extremes beget extremes a balanced approach to global trade and the role of governments

EXTREMES BEGET EXTREMESEXTREMES BEGET EXTREMESA Balanced Approach toA Balanced Approach to

Global Trade and the Global Trade and the Role of Governments Role of Governments

2

Free TradeFree Trade

3

“Greater scope for market forces to determine the value of the Yuan would reduce an important distortion in the Chinese economy, namely the incentive for Chinese firms to focus on exporting rather than producing for the domestic market.”

Federal Reserve Chairman, Ben Bernanke, December 2006.

Currency ManipulationCurrency Manipulation

4

Currency ManipulationCurrency Manipulation• Nations undervalue their own currency to gain an

unfair advantage in global trade.

RESULT:

• Exports are cheap, and imports are expensive. They sell their goods, but don’t buy others’ goods.

• China undervalues its currency up to 40% in relation to the U.S. Dollar to make its goods cheaper. People buy Chinese goods because they are cheaper than the same goods made in America.

If China ended its currency manipulation, the U.S. economy could grow by as much as $250 billion and 2.5 million new jobs!

5

How China Does It:1. Purchasing American Treasury Bills

This creates debt for America and floods our markets with cash, which when done over time helps maintain the undervalue of the yuan.

2. “Surrender Requirements” People with dollars in China are forced to turn them in for yuan to the Central Bank, which controls the exchange rate.

3. Government Control of BusinessMany corporations are owned or controlled by the government, which uses profits to buy more financial instruments to control the currency value.

America’s trade deficit with China is increasing by about $1 Billion per day!

Currency ManipulationCurrency Manipulation

7

0.10

0.11

0.12

0.13

0.14

0.15

0.16

0.17

0.18

Mar-93

Jun-93Sep-93Dec-93M

ar-94Jun-94Sep-94Dec-94M
















ar-10Jun-10Sep-10

U.S. Dollars per Yuan

U.S. Dollars per Chinese YuanU.S. Dollars per Chinese YuanExchange Rate (1993-2010)Exchange Rate (1993-2010)

Source: Pacific Exchange Rate Service

8

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

Mar-93

Jun-93Sep-93Dec-93M

















ar-10Jun-10Sep-10

U.S. Dollars per Ringgit

U.S. Dollars per Malaysian Ringgit U.S. Dollars per Malaysian Ringgit Exchange Rate (1993-2010)Exchange Rate (1993-2010)


9

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0.040

0.045

Mar-93

Jun-93Sep-93Dec-93M

















ar-10Jun-10Sep-10

U.S. Dollars per Baht

U.S. Dollars per Thai BahtU.S. Dollars per Thai BahtExchange Rate (1993-2010)Exchange Rate (1993-2010)


10

0.0000

0.0001

0.0002

0.0003

0.0004

0.0005

Dec-95M















ar-10Jun-10Sep-10

U.S. Dollars per Rupiah

U.S. Dollars per Indonesian Rupiah U.S. Dollars per Indonesian Rupiah

Exchange Rate (1995-2010)Exchange Rate (1995-2010)


11

0.000

0.002

0.004

0.006

0.008

0.010

0.012

0.014

Mar-93

Jun-93Sep-93Dec-93M

















ar-10Jun-10Sep-10

U.S. Dollars per Yen

U.S. Dollars per Japanese YenU.S. Dollars per Japanese YenExchange Rate (1993-2010)Exchange Rate (1993-2010)


12

0.0000

0.0002

0.0004

0.0006

0.0008

0.0010

0.0012

0.0014

Mar-93

Jun-93Sep-93Dec-93M

















ar-10Jun-10Sep-10

U.S. Dollars per Won

U.S. Dollars per South Korean WonU.S. Dollars per South Korean WonExchange Rate (1993-2010)Exchange Rate (1993-2010)


13

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0.040

0.045

Mar-93

Jun-93Sep-93Dec-93M

















ar-10Jun-10Sep-10

U.S. Dollars per Dollar

U.S. Dollars per Taiwanese DollarU.S. Dollars per Taiwanese DollarExchange Rate (1993-2010)Exchange Rate (1993-2010)


