extremes beget extremes a balanced approach to global trade and the role of governments
TRANSCRIPT
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 Business
Many 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
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7
0.10
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0
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-9
3Ju
n-9
3Sep-9
3D
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3M
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4Ju
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4Sep-9
4D
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9D
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9M
ar-0
0Ju
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0Sep-0
0D
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0M
ar-0
1Ju
n-0
1Sep-0
1D
ec-0
1M
ar-0
2Ju
n-0
2Sep-0
2D
ec-0
2M
ar-0
3Ju
n-0
3Sep-0
3D
ec-0
3M
ar-0
4Ju
n-0
4Sep-0
4D
ec-0
4M
ar-0
5Ju
n-0
5Sep-0
5D
ec-0
5M
ar-0
6Ju
n-0
6Sep-0
6D
ec-0
6M
ar-0
7Ju
n-0
7Sep-0
7D
ec-0
7M
ar-0
8Ju
n-0
8Sep-0
8D
ec-0
8M
ar-0
9Ju
n-0
9Sep-0
9D
ec-0
9M
ar-1
0Ju
n-1
0Sep-1
0
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)
Source: Pacific Exchange Rate Service
9
0.005
0.010
0.015
0.020
0.025
0.030
0.035
0.040
0.045
Mar-9
3Ju
n-9
3Sep-9
3D
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3M
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4Ju
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4D
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4M
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5Sep-9
5D
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6Sep-9
6D
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7Ju
n-9
7Sep-9
7D
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7M
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8Ju
n-9
8Sep-9
8D
ec-9
8M
ar-9
9Ju
n-9
9Sep-9
9D
ec-9
9M
ar-0
0Ju
n-0
0Sep-0
0D
ec-0
0M
ar-0
1Ju
n-0
1Sep-0
1D
ec-0
1M
ar-0
2Ju
n-0
2Sep-0
2D
ec-0
2M
ar-0
3Ju
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3Sep-0
3D
ec-0
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ar-0
4Ju
n-0
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5D
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5M
ar-0
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n-0
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7D
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8Ju
n-0
8Sep-0
8D
ec-0
8M
ar-0
9Ju
n-0
9Sep-0
9D
ec-0
9M
ar-1
0Ju
n-1
0Sep-1
0
U.S. Dollars per Baht
U.S. Dollars per Thai BahtU.S. Dollars per Thai BahtExchange Rate (1993-2010)Exchange Rate (1993-2010)
Source: Pacific Exchange Rate Service
10
0.0000
0.0001
0.0002
0.0003
0.0004
0.0005
Dec-9
5M
ar-9
6Ju
n-9
6Sep-9
6D
ec-9
6M
ar-9
7Ju
n-9
7Sep-9
7D
ec-9
7M
ar-9
8Ju
n-9
8Sep-9
8D
ec-9
8M
ar-9
9Ju
n-9
9Sep-9
9D
ec-9
9M
ar-0
0Ju
n-0
0Sep-0
0D
ec-0
0M
ar-0
1Ju
n-0
1Sep-0
1D
ec-0
1M
ar-0
2Ju
n-0
2Sep-0
2D
ec-0
2M
ar-0
3Ju
n-0
3Sep-0
3D
ec-0
3M
ar-0
4Ju
n-0
4Sep-0
4D
ec-0
4M
ar-0
5Ju
n-0
5Sep-0
5D
ec-0
5M
ar-0
6Ju
n-0
6Sep-0
6D
ec-0
6M
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n-0
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7D
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7M
ar-0
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8D
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ar-0
9Ju
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9Sep-0
9D
ec-0
9M
ar-1
0Ju
n-1
0Sep-1
0
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)
Source: Pacific Exchange Rate Service
11
0.000
0.002
0.004
0.006
0.008
0.010
0.012
0.014
Mar-9
3Ju
n-9
3Sep-9
3D
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ar-0
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0Sep-0
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ar-0
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9D
ec-0
9M
ar-1
0Ju
n-1
0Sep-1
0
U.S. Dollars per Yen
U.S. Dollars per Japanese YenU.S. Dollars per Japanese YenExchange Rate (1993-2010)Exchange Rate (1993-2010)
Source: Pacific Exchange Rate Service
12
0.0000
0.0002
0.0004
0.0006
0.0008
0.0010
0.0012
0.0014
Mar-9
3Ju
n-9
3Sep-9
3D
ec-9
3M
ar-9
4Ju
n-9
4Sep-9
4D
ec-9
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ar-9
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5D
ec-9
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ar-9
6Ju
n-9
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6D
ec-9
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ar-9
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n-9
7Sep-9
7D
ec-9
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ar-9
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n-9
8Sep-9
8D
ec-9
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ar-0
0Ju
n-0
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1Ju
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ar-0
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ar-0
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4D
ec-0
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ar-0
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n-0
