News & Analysis
Yoshida in China: Which candidate can save U.S. jobs?
Junko Yoshida
10/25/2012 10:55 AM EDT
Are you worried about your job being shipped to China?
Which presidential candidate's China trade policy will help save American jobs?
On the surface, the candidates positions on China don't differ much. After all, talking tough on China is apparently what every U.S. presidential candidate to get elected. No one questions the wisdom of this tactic, especially in Rust Belt states. Each candidate is willing to escalate the rhetoric to the point of asking voters: “Who is tougher on China? Me or the other guy?”
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But post-election, these same politicians often display an almost teenage crush on China. They portray China as the biggest consumer market that the U.S. can’t do without. Business leaders and their lobbyists, eager for a foothold in China, work to ensure that U.S. trade rules work for them, and not necessarily for American workers.
You may say: “No surprise there.” Politicians, by nature, are hypocrites.
But we the people also tend to be bipolar when it comes to China. China’s our convenient punching bag when we’re frustrated with the state of our economy while paying lip service to China when we see it as a customer for U.S. products.
Hence, what we are seeing on the campaign trail merely reflects what politicians think we want to hear about our Asian competitor.
This ambivalence doesn’t clarify U.S. messaging toward China. Beijing sees through all our posturing. Xinhua, China’s state-run news agency, recently described U.S. politicians’ statements on China as “self-contradictory.”
Xinhua stated the “two main accusations the U.S. presidential candidates, in particular Mitt Romney, [have] filed against China,” are that a) China “has ‘stolen’ American jobs by absorbing U.S. capital,” and b) that “it has ‘manipulated’ its currency, the yuan, to keep the exchange rate at a lower level and retain competitiveness in exports.”
Xinhua concluded: “The candidates should be pleased because all these so-called ‘stolen’ jobs have enabled American citizens to live decent lives with cheaper products at the cost of Chinese resources and manpower.”
Hard to argue with that.
Let’s break down where each presidential candidate stands on China.
Mitt Romney has famously promised, “On Day One I will label them [China] a currency manipulator which allows us to apply tariffs where they're taking jobs.” Romney said in the presidential debate on foreign policy, “They're stealing our intellectual property, our patents, our designs, our technology, hacking into our computers, counterfeiting our goods. They have to understand, we want to trade with them, we want a world that's stable, we like free enterprise. But you’ve got to play by the rules.”It’s clear Romney is advocating aggressive trade rules with China. But far less clear is whether the former Massachusetts governor, who built his fortune as founder of Bain Capital, a private equity firm, would remain as tough on China once in the Oval Office.
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Brian Fuller2
10/25/2012 12:30 PM EDT
I'm not sure either candidate will be better. No amount of realistic tax incentives will stave off a shift of jobs if the underlying economics don't work. (Neither will a like amount of trade obstructionism).
That said, we're starting to see companies in the past two years realize that we can do electronics manufacturing really, really well by adding design value and services on top. That's happened since Obama was elected and there weren't a ton of incentives that I can see that spurred that. I'm not sure it would have been any different if McCain had won.
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tb1
10/25/2012 2:31 PM EDT
Wow, this topic is likely to attract lots of 'your party will destroy this country, my party is perfect' posts. I hope not, but you don't always get what you want.
China and US, as with any two politically and economically strong countries, have a love-hate relationship and so we can always expect contradictory statements to be coming from both governments.
I hope they both realize that despite all the political posturing and economic competition, in the end both countries receive an enormous benefit from each other's existence and that both will continue to prosper as long as they remember that and continue to work to smooth out some of the worst conflicts before things ever get dangerously out of hand.
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Bert22306
10/25/2012 4:25 PM EDT
I agree that neither of the two candidates has articulated anything that could make a credible difference. The fact that our corporate taxes are the highest in the industrialized world doesn't help, certainly, but on the other hand, ask Apple why they use Foxconn. Hard to compete against $10 per week, 60 hours per week labor. And the flexibility advantages of having assembly lines manned by humans rather than robots.
