great thing. Even this Affordable Care Act, I think he’s done a pretty good job on that there. It needs to be revamped here and there but I think everybody deserves the right to be able to get insurance.

“But I might just go ahead and retire. It’s all these trade agreements and there is nothing we can do about it.”

Let’s focus on getting America on its feet where we can do the things we did decades and decades ago. — Charlie Kelly

Charlie Kelly spent 32 years toiling in the mill Bethlehem Steel in Bethlehem, Pa., before he retired at age 55. Now 73, Kelly is as feisty as ever when it comes to the subject of foreign trade.

“I guess the only drawback with the Obama administration is all these different trade agreements that are being made,” he said. “As plain as I can say it — let’s stop worrying about taking care of other countries. Let’s focus more like when he does on Medicare, Social Security, and better wages. Let’s focus on getting America on its feet where we can do the things we did decades and decades ago.

“He’s maintaining Medicare and Social Security but he’s always under attack. The few things he does wrong as far as trade and getting involved in helping other countries out, he still fights for the middle-class people. He’s saying that these people that are making millions and billions of dollars just aren’t doing their fair share. They’re just not doing it.”

Kelly comes from an age when there was little global economy, and believes U.S. money should be made here through manufacturing and spent here helping Americans. Especially troubling to Kelly is the way Japan and South Korea have used unfair trade.

“They’re our allies. But when our own allies like Japan and South Korea do what they do with their steel, selling it so cheap here, I say now what do we want to do? Take care of them for the rest of time? We got to look for some parity in these trade agreements. There’s no parity. It’s too one-sided.”

The companies and even the government don’t care about workers in this country. — David Ragan

David Ragan is a 73-year-old retired Wheeling Pitt steelworker living on a small farm in Wellsburg, W. Va., located in the northern panhandle of the Mountaineer state along the Ohio River. Ragan is a major Obama supporter who would vote for him a third time if he could.

“I’ll tell you one thing that is kind of tremendous is this health care,” Ragan said. “Come hell or high water he was going to get it through. I had my doubts but it worked out good.

“People in West Virginia don’t look at the positives Obama has done. The economy is getting better, unemployment has dropped. He said he would get the coal mines working and he’s done it. The mines produced more coal in 2014 than the previous year.”

But Ragan is also concerned about currency manipulation and trade agreements such as the TPP.

Near his farm on the Ohio River, is the former Wheeling Pittsburgh Steel Coke Works plant. Coke is necessary ingredient in making steel. The plant was sold three times and is now known as Mountain State Carbon. It is owned by AK Steel which uses the coke from the plant to make its steel.

Under Wheeling Pitt’s control, the plant sent a lot of its coke offshore. It now is a much smaller producer of coke and does not run at full capacity.

“The Chinese and all the foreign countries were buying coke and shipping it over there,” Ragan said. "At first, I couldn’t figure out why. But we don’t subsidize our factories like they do. They don’t have the overhead we do. They’re getting a better deal.

“This TPP and controlling currency sounds like it would be dreaming, but if they can do it … ah, who am I B.S’ing. [The administration] can’t. The companies and even the government don’t care about workers in this country. It puts a hurting on us but I understand. There is going to be a certain degree of that, because good trade policies and good unions don’t happen overnight. It’s going to be that way for a while at least until we get a level playing field.”