The Conservative Treehouse pointed out an unexpectedly televised roundtable with Members of Congress and President Trump’s Cabinet regarding our nation’s Trade Policies.
What transpired was nothing short of astonishing:
Yesterday President Trump invited the media to keep their cameras on during a round-table discussion on trade. He did this for a reason. President Trump wanted the American voters to watch Republican politicians demand that he stop trying to bring manufacturing jobs to the United States.
Which is exactly what the Republican Congressmen did.
You can find the full transcript here.
As you read through the excerpted comments note the two sides of the argument.
One the one hand, you have President Trump’s focus on job creation and the revitalization of our manufacturing industry while keeping an eye on input costs.
As President Trump noted during the Trade Meeting:
You may have a higher price or maybe a little bit higher, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs; it’s going to be made in China and other places. So those are big decisions. But, to me, jobs are very important.
President Trump is looking at short-term, tactical use of targeted tariffs – but not for the sake of having tariffs. He is looking to use them as a bargaining force leading to a more balanced playing field and increased domestic production.
The ultimate goal of his plan is no tariffs at all.
As President Trump stated in one of his responses:
Ultimately, what’s going to happen, either we’ll collect the same that they’re collecting, or they’ll end up not charging a tax and we won’t have a tax. And that becomes free trade.
Note that President Trump has answers for each Congressman’s objections. He clearly understands our trade situation better than they do.
His economic advisors – Mnuchin, Lighthizer and Ross appear fully on board with the President’s agenda of job creation and manufacturing growth.
Then you have the side of the Congressmen, who – with the notable exceptions of Reps. Jason Smith (R), Mike Bost (R), Rick Crawford (R) and Senator Gary Peters (D) – seem to be taking their marching orders straight from the most powerful lobbying force in the United States. The U.S. Chamber of Commerce – led by Tom Donohue.
Their nearly unified position centers solely around lower input costs for corporations – both labor and raw materials – to the exclusion of all else. Jobs and middle-class workers seem to be an afterthought – at best.
What’s so surprising – as noted by CTH – is the openness of their admissions. It’s almost as if they forgot the cameras were on.
Pay particular attention to Senator Ron Johnson’s comments which can be viewed here:
It makes no sense for me to try and bring back high labor-content manufacturing to America. – Senator Ron Johnson
For the sake of clarity, I am not in favor of tariffs. I’m in favor of free trade. But free trade is something we have not had for a very long time – if ever.
President Trump appears focused on attacking long-standing trade inequities and revitalizing our domestic manufacturing capacity.
A re-balancing of our entire trade policy.
President Trump held the meeting with fifteen Republicans and four Democrats. Also in attendance was Secretary of Commerce Wilbur Ross and U.S. Trade Representative Robert Lighthizer.
I have denoted each Congressman’s political affiliation with their name. Note that political affiliation matters little in this discussion. Again, with the limited exceptions of Reps. Smith (R), Bost (R), Crawford (R) and Senator Peters (D), all attending Congressmen appeared unified in their positioning.
Before we move forward a quick look at our labor force is worthwhile.
Here is the most recent release from the Bureau of Labor Statistics – The Employment Situation – January 2018.
In January, the unemployment rate was 4.1 percent for the fourth consecutive month. The number of unemployed persons, at 6.7 million, changed little over the month.
The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.4 million in January and accounted for 21.5 percent of the unemployed.
The labor force participation rate was 62.7 percent for the fourth consecutive month and the employment-population ratio [% of the total US working-age population employed] was 60.1 percent for the third month in a row.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 5.0 million in January. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
In January, 1.7 million persons were marginally attached to the labor force, little changed from a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
6.7 million unemployed Americans providing an unemployment rate of 4.1%.
Add to that number at least some significant portion of the following:
5.0 million involuntary part-time workers.
1.7 million Americans who have temporarily given up looking for work.
So, while our unemployment rate is at 4.1 percent – the immediately available pool is essentially double that figure.
13.4 million Americans looking for full-time employment.
President Trump sometimes references 100 million Americans not in the workforce. This is factually correct – the actual number for January was 95.6 million.
However, while technically correct, about half of the 95.6 million – 46.7 million – are retired.
Another 13.8 million are on some form of disability.
Another 6.4 million are Social Security beneficiaries who are neither aged nor disabled (for example, early retirees, young survivors).
Of the remaining 28.7 million Americans not in the workforce about 15 million were either in school or in job-training. The remaining pool of ~13.7 million Americans were care-givers of some nature.
You can find all these numbers here.
My point to all this is simple.