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5D
ec-0
5M
ar-0
6Ju
n-0
6Sep-0
6D
ec-0
6M
ar-0
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n-0
7Sep-0
7D
ec-0
7M
ar-0
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n-0
8Sep-0
8D
ec-0
8M
ar-0
9Ju
n-0
9Sep-0
9D
ec-0
9M
ar-1
0Ju
n-1
0Sep-1
0
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)
Source: Pacific Exchange Rate Service
13
0.000
0.005
0.010
0.015
0.020
0.025
0.030
0.035
0.040
0.045
Mar-9
3Ju
n-9
3Sep-9
3D
ec-9
3M
ar-9
4Ju
n-9
4Sep-9
4D
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4M
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5Sep-9
5D
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5M
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6Ju
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6Sep-9
6D
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ar-9
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n-9
7Sep-9
7D
ec-9
7M
ar-9
8Ju
n-9
8Sep-9
8D
ec-9
8M
ar-9
9Ju
n-9
9Sep-9
9D
ec-9
9M
ar-0
0Ju
n-0
0Sep-0
0D
ec-0
0M
ar-0
1Ju
n-0
1Sep-0
1D
ec-0
1M
ar-0
2Ju
n-0
2Sep-0
2D
ec-0
2M
ar-0
3Ju
n-0
3Sep-0
3D
ec-0
3M
ar-0
4Ju
n-0
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4D
ec-0
4M
ar-0
5Ju
n-0
5Sep-0
5D
ec-0
5M
ar-0
6Ju
n-0
6Sep-0
6D
ec-0
6M
ar-0
7Ju
n-0
7Sep-0
7D
ec-0
7M
ar-0
8Ju
n-0
8Sep-0
8D
ec-0
8M
ar-0
9Ju
n-0
9Sep-0
9D
ec-0
9M
ar-1
0Ju
n-1
0Sep-1
0
U.S. Dollars per Dollar
U.S. Dollars per Taiwanese DollarU.S. Dollars per Taiwanese DollarExchange Rate (1993-2010)Exchange Rate (1993-2010)
Source: Pacific Exchange Rate Service
14
U.S. Manufacturing JobsU.S. Manufacturing Jobs(in thousands)(in thousands)
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
Mill
ion
11.8
Mill
ion
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. G
DP
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
Em
plo
yees
(M
illions)
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
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 G
lobal
GD
P
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
plo
ye
es
in M
an
ufa
ctu
rin
g (
in T
ho
us
an
ds
)
0
100
200
300
400
500
600
700
800
900
U.S
. Tra
de
in G
oo
ds
De
fic
it in
Bill
ion
s o
f D
olla
rs(O
ve
r P
rev
iou
s 4
Qu
art
ers
)
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
0
100
200
300
400
500
600
700
800
900
Billions
of D
ollar
s
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
Billions
of D
ollars
China Japan EU Canada Mexico World
1997
2010
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-76
Sep-77
Nov-78
Jan-80
Mar-81
May-82
Jul-83
Sep-84
Nov-85
Jan-87
Mar-88
May-89
Jul-90
Sep-91
Nov-92
Jan-94
Mar-95
May-96
Jul-97
Sep-98
Nov-99
Jan-01
Mar-02
May-03
Jul-04
Sep-05
Nov-06
Jan-08
Mar-09
May-10
Va
lue
of
U.S
. Do
llar,
Tra
de
We
igh
ted
Ind
ex
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
. T
rad
e in
Go
od
s D
efic
it i
n B
illi
on
s o
f D
oll
ars
(Ove
r P
revi
ou
s 4
Qu
arte
rs)
90
100
110
120
130
140
Val
ue
of
U.S
. D
oll
ar T
rad
e W
eig
hte
d I
nd
ex
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
plo
ye
es
in M
an
ufa
ctu
rin
g (
in T
ho
us
an
ds
)
90
100
110
120
130
140
Val
ue
of
U.S
. D
oll
ar T
rad
e W
eig
hte
d I
nd
ex
Manufacturing JobsManufacturing Jobs
Manufacturing Jobs vs. Value of U.S. Manufacturing Jobs vs. Value of U.S. DollarDollar(2000-2010)(2000-2010)
Value of U.S. DollarValue of U.S. Dollar(Trade Weighted)(Trade Weighted)
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
Pro
fit
Sh
are
of
Nat
ion
al I
nco
me
in D
om
esti
c M
anu
fact
uri
ng
90
100
110
120
130
140
Val
ue
of
U.S
. D
oll
ar T
rad
e W
eig
hte
d I
nd
ex
The Dollar Goes Up – The Dollar Goes Up – Manufacturing Profits Go Down!Manufacturing Profits Go Down!
Value of U.S. DollarValue of U.S. Dollar(Trade Weighted)(Trade Weighted)
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
Manufa
cturi
ng J
obs
Com
pute
r Sto
rage
Device
s
Manufa
cture
d a
nd
Mobile
Hom
es
Bro
adw
oven
Fabrics
Lig
ht T
ruck
s and
Untility
Vehicle
s
Bare
Prin
ted
Circu
it Board
s
Audio
& V
ideo
Equip
ment
Fla
t Gla
ss and
Oth
er B
low
n G
lass
Fib
er, Y
arn
&Thre
ad
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
29.72
7.4
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
Mill
ions
of M
etric
Ton
s
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
Billions
of U
.S. D
ollars
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
China 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
Sh
are
of
Man
ufa
ctu
rin
g I
nd
ust
ry I
nve
stm
ent
in P
riva
te F
ixed
Ass
ets
40
50
60
70
80
90
100
110
120
130
140
Val
ue
of
U.S
. D
oll
ar T
rad
e W
eig
hte
d I
nd
ex
The Dollar Goes Up – The Dollar Goes Up – Manufacturing Investments Go Down!Manufacturing Investments Go Down!
Value of U.S. DollarValue of U.S. Dollar(Trade Weighted)(Trade Weighted)
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
2009
Sh
are
of
Man
ufa
ctu
rin
g I
nd
ust
ry I
nve
stm
ent
in P
riva
te F
ixed
Ass
ets
0
10
20
30
40
50
60
U.S
. D
irec
t In
vest
men
t in
Ch
ina
(Bil
lio
ns
of
Do
llar
s)
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.