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The shift in American jobs to China, India, and other countries is alarming to displaced American workers but politicians and business executives seem oblivious to the unemployment problems created by this foreign trade and foreign business investment policy.
In the last decade, GE has closed over fifteen factories in Ohio and downsized numerous others. Since 1980, employment in GE Lighting has dropped by 68 percent. A large chunk of that manufacturing has gone to China, and now GE plans to send even more to China in the wake of new clean energy policies. By 2014, Americans will only be able to purchase more energy efficient CFL light bulbs. However, GE has located all of its facilities for high-efficiency light bulbs to China and has told the union representing the workers that they have no intention to locate compact flourescent facilities in the United States.
COLUMBUS, Ga. - The W.C. Bradley Co. announced it will shift manufacturing of its Char-Broil grills to China, threatening 500 full-time and 1,000 seasonal manufacturing jobs in Columbus. Char-Broil plans to stop making its 2 million annual grills by the end of 2006, with normal production next year. "We expect there will be jobs lost, but we don't know how many to say at this point," W.C. Bradley chairman and CEO Steve Butler told the Columbus Ledger-Enquirer. Butler said pressure from Chinese manufacturers has been growing over the last four years. He said the decision was between moving the operation to China, where grills can be produced for 25 percent less, or "get out of the business."
IT major, IBM is planning to move about 150 jobs from Australia to locations in India and China. According to a spokesperson of the Australian Services Union (AUS), these jobs will be moved to IBM centres in Bangalore-India and Shen zhen-China. This is good news for job seekers in India, especially IT guys who struggled to keep up or find new jobs during recession and subsequent layoffs. The recession phase however, is over now, as all the major IT companies in India aren’t only recruiting but are on an aggressive hiring spree.
Stanley Furniture Co. Inc. is cutting about 530 jobs from its Virginia operations as part of a restructuring that involves moving some production to overseas vendors. The company said in a statement May 12, 2010 that it will transition the majority of the manufacturing of its Stanley Furniture adult product line from its plant in Stanleytown, in Henry County, to "several strategic offshore vendors with whom it has existing working relationships."
Lexmark International, the world’s second-largest computer printer manufacturer, shifted production simultaneously to Mexico and China. The Lexmark layoffs affected about 900 workers, including 600 manufacturing workers in Lexington, Ky.
Three years after Ericcson gained $500,000 in state and local incentives to expand operations at its Candlers Mountain facility, the company announced it would relocate between $60 million and $80 million worth of equipment overseas. As a result, Lynchburg lost approximately $650,000 in machinery and tools tax revenue. The city cut back the fire department and sheriff’s department and faced a significant shortfall in its school system budget.
In the past decade, U.S. trade and investment with China has increased dramatically. Today, China has become the U.S.’s fourth-largest trading partner, following Canada, Mexico, and Japan. Foreign direct investment in China by U.S. firms has increased from only $200 million in 1989 to more than $7.8 billion in 2000.
Contrary to once-high expectations that China’s 1.2 billion population would provide an ever-expanding market for U.S. goods, by 2000 the value of goods imported to the U.S. from China exceeded the value of U.S. goods exported to China by a factor of more than 6:1—resulting in a bilateral trade deficit of $84 billion.
Today, the trade deficit with China comprises almost 20% of the total U.S. trade deficit and is the largest trade deficit the U.S. has with any single nation. Since the enactment of Permanent Normal Trade Relations (PNTR) legislation with China, production shifts out of the U.S. and into China have escalated. According to research data, between 1 Oct. 2000 and 30 April 2001, more than 80 corporations announced intentions to shift production to China, with the number of production shifts increasing from two per month in October 2000 to 19 per month by April 2001.
