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Has Obama Assumed the Position of Salesman-in-Chief to China?

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What do the heads of Goldman Sachs, JPMorgan Chase, Microsoft, Motorola, General Electric, Boeing and the Carlyle Group have in common? They all attended last night’s State Dinner with President Hu Jintao. Earlier the White House announced $45 billion in new trade deals with China, including a $19 billion deal with Boeing and a package with GE expected to generate more $2 billion in U.S. exports. Some economists say the deals will hurt U.S. efforts to end the jobless Great Recession. “President Obama has assumed the position of salesman-in-chief for companies like Boeing and General Electric who are actually engaged, along with many other multinational businesses, in primarily outsourcing American jobs to China,” says guest Robert Scott, senior international economist with the Economic Policy Institute. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ: We turn now from human rights in China to the country’s economic relationship with the United States. Top U.S. business leaders met with Presidents Obama and Hu Jintao on Wednesday to call for increasing exports to China. Just before the meeting, the White House announced a list of trade deals with China totaling $45 billion. The list includes a $19 billion deal with Boeing for aircraft technology and a package with General Electric that’s expected to generate more than $2 billion in U.S. exports.

After meeting with executives from several U.S. corporations, Obama said he hoped to ease some of the friction over trade between the U.S. and China.

PRESIDENT BARACK OBAMA: Even with China’s enormous population, the United States still does more trade with Europe than it does with China. That, I think, gives an indication of the amount of progress that can be made, if we are consulting with each other, if we are hearing specifically from businesses in terms of how we can ease some of the frictions that exist in our trading relationship. And so, my hope is that today, in the brief time that we have, we’ll be able to hear some concrete ideas about how we make sure that fair — that trade is fair, that there is a level playing field, how can we protect intellectual property, how can we promote innovation, how can both of our governments remove barriers to trade and barriers to job creation. And with China’s growing middle class, I believe that over the coming years we can more than double our exports to China and create more jobs here in the United States.

AMY GOODMAN: Later today, President Hu plans to address trade and economic concerns at the U.S.-China Business Council in Washington.

Joining us now to discuss the U.S.-China relationship in more depth is Robert Scott, senior international economist with the Economic Policy Institute, a D.C.-based think tank that focuses on the economic condition of low- and middle-income Americans. Staying with us is Marc Blecher, who is the professor of politics and East Asian studies at Oberlin College and author of several books, including China Against the Tides.

Robert Scott, let’s begin with you on China’s economy and its significance here.

ROBERT SCOTT: Well, China is perhaps one of the United States’ most significant trading partners, and we have the most unequal trading relationship with China of any country in the world. We import almost five times as much from China as we export to them. Over the last nine years, the United States has lost about two-and-a-half million jobs due to growing trade deficits with China, more than a half-million jobs in the last year alone. We’ve lost jobs in every state. We’ve lost jobs in every congressional district in the country. And I’ve produced studies that have documented all of this.

JUAN GONZALEZ: Yet, Mr. Scott, none of that was part of the discussion between President Obama and President Hu in the past day.

ROBERT SCOTT: Well, that’s correct. I think in these discussions, unfortunately, President Obama has assumed the position of salesman-in-chief for companies like Boeing and General Electric who are actually engaged, along with many other multinational businesses, in primarily outsourcing American jobs to China. So, much of the discussion concerned the terms under which U.S. firms could do business in China and that sort of thing.

President Obama seems to have a gap in his vocabulary. He almost never mentions the word “imports.” He talks constantly about exports, and that’s all they’ve talked about yesterday in the negotiations. They never talk about the vast excess of imports over exports. And that’s what’s driving trade and trade-related job loss here in the United States.

JUAN GONZALEZ: Marc Blecher, I’d like you to respond to that, but also to talk about the — much of these imports are based on cheap Chinese labor. One of the things that’s happened in the last couple of years is this amazing upsurge among Chinese workers, seizing factories, demanding huge increases in wages. How do you see that developing in terms of the vast dissent that you’ve talked about that exists within Chinese society and how that will impact on future trade and imports to the U.S.?

MARC BLECHER: Two comments. On the employment question, while there’s no question that China has attracted a certain amount of employment from the U.S. and that the U.S. has suffered a certain amount job loss to China, I worry that we’re using China as a whipping boy for our employment problems. If you look back over the past 30 years, the whole neoliberal period that we’ve had, the vast majority of employment losses in this country have not been due to outsourcing. They have been due to technological upgrading. And that’s an inevitable problem. And the U.S. government, over all those years, over many presidents, has not had an active labor market policy to try to help us cope with that by upgrading our labor force. Instead, we’ve cut support for education and technology and so on. So, I haven’t seen the Obama administration do much about the enormous job losses in this country over the past two years. I think they’ve tried, and most of the responsibility for this goes to opposition in Congress to spending more money for job stimulation. But to use China as a whipping boy for our employment problems, I think, is something we ought to be wary about.

As far as your second question, the tremendous upsurge in labor protest in China is something that is amazing. It’s something that we should actually applaud. On the one hand, it shows that —-— what I was saying earlier, that there’s huge scope for political expression in China. In every Chinese city, every single day, there are protests about labor issues, about people being evicted from their homes, and so on. And these people don’t get arrested and all thrown into jail. If they did, they wouldn’t keep protesting. Instead, the government has figured out a strategy of coming in, paying them off, and trying to cope with their problems.

