Shed No Tears for U.S. Manufacturers

I’m going on BBC radio shortly to comment on the creation of a new lobbying group called the Alliance for American Manufacturing. Funded in part by the United Steelworkers Union, the group promises to agitate for trade restrictions against allegedly “unfair” imports from China.

Putting the “unfair trade” charge aside for a moment, there is no evidence that U.S. manufacturing as a whole is suffering from import competition, whether fair or unfair (whatever that means). Consider a few facts that you probably won’t find on the AAM’s slick new website:

U.S. manufacturing output is up 40 percent in the past decade by volume. American workers continue to produce more chemicals and pharmaceuticals, more semiconductors and sophisticated medical equipment, more aircraft and even auto parts than ever before.

After-tax profits of U.S. manufacturing companies topped $400 billion last year.

Imports from China have displaced relatively few Americans workers. Workers who have lost their jobs because of imports from China account for only about 1 percent of annual U.S. job displacement. The sectors where China has been most competitive tend to be in lower-value goods such as clothing, shoes and other labor-intensive products.

Manufacturing jobs have been declining, not because of falling production, but because of soaring productivity. We are producing record volumes of manufacturing output with fewer workers because remaining workers are so much more productive.

China represents the fastest growing major export market for U.S. manufacturing exporters.

To get more details and analysis on our trade relationship with China, check out my 2006 Cato Trade Briefing Paper, “Who’s Manipulating Whom?”

Send Your Wish-Lists to Senator Clinton

In a press release yesterday, presidential candidate Sen. Hilary Clinton (D, NY) spoke about her commitment to “rural economic development.” Her commitment was demonstrated by introducing a bill in March called the Rural Investments to Strengthen our Economy Act (RISE Act), which provides employer tax credits for “rural entrepreneurs and small business.”

“The RISE Act will increase jobs, wages and other financial incentives allowing individuals to decide where they live by their desire, not by limited opportunities,” said Senator Clinton (emphasis added).

Really? So if I want to live in, say, one of those townhouses in Georgetown, then the government will take money from other people and buy it for me? Awesome.

(For more discussion on rural America, please attend or view online our forum today on the latest trade policy analysis from Cato’s Center for Trade Policy Studies, “Freeing the Farm: A Farm Bill for All Americans”)

As We Age

Atul Gawande writes,

Little of what the geriatricians had done was high-tech medicine: they didn’t do lung biopsies or back surgery or PET scans. Instead, they simplified medications. They saw that arthritis was controlled. They made sure toenails were trimmed and meals were square. They looked for worrisome signs of isolation and had a social worker check that the patient’s home was safe.

How do we reward this kind of work? Chad Boult, who was the lead investigator of the St. Paul study and a geriatrician at the University of Minnesota, can tell you. A few months after he published his study, demonstrating how much better people’s lives were with specialized geriatric care, the university closed the division of geriatrics.

“The university said that it simply could not sustain the financial losses,” Boult said from Baltimore, where he is now a professor at the Johns Hopkins Bloomberg School of Public Health. On average, in Boult’s study, the geriatric services cost the hospital $1,350 more per person than the savings they produced, and Medicare, the insurer for the elderly, does not cover that cost. It’s a strange double standard. No one insists that a twenty-five-thousand-dollar pacemaker or a coronary-artery stent save money for insurers. It just has to maybe do people some good.

En passant, he writes, “We cling to the notion of retirement at sixty-five—a reasonable notion when those over sixty-five were a tiny percentage of the population, but completely untenable as they approach twenty per cent.”

So it seems that Medicare is letting down the elderly when it comes to geriatric care.  And Social Security is untenable.  Who would have thought that government would make mistakes?

