Decoding the Debate on Manufacturing and China – Huffington Post

If you tuned into the presidential debate Tuesday night
wondering why President Obama and Mitt Romney spent so much time hitting each
other on manufacturing and China, then you don’t live in a swing state.

The good news is that America really has a future in
manufacturing.  The brightest minds at
Harvard, MIT, and in the consulting community see enormous possibilities for
American manufacturing. We’re competitive in energy costs, labor productivity,
and other factors.  Reshoring has already
begun. Both the candidates recognize the possibilities, which is why the
ad war on China and manufacturing has been underway since this summer.

Here’s a quick primer on what the candidates have been
saying, and where American manufacturing can travel in the next few years:

1. Could a college
graduate get a manufacturing job?

Audience member Jeremy Epstein said he’s wondering about a
job after he graduates, and President Obama launched into his jobs plan, with a
focus on manufacturing. Even the Huffington Post’s Howard Fineman, whom I
admire, missed the point in a post-debate Tweet
stating that Americans don’t want manufacturing jobs. In fact, the Bureau of Labor Statistics
reports that there are roughly 250,000 job openings in manufacturing, and a
fair number of those challenging positions require a college degree. Think
engineers, managers, accountants, scientists, and the like. It’s a good job
option for many college graduates, and consulting firms like BCG believe that
the U.S. could produce 2-3 million more manufacturing jobs in the coming years.

2. Who’s created
manufacturing jobs?

Mitt Romney said we’ve lost 500,000 manufacturing jobs since
Obama took office. The larger picture is this: The United States lost 5.5
million manufacturing jobs 2000-2009–before and during the Great Recession,
the largest decline on record. The vast majority of the bloodletting occurred
during the Bush Administration. We’ve gained 500,000 manufacturing jobs since
the beginning of 2010. That’s the largest gain in manufacturing jobs since the
early 1990s. Granted, the gains are a drop in the bucket compared to what we
need, but at least the needle is generally headed in the right direction. It’s
true that China passed the United States to become the largest
manufacturer in the world, but that was a trend well underway before Obama
took office in 2009.

3. Who’s tougher on
China?  Here, both candidates have points
to make.

Mitt Romney rightly points out that President Obama has failed
to designate China as a currency manipulator. There is no question that
China manipulates
its currency. There is also no question that China’s exchange rate policy
harms American jobs.
Unless you’ve been living in a cave, you know that Mitt Romney will “designate
China as a currency manipulator on day one of his Administration.” But, why
hasn’t Mitt Romney asked House Speaker John Boehner to bring a bipartisan
currency bill to the floor for a vote? Why did Paul Ryan vote
against a China currency bill in 1010, when more than half of House
Republicans supported it? The China currency bill was the only major bill to
beat a Senate filibuster by Mitch McConnell over the past two years. Also,
after Romney calls out China, what’s the plan to change China’s behavior?

President Obama reminds us that he’s cracked down on China.
He’s put tariffs on Chinese
tires, a move that Romney opposed. He’s initiated an action against Chinese
auto parts, and
has supported relief for American solar, steel, and other producers against
dumped and subsidized products from China. His enforcement initiatives are the
best we’ve seen since the 1980s. President Obama further charges that Romney
invested in Chinese firms…and still does.

4. Who’s got a plan
to grow manufacturing?

President Obama has laid out a plan to create 1 million new
manufacturing jobs in a second term. Investing in education, innovation, and
infrastructure, trade enforcement/opening new markets, eliminating tax breaks
for offshoring and deepening tax cuts for manufacturing in America are key
elements of the plan, as well as investing in all domestic forms of energy.
Mitt Romney doesn’t offer a specific job creation promise on manufacturing, and
focuses on traditional energy investment, broad tax relief, and reducing
regulation, as well as cracking
down on China and entering into free trade agreements with Latin American
nations.

5. Differences on the
auto bailout.

There is no doubt that President Obama helped to save the
American auto industry and transformed it for the future. American
consumers have better choices, and Chrysler and GM are hiring again after
decades of shedding production and jobs. The Administration used a managed
bankruptcy, emergency loans, and other tools to achieve this. Most outside
observers believe Mitt Romney’s plan would have liquidated the industry as we
know it.

6. Is this focus on
China counterproductive?

Not at all. Putting pressure on China works. That’s why the
value of China’s currency is now at an all-time high, even though it is still undervalued.
We have more leverage
than most Americans believe. China does own some of our public debt, but its
holdings are falling. Sadly, perhaps, there are plenty of buyers of public
debt–we don’t need to depend on China. China buys dollars to help keep the
value of its own currency artificially low. And, it buys dollars because it
runs about a $28
billion per month trade surplus with the United States. That’s a terribly
unhealthy dynamic. On the other hand, China depends on the American consumer
and unfettered access to our market. If we conditioned access to our market on
playing by the rules, China would have no other choice because it has no
substitute. China is a growing market for U.S. exports, but it pales in
comparison to Chinese imports to the United States. It’s worth standing up to
China.

8. Are labor costs
really the only reason why Apple manufactures in China?

Actually, it’s the least
significant reason of all. Bigger factors are the exchange rate, China’s
restrictive policies on rare earth mineral exports (which are essential to this
type of production), subsidies, and lack of enforcement of labor, health, and
environmental rules. Plus, for as good as Apple is at design, it is terrible at
manufacturing. Instead of investing in a sophisticated, modern production
facility that is operated by robots and highly-paid American engineers, it opts
to exploit
hundreds of thousands of Chinese workers. Public policy can help to create the
proper ecosystem for Apple to shift its production to America. Not every
manufacturing job is coming back, but these certainly can.

So, what’s next?

Expect a crescendo on China next week when the candidates
spar on foreign policy at the Boca Raton debate. And, expect shrill editorials
from all the editorial boards that got it wrong on China the first time as they
fret about “China bashing.” When the elites are losing the argument, they start
name-calling. The debate on manufacturing and China is long overdue. Let’s keep
it going.

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