While President Trump’s 100 million “pool” number does not represent the true number of Americans who might be willing to work, the number of available workers is nevertheless far higher than the 6.7 million unemployment rate.
There are significant numbers among the “retired” who would come out of retirement if appropriate opportunities presented themselves.
Our Disability System has long been a source of fraudulent claims. The 13.8 million number overstates the number of Americans with true disabilities.
A large but indeterminate number of Americans are “under-employed”.
There are currently 13.4 million Americans looking for full-time employment. Add to this workers from the ranks of the “retired but willing to work” along with the excess from our disability ranks and one can see that we have far more flexibility within our employment levels than the stated rate of 4.5% would suggest.
Here’s another way to look at the employment scenario:
The percentage of Americans expected to pay no Federal Income tax in 2018 is ~45%.
The actual number for 2016 was 44.3%.
That implies a lot of folks who are under-employed and might be inclined to work for higher paying jobs – if they were available.
Jobs like those offered from manufacturing…
Back to those Congressman.
President Trump starts things off.
THE PRESIDENT: We’re here today to discuss a matter of vital importance to our nation’s economy and security, and I’ve been discussing it for years. And I’ve certainly discussed it in great detail on the campaign trail. That’s America’s aluminum and steel industries, and many other industries where we are taken advantage of by other countries.
Last year, I directed the Secretary of Commerce to investigate whether steel and aluminum imports are threatening to impair U.S. national security. You see what’s happened with our steel and aluminum industries. They’re being decimated by dumping from many countries, in particular one, but many countries. They’re dumping and destroying our industry and destroying the families of workers.
My administration is now reviewing the reports and considering all options. And part of the options would be tariffs coming in. As they dump steel, they pay tariffs — substantial tariffs — which means the United States would actually make a lot of money, and probably our steel industry and our aluminum industry would come back into our country.
I will make a decision that reflects the best interests of the United States, including the need to address overproduction in China and other countries.
I look at it two ways: I want to keep prices down, but I also want to make sure that we have a steel industry and aluminum industry.
SENATOR ROY BLUNT (R): Well, Mr. President, I think we do need to be careful here that we don’t start a reciprocal battle on tariffs. You know, we make aluminum and we make steel in Missouri, but we buy a lot of aluminum and we buy a lot of steel as well…clearly, we’re concerned about those new jobs, but also concerned about all the jobs — whether it’s in the electric steel area or the aluminum area, are very, very price sensitive here.
THE PRESIDENT: Good. And I understand that very well. One thing I just want to tell you, we just got this notice. General Motors in Korea announces the first step in necessary restructuring. GM Korea company announced today that it will cease production and close its Gunsan plant in May of 2018, and they’re going to move back to Detroit. The big tax cuts had a big impact.
REPRESENTATIVE MIKE BOST (R): Mr. President, let me tell you that 2,800 people were laid off in my district in 2015, in a steel plant that’s been operating for over 100 years. Korea has dumped 200 percent in the last year in an overabundance into that particular market. Because of that, we’re not able to get those 2,800 jobs back.
THE PRESIDENT: The Korean Agreement was supposed to produce 150,000 to 200,000 jobs. And it did — for Korea. For us, it produced nothing but losses. You’re one example of it, but there are many examples all over the country.
THE VICE PRESIDENT: It is very much the President’s desire, our administration’s desire, to hear from each of you and the perspectives that will also inform the decisions that the President will make. The President directed a 232 review to determine whether or not our national security has been affected by the dumping of steel and aluminum. I think that it’s fair to say that we all support national security…But we also all support American jobs.
THE PRESIDENT: As Mike said, I want to hear from both sides before we make the decision…In one case, you’re going to create jobs. You may have a higher price or maybe a little bit higher, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs; it’s going to be made in China and other places. So those are big decisions. But, to me, jobs are very important.
SENATOR TODD YOUNG (R): Mr. President, thank you for having us here today. I represent a state that is not only a major manufacturer of steel — we have U.S. Steel, ArcelorMittal, and others who are manufacturing it — but we have the downstream users, which you alluded to. So, clearly, you understand the need to balance the two, to come up with a balanced approach here.
I think the main target — and I’ll just speak plainly with you, sir — should be China. They’re violating the international rules, stealing our intellectual property, overproducing steel products and other products.
THE PRESIDENT: We have a trade deficit with China of $504 billion – it’s a big percentage of our deficits. And the money that we’ve lost and the jobs that we’ve lost to China, it’s unthinkable that people allowed that to happen.
[It’s] not just Obama. This is over a period of many years this has happened.
SENATOR PAT TOOMEY (R): Thanks very much, Mr. President. I would just urge us to go very, very cautiously here, especially with section 232.