More Than 70,000 Jobs Lost
The estimated number of jobs lost through these production shifts to China was as high as 34,900, compared with 29,267 jobs lost to Mexico, 9,061 jobs lost to other Asian countries, and fewer than 1,000 jobs lost to other Latin American countries. Production shifts out of the U.S. into China are concentrated in certain industries: electronics and electrical equipment (37%), chemicals and petroleum products (17%), household goods (11%), toys (8%), textiles (6%), plastics (6%), sporting goods (5%), and wood and paper products (5%).
Production shifts to China were also concentrated in certain regions and states: the Southeast and West Coast. California was hardest hit, accounting for 14% of all production shifts to China, followed by North Carolina (11%) and Texas (10%).
Labor Costs 50 Times Lower
California Cedar Products announced 20 Jan. 2001 that it would be shifting most of its pencil-slat production to Tianjin, China, during the next 18 months, forcing most of its 325 unionized employees to lose their jobs. The company, which also manufactures Duraflame fireplace logs, has been operating out of its Stockton, Calif., plant more than 60 years. While starting workers average $8.03 an hour, the top of the scale goes as high as $20.15 an hour. Teamsters Local 439, the union representing the workers, offered pay cuts averaging $1.00 an hour to try and persuade the company to keep the pencil-slat operation in Stockton. However, company officials argued they needed as much as $6.5 million in labor cost cuts if they were going to remain in Stockton.
Company president Charles Berolzheimer told the workers the company could not remain in the U.S. because "a typical Chinese laborer, with full benefits, earns the equivalent of $60 to $80 a month." According to Berolzheimer, that would make labor costs 50 to 80 times lower than in the Stockton plant.
For some communities, the loss of jobs is only part of the story of how the pursuit of low-cost manufacturing has impacted their town. When cell phone manufacturer Ericcson decided to move production from Lynchburg, Va., to Mexico, Brazil, and eventually China, the city faced not only the loss of jobs but also a significant loss of tax revenue.
The World Bank calculated that in the period from 1990 to 1998, China’s output grew at an average annual rate of 11.2%—a pace fast enough to double the economy’s size within seven years. For the same 1990–’98 period, the U.S. economy grew at an average annual rate of 3.2%.
The largest trade imbalances with China in 1999 on the industry level are in the industry groups of electrical machinery/equipment ($16.4 billion deficit), leather goods ($10.2 billion deficit), apparel and related products ($8.2 billion deficit), and machinery except electrical ($6.3 billion deficit).
Is the Trend Shifting?
A button maker in this hilly north Georgia town did the unthinkable: It closed a factory in China and saved American jobs. “Hey, made in the USA is always the best,” said Angie Kastner, an assembly line leader at Scovill Fasteners Inc. “I don’t want anybody not to have a job. But I was glad to see a lot of jobs come back here.” Scovill’s decision to quit low-wage China — which has sucked up tens of thousands of Georgia jobs this decade — and return to the United States is a rare, stand-economic-theory-on-its-head cautionary tale. Communist China, it seems, isn’t manufacturing heaven for everybody. Scovill’s CEO is the first to say his company made mistakes that led to its exit from mainland China. But China’s economic ascension, with the attendant rise in salaries, industrial expectations and standard of living, made it increasingly difficult, and expensive, for U.S. companies to thrive there. The so-called “China price,” where American manufacturers automatically expected savings of 30 percent, 40 percent or even 50 percent simply by moving production to China, is disappearing. Scovill, which saved 170 U.S. jobs by abandoning China, belatedly discovered that Clarkesville made more financial sense than China.
What Can American Citizens Do?
Simply put, buy American. Walmart is a good example of a company that buys Chinese, in lieu of American. On your next visit to Walmart, take note of where merchandise is manufactured and you will see that a great percentage of it is from China. Our choice as American citizens is whether we are willing to buy foreign goods at a lower price, or pay higher prices for American made products. If I was a displaced employee of a company that moved my job to China, I certainly wouldn’t buy their Chinese made product. Do Americans have to feel the pain before they are willing to protest by way of their purchasing power?