What can politicians offer whose side-effects aren't worse than the disease? The only thing I can think of is to keep the IP theft problem on the front burner. No one wants to work with a partner who makes it a habit to steal from you?
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junko.yoshida
10/25/2012 6:04 PM EDT
Actually, lowering corporate tax rates probably wouldn't help the situation much, at a time when corporations are getting the ability to defer taxes on overseas profits. That alone certainly gives them an incentive to shift their operations abroad.
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Bert22306
10/25/2012 6:12 PM EDT
????
Junko, if a corporation has to pay just about 40 percent taxes for profits made in the US, but much less than that for profits at overseas operations, you don't think that LOWERING that US tax rate wouldn't help matters?
If the goal is to move operations back to the US, either you decrease the US corporate taxes, or you levy stiff taxes for overseas operations. And the latter approach is riddled with undesirable side-effects, namely trade wars.
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junko.yoshida
10/25/2012 6:34 PM EDT
You are absolutely right, Bert.
President Obama and Governor Romney may have their differences on tax policy, but both candidates agree that the United States needs to cut its corporate tax rate.
Including federal, state, and local taxes, corporate profits are currently taxed at 39.1 percent, the highest rate in the industrial world.
But somehow, with all the tax loopholes around, I don't think that this alone will be a single bullet to keep jobs in the United States.
OK, it may be a good start, but I don't think giving corporations an incentive to stay their operations in the United States is a bad idea at all.
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Ogemaniac
10/29/2012 3:50 AM EDT
Those are the statuatory rates, not the overall rates. The average corporation pays something in the mid to low twenties, most multi-nationals even less.
The only long-term solution to corporate tax policy (and tax policy for the wealthy) is global synchronization. It is a long road, but the only alternative is nations endlessly trying to poach jobs and factories from each other by offering better deals, which results in all sorts of subsidies, graft, and other foul elements of banana republics.
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nyh20028319
10/26/2012 10:07 AM EDT
China need foreign investment in
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nyh20028319
10/26/2012 10:14 AM EDT
Americans would not do manufaturing jobs like the girls doing assemble in foxconn.
It's hard working job.Need transfering from day to night.
Americans doing designing,china make thing together.Like food chains
I don't like mitt rommey this guy,if i have the right of voting in usa, I will give my vote to obama.
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danny1024
10/26/2012 1:56 PM EDT
Americans are more than willing to do the manufacturing jobs done by slave labor in China; the major difference is that Americans won't work under the appalling conditions and for the marginal wages paid in China.
The best thing America can invest in is robotics and automation; a high speed, fully automated assembly line that can match or exceed the throughput achieved by Foxconn eliminates one major reason for exporting jobs to China.
America recently became the number one producer of natural gas and is on its way to becoming the number one oil producer (at the moment the US is just behind Saudi Arabia). That means low energy costs.
With an American manufacturing environment with low labor costs (via automation) and low energy costs (via fracking/horizontal drilling) the two major reasons for manufacturing in China.
As someone once said: "the rapid improvement of all instruments of production [...] draws all, even the most barbarian, nations into civilisation [...] with which it batters down all Chinese walls"
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Frank Eory
10/26/2012 7:54 PM EDT
Interesting, but I think incorrect observations about the effect of the U.S. natural gas and oil production boom on lowering our energy costs and making U.S. manufacturing more competitive with China.
Yes we are the number one producer of natural gas and will soon surpass Saudia Arabia and become the number one oil producer.
But there's a problem -- inefficient means of distribution from the source to the end customer. This is why the price of North Dakota crude oil this week was 12% below the U.S. benchmark and 30% below the international benchmark. This is why some North Dakota producers are shipping crude oil to the Gulf coast any way they can -- railroad, river barge or truck. Because the pipelines don't yet exist.
You're probably aware that the U.S. is now exporting refinery products -- gasoline, diesel, etc. Where do you think those exports are going? You might also be aware that the natural gas & oil industries are lobbying for regulatory approval to export American natural gas and crude oil as well. If that North Dakota crude can find it's way to the refineries and seaports on the Gulf coast of Texas, it can command an additional $30 a barrel when sold on the open market -- which will often mean when sold to buyers in Asia.
