Opinion: Trading Away Jobs is the Real March Madness

Mar 10 2015 |
Manufacturing & Technology News founder and publisher Richard McCormack appears before the House Manufacturing Caucus on March 4.

Richard McCormack on America’s true trade contest.

The post below is an opinion piece written by award-winning journalist Richard McCormack, the founder and publisher of Manufacturing & Technology News. McCormack also served as the editor of the 2013 book on revitalizing manufacturing, ReMaking America. You can follow him on Twitter at @RichardAMc.

Since Americans are obsessed with sports and because it's time for March Madness, let's turn the U.S. global trade position into a basketball metaphor.

U.S. exports increased last year by $65 billion.

U.S. imports increased by $94 billion.

If this had been a basketball game, the United States lost to its international competitors last year by a score of 94 to 65.

That is a blow-out.

With such a lopsided defeat, fans of the team would be in a sour mood. The last thing they would expect during the press conference after the game is the coach denying that the team even lost.

Yet here is what Commerce Secretary Penny Pritzker stated upon release of the 2014 trade numbers: "U.S. exports hit a new annual record."

This is like a coach of the losing team saying, "We scored 65 points — the most ever" — while failing to mention that the other team scored 94.

In Pritzker's celebratory press release, the word "export" appears 15 times. The word "import" does not appear once.

This has been going on for 40 years. The last time the United States ran a trade surplus was in 1975.

With year after year of defeat utilizing the same strategy, fans would be clamoring for a change of management and ownership.

Let's play another game. How about America's pastime, baseball?

In 2010, the Office of the U.S. Trade Representative (USTR) issued a press release stating that the proposed Korea Free Trade Agreement would result in "countless new opportunities for U.S. exporters to sell more Made-in-America goods, services and agricultural products to Korean customers — and to support more good jobs here at home." In the buildup to Congress's vote on the agreement, the USTR cited an International Trade Commission report that projected $10 billion more in annual merchandise sales to Korea and the creation of 70,000 American jobs.

Last year, the U.S. trade deficit with Korea reached an all-time record of $25 billion, almost doubling since 2011.

In 2014, U.S. exports to Korea stood at $44.5 billion, up from $42.3 billion in 2012 when the agreement went into effect, an increase of just over $2 billion. But imports from Korea increased by $11 billion (from $59 billion to $70 billion).

The score: USA, 2; Korea, 11.

It's another blowout, with the management of Team USA denying the poor showing. It is another indication of the need for a new trade strategy.

Let's look at the cost of trade in 2014.

While testifying in January before the House Ways and Means Committee, U.S. Trade Representative Michael Froman estimated that every $1 billion in exports results in the creation of between 5,400 and 5,900 U.S. jobs.

If that is the case, then so, too, is the inverse. With the U.S. trade deficit in goods and services in 2014 standing at $505 billion, that is equal to the loss of about 2.8 million U.S. jobs.

Excluding services, the U.S. goods trade deficit of $737 billion equates to a loss of 4.1 million U.S. manufacturing jobs, according to the USTR's calculation (of 5,500 jobs per $1 billion in export). The trade deficit with Korea (at $25 billion) represents a loss of 137,500 U.S. jobs.

At $505 billion, the trade deficit in goods and services in 2014 was $1.4 billion per day, or $4.37 for every American every day. It added up to a loss of $1,578 per American in 2014.

For a household of four, that is a loss in one year of $6,312.50.

The total import bill for goods and services — at $2.85 trillion, or 16.5 percent of GDP — means that every American imported $8,906 worth of goods and services in 2014, or $24 of imports per American per day.

Add it all up and the import bill for an American family of four in 2014 was $35,623. That is a lot of money for the purchase of goods and services that are not Made in America.

With so much of the nation's wealth hemorrhaging offshore, the U.S. government is not generating enough revenue to pay its bills, leading to the decade-long destructive political battle over federal budgets that cannot fund the retirement and medical costs of the baby boomers, the education of the millennials' children, national security and fixing a deteriorating infrastructure (especially after this particularly brutal winter).

The U.S. government can no longer afford a cavalier attitude toward manufacturing in the global race for jobs. In the coming political consideration of the Trans-Pacific Partnership (TPP) and Trade Promotion Authority (TPA), American job creation must be the central focus of debate.

If Froman insists that the Trade Adjustment Assistance (TAA) program for workers be reauthorized this year because there will be jobs displaced by the trade agreement, then it must be recognized that he is tacitly acknowledging that his team has negotiated away specific industrial sectors of the U.S. economy.

It is essential to know precisely which industries that, in the view of U.S. negotiators, are not worthy of being globally competitive.

Manufacturers and their workers need to tell politicians deciding the fate of these industries that every manufacturing job in the United States is sacred. For today, manufacturing has become America's innovation sector. The manufacture of high-volume products for millions of consumers is high-tech. Virtually every factory in America has deployed advanced automation, robotics and IT software systems to turn invention into wealth. A manufacturing job is an innovation job.

There is not a single manufacturing sector that can be compromised in a trade deal.

When the TPP is finalized and released, it will be incumbent for workers, domestic manufacturers and lawmakers to read it line by line with the assistance of experienced trade lawyers to determine if U.S. negotiators have continued the longstanding practice of trading away American industries.

If there is acknowledgment that the deal will lead to the loss of any American manufacturing jobs, then the trade deal should be shelved (since it can't be amended) and trade negotiators should be told to start over with the goal of negotiating deals that tilt the playing field to America's advantage and result in trade surpluses.

The country needs to reclaim the mantle of a winning team, since losing over the past 40 years by such large margins is dangerous both economically and socially. Losing is not in the American tradition. It should not be tolerated.

More McCormack: Basic Facts are Being Ignored in the Trade Debate.