14

U.S. Manufacturing JobsU.S. Manufacturing Jobs(in thousands)(in thousands)

10,000

12,500

15,000

17,500

20,000

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Nearly 6 million manufacturing jobs have been lost since Nearly 6 million manufacturing jobs have been lost since manufacturing last peaked in 1998manufacturing last peaked in 1998

June 1998

June 1998

17.7 Million

17.7 Million

JobsJobs

Sept

embe

r

Sept

embe

r

2010

2010

11.8

Million

11.8

Million

Jobs

Jobs

14Source: U.S. Bureau of Labor Statistics, Not Seasonally Adjusted

15

U.S. ManufacturingU.S. ManufacturingAs a Percentage of Gross Domestic ProductAs a Percentage of Gross Domestic Product

Source: US Department of Commerce, Bureau of Economic Analysis (BEA). Manufacturing Industry value added as a percentage of GDP (Apr. 9, 2008).

8.0%

12.0%

16.0%

20.0%

24.0%

% o

f U.S

. GDP

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

45%45%DropDrop

16

The State Crisis: Manufacturing Jobs The State Crisis: Manufacturing Jobs LostLostJune 1998 to September 2010June 1998 to September 2010

17

Wal-Mart’ing of AmericaWal-Mart’ing of AmericaEmployment in Manufacturing vs. Retail SectorsEmployment in Manufacturing vs. Retail Sectors

4

8

12

16

20

Empl

oyee

s (M

illio

ns)

19501952

19541956

195819601962

19641966

19681970

19721974

197619781980

19821984

19861988

199019921994

19961998

20002002

200420062008

2010

Manufacturing Retail

Less ManufacturingJobs now than anytime since 1941!

Average Manufacturing Job: $23.31 /hr Average Retail Job: $15.70 /hrAverage Manufacturing Job: $23.31 /hr Average Retail Job: $15.70 /hr Source: U.S. Bureau of Labor Statistics, Current Employment Statistics Survey, Not Seasonally Adjusted; Average hourly Earnings of All Employees

18

World ExportsWorld ExportsAs a Percentage of World Gross Domestic ProductAs a Percentage of World Gross Domestic Product

Source: International Monetary Fund, World Economic Outlook Database, Oct. 2010

20.9

%

17.1

% 20.0

%

25.2

%

32.6

%27

.1% 29.1

%29

.9%

10%

15%

20%

25%

30%

35%

40%

% o

f Glo

bal G

DP

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

19

11000

12000

13000

14000

15000

16000

17000

18000

Mar-00

Sep-00

Mar-01

Sep-01

Mar-02

Sep-02

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

U.S

. Em

ploy

ees

in M

anuf

actu

ring

(in T

hous

ands

)

0

100

200

300

400

500

600

700

800

900

U.S

. Tra

de in

Goo

ds D

efic

it in

Bill

ions

of D

olla

rs(O

ver P

revi

ous

4 Q

uarte

rs)

Source: U.S. Census Bureau, U.S. Bureau of Labor Statistics

Trade DeficitTrade Deficit

Manufacturing JobsManufacturing Jobs

Manufacturing Jobs vs. Trade DeficitManufacturing Jobs vs. Trade Deficit(2000-2010)(2000-2010)

20

0100200300400500600700800900

Billi

ons

of D

olla

rs

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

U.S. Trade DeficitU.S. Trade Deficit(1997-2010)(1997-2010)

Source: U.S. Trade in Goods with World (Seasonally Adjusted) in Billions of Dollars U.S. Census Bureau

ChinaChina will willAccount forAccount for

almost 40% ofalmost 40% ofthe U.S. Tradethe U.S. TradeDeficit in 2010!Deficit in 2010!