It is unclear if allowing exports and building new pipelines will reduce the cost of energy for either the U.S. or China, since the goal isn't to reduce prices, but to reduce delivery costs and thus increase profits.
This oil & gas boom in the U.S. will certainly reduce dependence on middle eastern oil -- both for the U.S. and for China -- and whoever our elected politicians are, I think they will have a tough time explaining to the American people why this is a good thing for both countries, especially if there is little or no net reduction in energy costs for American consumers and businesses.
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danny1024
10/26/2012 10:32 PM EDT
If our glut of oil and gas is exported and if that exporting causes energy prices to increase sufficiently the US will accelerate production of the new nuclear reactors in the pipeline (the emerging class of mini-reactors has a compelling value proposition) or alternatively, take another look at clean coal.
Laying new pipeline is relatively easy from a technical standpoint; the real impediments are regulatory particularly right-of-way.
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Ogemaniac
10/29/2012 3:51 AM EDT
Our "glut" of oil?
By which you mean that production is up roughly 15% in the last few years due a tripling in price...but still 40% our production peak back in the early seventies?
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Ogemaniac
10/29/2012 3:52 AM EDT
That was supposed to read 40% below our peak levels of the seventies.
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gasdfnq
10/26/2012 2:23 PM EDT
Romney's energy policy is very interesting. i feel like US will be somewhat like Saudi Arabia in the future, supply the gas and coal to China for high tech. production. it is also a good food chain, good help to reduce the polution in China and Americans can shift to energy industy to avoid direct competition with China. good or not good?
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MClayton
10/26/2012 4:00 PM EDT
Emphasis on COAL will cause both US and China to lose in air quality unless it is CLEAN COAL technology. Romney simply wants votes from coal producing states.
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danny1024
10/26/2012 10:34 PM EDT
There's always coal gasification as feedstock for either coal-to-liquid-fuel or other important applications. I still think Clean Coal has a value proposition provided state, local and federal authorities are willing to provide loan guarantees.
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Frank Eory
10/26/2012 8:02 PM EDT
Sorry, I didn't see your comment before I posted mine above. It is a curious thing that the U.S. is now and will increasingly in the future be an energy exporter at the same time that we are also an energy importer.
But I think few would argue that it is a bad thing to have more oil produced by the U.S. and Canada relative to oil production in the middle east -- even if some of that North American oil gets sold on the global market, meaning mostly to China.
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danny1024
10/26/2012 10:36 PM EDT
I think your speculative destination for US energy exports is inaccurate; it will probably be Japan.
The Japanese are willing to pay a premium for our energy exports which in turn would help the balance of trade.
China will be fed largely by the oil and natgas extracted from Sakhalin or from the trans-asiatic pipeline if it ever gets built.
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danny1024
10/26/2012 10:42 PM EDT
I think the Japanese (especially if the continue to de-nuclearize their power grid) will be the more probable destination for US energy exports; they are closer and willing to pay a premium and there are fewer security concerns.
Also strategically, it's much harder for China to cut off Japan's energy supply if it's coming across the Pacific rather than through the Indian Ocean to the Sea of Japan.
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MClayton
10/26/2012 3:37 PM EDT
Robotics are not yet flexible enough to bring back consumer assembly jobs to US. They are great for industrial products, and big appliances, but not for trending toys like IPADS where change has to occur almost overnight. Foxconn-type human assemblers win on flexibility for changeovers. So let's focus bringing more appliance making home. Those won't be big quantity of jobs, but will be higher wage jobs. New flexible "almost human" robots are being made now, and by 2016 may have impact of the "trendy" stuff.
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danny1024
10/26/2012 10:39 PM EDT
I think the relentless pace of iPad/iPhone development will eventually start to abate as the sector matures. At the limit, the iPad and iPhone become laptops.
More importantly, how many tablet, smartphone and laptop manufacturers can the world + dog support? The shakeup is already underway with TI looking to hock its OMAP SoC division to Amazon.
I think modern robotics will surprise you in terms of its dexterity and flexibility but it's probably not quite cost effective at this point.
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