TMA Media – Fifty-two years ago, President Nixon went to China. The news of his visit was shocking. The Washington Post wrote, “If Mr. Nixon had revealed he was going to the moon, he could not have flabbergasted his world audience more.”
That visit opened the door for U.S. business people to begin working with China. Forbes writer Warren Shoulberg wrote in February 2022, “The Chinese, who were perceived as quick learners and eager to cooperate, were only all-too-eager to accept the Western interlopers. The passing of Mao and the transition to the more practical politics and ideology of Deng Xiaoping facilitated the process, and within two decades, China had become the factory floor of America.”
Indeed. Statistics show that by 1992, job quality in the United States began a downward spiral that continues in 2023. In comparing low-wage/low-hour and high-wage/high-hour positions, the “Job Quality Index” indicated a 14.5% drop as manufacturing in the United States declined and manufacturing jobs in China skyrocketed.
At the same time, American producers lost a substantial share of the domestic goods market. Americans continue to flock to the lower price items the “Made in China” label allows. In 2002, 78% of the U.S. market goods were made in the U.S. Today, that percentage has dipped to 68%, with more decline expected ahead.
An urgent need to return to domestic production
America’s Founding Fathers viewed production as the most effective way to build a healthy national economy. Unless America moves back to creating more than it takes in from other countries, the U.S. economy will continue to struggle.
That’s what Michael Stumo, CEO of Coalition for a Prosperous America, told TMA members in July.
“America’s trade deficit is the worst in the world, where we import far more than we export,” Stumo said. “We currently do not produce enough for our own country’s demands.”
During the COVID-19 emergency, when supply chains took a deep pause from full activity, Americans experienced firsthand the need to return manufacturing to the U.S.
American manufacturing, taken for granted for decades as the industry moved overseas, was again in the spotlight.
America, the world’s leading consumer
Americans consume more than any other nation in the world – and China is very willing to export its products to a nation whose citizens want and can afford to buy almost anything. Other nations, including India, Germany, and Japan, are anxious to join the effort to meet insatiable American consumer demands.
The situation presents an opportunity for America to make significant economic policy adjustments.
“We are the market that matters, and so when we want to do trade deals, we don’t need to give away a single thing,” Stumo told the TMA members. “In fact, we should raise our tariffs. They all want to sell into our market.”
A nation’s security at risk
Dependency on foreign governments for essential needs such as medical equipment and pharmaceuticals is a threat to America’s national security, said Zach Mottl, CFO of Atlas Tool Works and chairman of CPA’s Board of Directors.
“We saw in the pandemic when countries wouldn’t send us medicine or masks. That’s not a good place to be. We should focus on value. There is a value to being able to produce for ourselves,” Mottl said.
Stumo agreed and proposed a solution. “I think we are in a Cold War, and we should be decoupling, disentangling, or something like that. But instead, we are funding China’s rise,” he said, “And we have the power to stop it.”
Growing global concern over China’s trade policies
China’s trade practices are troubling not only to the United States, but other countries are now voicing their concerns. In October 2021, nearly 50 years after Nixon visited Beijing and 20 years after the Communist economic powerhouse entered the World Trade Organization, several countries (including the United States, Japan, South Korea, and India) expressed frustration with China. Specifically the country’s:
- Industrial policies that skew the playing field against foreign competition and create systemic problems for global trade;
- Severe and persistent excess capacity, especially in the steel and aluminum sectors;
- Preferential treatment for state-owned enterprises that contributes to the un-level playing field for foreign competition;
- Forced technology transfer;
- Inadequate enforcement of intellectual property rights;
- Restrictions on foreign investment in key sectors;
- Inadequate regulatory transparency;
- Overly broad cyber security regime that seems designed to serve protectionist purposes;
- Cross-border data restrictions and data localization requirements;
- Use of forced labor in several sectors;
- Use of its Anti-Monopoly Law for industrial policy purposes; and
- Variety of problematic sanitary and phytosanitary (SPS) measures.
“That is a very long list of problems that have been identified with China’s trade regime, and all of these problems are serious ones,” David Bisbee, who represents the United States as Deputy Permanent Representative to the World Trade Organization (WTO), said.
“We hold out hope that China will take the initiative to address each of these problems,” he said, despite recognizing that China ignored a similar challenge three years previously.
Is hope around the corner?
Turning the corner for U.S. manufacturing to regain its strength before China’s exponential economic growth looks more hopeful in 2023 than it did a few years ago.
Stumo is optimistic about the U.S. economy’s future because more and more Washington, D.C. policymakers are beginning to see the need to change crucial trade policies drastically.
“At the national level, some big, good things will happen. We will have more wins in the next few years,” Stumo said.
“We see the world is turning our way, and we’re helping it,” Mottl added. “It’s going to be helpful to your industries when your customers are busier and are buying more here and are more incentivized to buy more here for the supply chains that fit in.”
Stumo and Mottl encouraged TMA members to join the Coalition for a Prosperous America to be more effective at the nation’s Capitol as the organization works with other likeminded efforts.
They concluded that the more manufacturers and industries that get involved in the effort to hold China accountable, the brighter the hope to see dramatic changes.
“Over the years, America became focused on the financialization of things as opposed to the production of things,” Stumo said. “We’re working very hard to reverse that policy.”
First published in the Fall 2023 TMA News Bulletin. Written by Fran Eaton, News Bulletin editor