21

$260

$56$79

$30

$67

$640

0

100

200

300

400

500

600

700

Billi

ons o

f Dol

lars

China Japan EU Canada Mexico World

19972010

U.S. Trade DeficitU.S. Trade DeficitTop Trading Partners 1997-2010Top Trading Partners 1997-2010

U.S. Trade in Goods with World (Seasonally Adjusted) in Billions of Dollars, estimated through Dec. 2010; U.S. Census Bureau423 %423 %

368 %368 % 94 %

94 %

359 %359 %

255 %255 %

22

20

40

60

80

100

120

140

Jan-73

Mar-74

May-75

Jul-76Sep-77

Nov-78

Jan-80

Mar-81

May-82

Jul-83Sep-84

Nov-85

Jan-87

Mar-88

May-89

Jul-90Sep-91

Nov-92

Jan-94

Mar-95

May-96

Jul-97Sep-98

Nov-99

Jan-01

Mar-02

May-03

Jul-04Sep-05

Nov-06

Jan-08

Mar-09

May-10

Valu

e of

U.S

. Dol

lar,

Trad

e W

eigh

ted

Inde

x

Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index)

Value of U.S. Dollar (1973-2010)Value of U.S. Dollar (1973-2010)(as valued against currencies of major U.S. trading partners)(as valued against currencies of major U.S. trading partners)

23

0

100

200

300

400

500

600

700

800

900

Mar-00

Sep-00

Mar-01

Sep-01

Mar-02

Sep-02

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

U.S.

Tra

de in

Goo

ds D

efic

it in

Bill

ions

of D

olla

rs(O

ver P

revi

ous

4 Q

uarte

rs)

90

100

110

120

130

140

Valu

e of

U.S

. Dol

lar T

rade

Wei

ghte

d In

dex

Trade Deficit vs. Value of U.S. DollarTrade Deficit vs. Value of U.S. Dollar(2000-2010)(2000-2010)

Value of U.S. DollarValue of U.S. Dollar(Trade Weighted)(Trade Weighted)

Trade DeficitTrade Deficit

Source: U.S. Census Bureau, U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index)

24

11000

12000

13000

14000

15000

16000

17000

18000

Mar-00

Sep-00

Mar-01

Sep-01

Mar-02

Sep-02

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

U.S

. Em

ploy

ees

in M

anuf

actu

ring

(in T

hous

ands

)

90

100

110

120

130

140

Valu

e of

U.S

. Dol

lar T

rade

Wei

ghte

d In

dex

Manufacturing JobsManufacturing Jobs

Manufacturing Jobs vs. Value of U.S. Manufacturing Jobs vs. Value of U.S. DollarDollar(2000-2010)(2000-2010)


Dollar Spikes Dollar Spikes --

Jobs VanishJobs Vanish

As industry declines,

As industry declines,

dollar follows

dollar follows

Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Labor Statistics

25

9%

10%

11%

12%

13%

14%

15%

16%

Mar-00

Sep-00

Mar-01

Sep-01

Mar-02

Sep-02

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

Prof

it Sh

are

of N

atio

nal I

ncom

e in

Dom

estic

Man

ufac

turin

g

90

100

110

120

130

140

Valu

e of

U.S

. Dol

lar T

rade

Wei

ghte

d In

dex

The Dollar Goes Up – The Dollar Goes Up – Manufacturing Profits Go Down!Manufacturing Profits Go Down!


Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Economic Analysis, Nati’ Income w/o Capital Consumption Adj. by Industry

Manufacturing ProfitsManufacturing Profits(As Share of National Income)(As Share of National Income)

26

Declining U.S. IndustryDeclining U.S. Industry

• Machinery• Autos• Textiles• Lumber/Paper• Chemicals• Aerospace• Metals

27

Endangered Manufacturing IndustriesEndangered Manufacturing Industries

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Man

ufac

turin

g Jo

bs

Computer StorageDevices

Manufactured andM

obile Homes

Broadwoven

Fabrics

Light Trucks andUntility Vehicles

Bare PrintedCircuit Boards

Audio & Video

Equipment

Flat Glass andO

ther Blown Glass

Fiber, Yarn &Thread

19982010

51%Source: U.S. Bureau of Labor Statistics, Current Employment Statistics Survey, Not Seasonally Adjusted