Rising wages in China, improved working conditions in China, are one of the best ways to help American workers, because sweatshop labor is what’s attracting so much of the employment loss that we do have with China. And, you know, then we have a race to the bottom, where wages and working conditions are depressed here to meet Chinese levels. The best thing we can do is to help encourage the growth of a lively labor movement in China. The American labor movement is beginning to do this. I would like to hear critics of human rights in China talk more, as Sharon did, about rights of workers and farmers, rather than just imprisoned political dissidents. I think that’s a good thing for American working people, but it’s also a good thing for the American economy as a whole, because if we stop relying on so much Chinese imports, because they become a little more expensive with improved conditions in China, then that can only help revive our economy here.

AMY GOODMAN: Some of the major deals that were made, the announcement yesterday, for example, of — what was it? — $19 billion deal for 200 Boeing airplanes. Also, General Electric announced five agreements with Chinese partners, including a joint venture to — for aircraft avionics. Talk about the significance of this, Robert Scott, and also — I mean, among those who were at the dinner, and including the heads of GE and Boeing and Microsoft and Carlyle Group, was Bob King, the head of UAW, United Auto Workers.

ROBERT SCOTT: Yes. Well, let me respond first to, I think, a misperception that Professor Blecher, I think, promoted a moment ago about productivity growth. United States has had productivity growth for generations. That’s not the cause of job loss. For example, during President Clinton’s term, we had created 23 million jobs. We had stable manufacturing employment. The problem really started in 2000. Since then, we’ve lost six million manufacturing jobs. We had essentially the same rates of productivity growth in the ’90s as we did in the last decade, and yet in the last decade we lost six million manufacturing jobs. And that — the entire reason for that is largely due to the growth of imports, and China is the largest source of the growth in those imports.

Now, in terms of these deals that were cut and announced yesterday, they were actually cut a year or two ago. These deals had been announced several years ago. This is just a formal government approval of the sale of these 200 jets by Boeing to the Chinese airlines. And these sales are going to be accumulated over the next decade or so. They’re going to be a drop in the bucket compared to the growth in imports from China, which have surged enormously just in the past year, as I mentioned earlier.

I’m also very concerned about the GE deal. GE is essentially giving away its technological keys to the kingdom in exchange for a few short-term sales. They’ve set up a joint venture with a Chinese company. They throw in $200 million and their most advanced avionics technology to their Chinese partner, who pays them handsomely for it, who puts in $700 billion, and in return they’re going to get some sales to Chinese aircraft manufacturers, which many other companies have been competing for. But there’s a pattern here. What happens is that the Chinese joint venture partners tend to suck the technology out of their foreign partners, and then they kick them aside in a few years. So, GE says this deal is good for 50 years; I can almost guarantee you that the deal will end in just a few years. And as a result, GE will find that it’s no longer in the business of making avionics equipment. That business will have shifted to this Chinese company. And that’s the problem we run into.

AMY GOODMAN: And Robert Scott, the story of — the story of Evergreen Solar, an amazing story of a U.S. company that received $43 million in state subsidies from Massachusetts for its solar panel factory in 2008, now announced it’s shutting the factory and moving to China.

ROBERT SCOTT: That’s right. And the reason for that is because China has offered huge subsidies to Evergreen and other solar manufacturers to build their plants in China. And that’s not about cheap labor. Cheap labor has nothing to do with it. The biggest cost of building a solar plant is the cost of the plant itself, the capital investment, which is rising exponentially. China offered this company interest rates of 4.8 percent, and they financed 60 percent of the new plant in China. And they don’t — Evergreen doesn’t even have to make a payment of interest or principal on those loans until 2015. So this is a tremendous subsidy to Evergreen. And this is really symptomatic of a much bigger problem of subsidies and currency manipulation, in particular, which makes it almost impossible for U.S. firms to compete with China on a level playing field.

JUAN GONZALEZ: But can you blame China for wanting to continue to develop its own national economy, given the fact that it is the largest country in the world and its people have been in poverty for so long, that even in terms of the issue of developing of bullet trains, of green technology, of infrastructure development, China is forging ahead to try to build a more prosperous society? So, you can’t really blame them. The question is, what is the United States doing in terms of assuring the future of its own economic development?

ROBERT SCOTT: Well, I certainly encourage China to maximize its own development, encourage them to develop their own green technology. The problem is that they are violating many, many standards of the World Trade Organization, the IMF, that they agreed to when they joined the WTO in 2001. For example, currency manipulation. China has spent almost $800 billion in the last year alone manipulating its currency. That makes its products about 40 percent cheaper than they would be on the open product and acts like a tax on U.S. exports to China and everywhere else in the world. So, China is competing unfairly. If China wants to play the game like everybody else, I welcome that competition. But I think China’s problem is they focus too much on exports and not enough on developing their domestic economy, where they have tremendous potential for growth.

AMY GOODMAN: Marc Blecher, we just have 30 seconds. Your final response?

MARC BLECHER: The issue of protectionism is a bit of a red herring or a bit hypocritical for us. All the major Western capitalist economies, in their formative periods, protected their economies. China is expected to develop its economy at a time of WTO and free trade. They are not going to be able to do that and support a population that they need to. So, I think we need to understand their need to protect things, and I would like to see us have an active industrial policy, like China does, so that we would be developing high-speed rail at the pace that they are and getting out of our airplanes and out of our cars and into high-speed rail. China is a model for this, and the U.S. state should follow them.

AMY GOODMAN: Thanks so much, both of you, for joining us — Marc Blecher, professor at Oberlin College, for making your way into Cleveland. And Robert Scott, senior international economist at Economic Policy Institute, author of ” Counting the Jobs Lost to China,” thanks so much for being there in Washington, D.C.

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