No Pearl(stein)s of Wisdom

Count the Washington Post’s chief business writer, Steven Pearlstein, among the disciples of “Dobbsonomics.” In his column today, Pearlstein writes:

There is a reason that, when it comes to trade and globalization, more Americans believe Lou Dobbs than Hank Paulson and Ben Bernanke — and it’s not because they’ve been bamboozled. The reason is that Americans perceive, correctly, that in recent years liberalized trade has not delivered as promised…(emphasis added)

Exactly what were those promises, Steven? Since 2001, the year of our last recession and the year China joined the WTO, U.S. GDP has increased 32 percent and about eight million net new jobs were created in the economy. Today’s unemployment rate stands at 4.4 percent. And don’t tell me that those 3 million people who lost manufacturing jobs at the beginning of the decade are flipping burgers or just stopped looking for work. The median salary in the services sector recently surpassed the median manufacturing salary.

A lot of the criticism of trade these days seems to be nothing more than expressions of self-loathing. As uneducated, unsuspecting, indebted sloths, Americans are living on borrowed time. Surely there will be hellish consequences to pay for our present profligacy.

Next time, let’s see the facts supporting the conclusion that U.S. trade policies have not delivered.

The Inherent Corruption of Antitrust Laws

Holman Jenkins’ Wall Street Journal column explains that government agencies have a natural – and corrupting – incentive to make decisions that rationalize their existence and increase their budgets. In the case of antitrust decisions, it therefore is not surprising that bureaucrats narrowly define product markets so as to give them an excuse to regulate, litigate, and otherwise interfere with market forces. To be fair, this is not just a public-sector problem. Tax lobbyists and tax preparation practitioners routinely oppose tax reform for the same reason. The unifying problem, of course, is government policy:

Federal agencies have two choices when presented with a merger. They can find a “problem” – in which case their budgets are justified and their walls fill up with scalps. Or they can find no problem. Guess which they do? Take the Federal Trade Commission lawsuit to block a proposed merger of Office Depot and Staples, a close parallel to Sirius-XM. The two would have accounted for just 4% of the office-supply market, but 100% of the market for office supplies purchased from … Office Depot or Staples! Take FTC’s failed attempt to block a deal bringing Häagen-Dazs and Dreyer’s under the same roof, which in a better world would forever have deprived its promoters of the respect of their peers. The agency’s case was built on the premise that “superpremium” ice cream doesn’t compete with, er, ice cream. … Antitrust battles may depend on the illusion of fierce debate about economics, but there’s only one antitrust establishment in Washington whose pre-emptive interest is keeping the charade going. … Even the alarm over Sarbanes-Oxley and its effect in driving listed companies offshore or into the hands of private equity is akin to fretting about tennis elbow when the arm may be amputated. Not when you have Congress eagerly promoting bills to put Congress in charge of deciding foreign investment inflows, to punish energy consumption, to prop up a dying private-sector labor movement and regulate CEO pay.

Europe’s Gas-Emitting Politicians

Imagine if the entire U.S. Congress moved from Washington to Cleveland for one week every month. Taxpayers would be justly outraged at the waste and foolishness, yet that is exactly what happens in Europe. The European Parliament leaves Brussels every month and spends a week in Strasbourg. The Parliamentarians so far have been impervious to arguments that they are wasting money, but they may be cowed by a new argument that they are contributing to global warming. The EU Observer reports on a new study showing that the monthly jaunt to Strasbourg increases greenhouse gas emissions:

The double seat arrangement of the European Parliament generates at least 20,000 extra tonnes of CO2 emissions – equalling 13,000 return flights from London to New York - according to a new study. The report … looks into the environmental costs of having two seats for the EU’s assembly - in Brussels and Strasbourg. … When a plenary session is held in Strasbourg once a month – it is empty for the remaining 307 days of the year - 1,220 officials and other servants of the parliament and political groups travel from Brussels to Strasbourg while another 525 travel from Luxembourg to Strasbourg. But it is not just people who have to get to the Alsatian capital but also all of their work paraphernalia. This means “fifteen lorries which ferry cupboards and tin trunks full of documents each month from Brussels or Luxembourg to Strasbourg and back again,” according to the report. As a whole, the costs of the “travelling circus” - as it is known by critics of the arrangement - amounts to around €200,000 per year, with the total cost of travelling plus the allowances people get for going to Strasbourg amounting to €18 million.