72%

78%

58%

70%

62%

53%

64%

28

United States Steel ImportsUnited States Steel Imports14.7

29

30.2

41.1

29.1

32.5

21

29.727.4

34.432.4

37.7

$16.8

$36.6

$29.0

$31.3

$23.3

$21.4

$10.4

$12.1

$11.5

$14.9

$12.6

$16.3

05

1015202530354045

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Steel Imports (million metric tons) Value (in billions of dollars)

Source: U.S. Census Bureau

29

0

100

200

300

400

500

600

700

Millio

ns of

Met

ric T

ons

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010Chinese Steel ProductionChinese Steel Production(1998-2010)(1998-2010)

Estimated Estimated 630 mmt in 2010630 mmt in 2010

Total Production of Crude Steel – World Steel Association, Steel Statistical Yearbook 2010

30

Chinese vs. U.S. Steel ProductionChinese vs. U.S. Steel Productionin Millions of Metric Tonsin Millions of Metric Tons

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090

100

200

300

400

500

600

China U.S.

Total Production of Crude Steel – World Steel Association, Steel Statistical Yearbook 2010

31

U.S. - China Direct InvestmentU.S. - China Direct Investment(2000 – 2009)(2000 – 2009)

Source: The U.S. Bureau of Economic Analysis, Direct Investment, Direct Investment Position on a Historical-Cost Basis

0

10

20

30

40

50

60

Billi

ons o

f U.S

. Dol

lars

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009China DirectInvestment in U.S.U.S. DirectInvestment in China

$49.4 Billion

$49.4 Billion

$791 million

$791 million

32

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Shar

e of

Man

ufac

turin

g In

dust

ry In

vest

men

t in

Priv

ate

Fixe

d As

sets

40

50

60

70

80

90

100

110

120

130

140

Valu

e of

U.S

. Dol

lar T

rade

Wei

ghte

d In

dex

The Dollar Goes Up – The Dollar Goes Up – Manufacturing Investments Go Down!Manufacturing Investments Go Down!


DomesticDomestic Manufacturing InvestmentManufacturing Investment(As Share of Investment in Private Fixed Assets)(As Share of Investment in Private Fixed Assets)

Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Economic Analysis, Investment in Private Fixed Assets by Industry

33

0%

2%

4%

6%

8%

10%

12%

14%

16%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009Sh

are

of M

anuf

actu

ring

Indu

stry

Inve

stm

ent i

n Pr

ivat

e Fi

xed

Asse

ts

0

10

20

30

40

50

60

U.S.

Dire

ct In

vest

men

t in

Chin

a (B

illio

ns o

f Dol

lars

)

The Dollar Goes Up – The Dollar Goes Up – Investments Go Overseas!Investments Go Overseas!

DomesticDomestic Manufacturing InvestmentManufacturing Investment(As Share of Investment in Private Fixed Assets)(As Share of Investment in Private Fixed Assets)

Source: U.S. Federal Reserve, Nominal Broad Dollar Index (Trade Weighted Index), U.S. Bureau of Economic Analysis, Investment in Private Fixed Assets by Industry

U.S. Direct InvestmentU.S. Direct Investmentin Chinain China

34

Major Issues in International Major Issues in International TradeTrade• Currency manipulation

– China and other Asian countries keep the value of their currencies artificially low to make their exports cheaper and imports more expensive

• Subsidies– China has provided billions of dollars in subsidies, directly and

indirectly, to its steel industry

• Attempts to weaken the trade laws– Multinational corporations that want to be able to rely on dumped

and subsidized merchandise

• Climate change– Some solutions would encourage U.S. manufacturing to move to

China and elsewhere, leading to greater greenhouse gas emissions

35

Trade Distortions: Do More.Trade Distortions: Do More.Determining the best path forward for America is not just the responsibility of the government and major corporations. The

ultimate responsibility for the future of America lies with informed American voters.

Your vote is your voice, and you have the right to be heard. Speak up for your jobs, your families, your country, and your

future.

Know More. Do More. Nucor.

extremes beget extremes a balanced approach to global trade and the role of governments

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