Imports in 2016 were 16 percent of domestic consumption. So the vast majority of the steel we consume, we in fact produce ourselves — which is the way I prefer it, and it is the case today. China was down to 2 percent of the 16 percent, so a very, very small portion. [This is wildly incorrect when indirect shipments are included]
THE PRESIDENT: But they have transshipping. They would ship to other countries, and their steel would come in from other countries so that you can’t see where the steel is coming from. [This is a factually correct statement]
SENATOR PAT TOOMEY (R): Right. So what I would urge is, any country that is violating our trade laws and our trade agreements, go after them. Countervailing duty and the dumping, if that’s happening.
THE PRESIDENT: That’s all countries. That’s all countries.
SENATOR PAT TOOMEY (R): But the 232 is a different matter, and invoking national security, when I think it’s really hard to make that case, invites retaliation that will be problematic for us.
THE PRESIDENT: Well, the word “retaliation,” Pat, is interesting… I think we should have a reciprocal tax. That’s called fair trade. It’s called free trade. Because ultimately, what’s going to happen — either we’ll collect the same that they’re collecting, or, probably, what happens is they’ll end up not charging a tax and we won’t have a tax. And that becomes free trade.
SENATOR MIKE LEE (R): Yeah, sure. One of the things that worries me with regard to this proposed action is that there’s so many things manufactured in the United States; there’s so many jobs attached to so many things manufactured in the United States that use steel and aluminum as inputs.
Now in the case of steel, we’re talking about 16 percent that’s imported. But the availability of those imports and the absence of additional duties on those means that those goods can be manufactured and sold more cost effectively.
THE PRESIDENT: Steel and aluminum are interesting. It will create a lot of jobs. I believe that some of the dumpers will eat a lot of the tax themselves because they do it to keep people working. And we do it for that and other reasons.
Japan sends us tremendous numbers of cars. They also make cars. In a way, there’s no tax. All they have to do, Mike, is, very simple — they do a factory here. There’s no tax. Now all of a sudden there’s no tax. So they’ll build factories here in order to avoid the tax.
You know, we did it with the washing machines, as you saw a couple of weeks ago. It’s had a huge impact on that industry. A huge impact. And, by the way, you know what’s happening? The people that made the washing machines outside of this country are now expanding their factories in the United States so they don’t have to pay the 25 and 30 percent tax.
So with a finished product, it’s a little bit different. But again, with steel and aluminum, which is what we’re talking about today — you know, that’s a good point, Mike. You’re right. The question is, would you rather pay a little bit more and create jobs all over the country?
Really, you won’t be having much of a problem in terms of pricing. Because I actually think a lot of the countries are going to eat it because they want to continue to export. And they’re making a fortune.
I said yesterday, we’ve spent $7 trillion. When I say “spent,” and I mean wasted, not to mention all of the lives — most importantly — and everything else. But we’ve spent $7 trillion, as of about two months ago, in the Middle East — $7 trillion. And if you want to borrow two dollars to build a road someplace, including your state, the great state of Ohio — if you want to build a road, if you want to build a tunnel or a bridge, or fix a bridge, because so many of them are in bad shape, you can’t do it. And yet, we spent $7 trillion in the Middle East.
REPRESENTATIVE JACKIE WALORSKI (R): I represent the recreational vehicle industry in northern Indiana, Elkhart County. We have 85 percent of that market. The mere threat of tariffs, right now, has already raised aluminum and steel costs by 25 percent. Canadian softwood has raised 20 percent. The labor cost to the industry is already up 10 to 15 percent because the job market is so tight.
THE PRESIDENT: When you build your product and you send that big, beautiful product that they make like nobody else, and you send that to another country, how much tax does that other country charge them? And therefore, they don’t sell it there very much because the tax is so high. One of the things we want to do is we want fairness.
REPRESENTATIVE JACKIE WALORSKI (R): But I would say, Mr. President, there’s also the second issue that has developed in this country with these corporations in producing the quality of vehicles that they do is, the true-American smelters left. And in reference to the costs here, they won’t even fill the products of some of these customers because they don’t have to, because they got people standing in line to buy — there are so few, right?
THE PRESIDENT: I get it. We want a combination of big competition, including competition from within our country competing against that. And we want to take outside sources. But we want competition and we want the jobs.
SENATOR LAMAR ALEXANDER (R): I hope you will look carefully at what President George W. Bush did in 2002 when he imposed 30 percent steel tariffs — 30 percent increase — on tariffs from China, South Korea, a couple of other places. The effect was, one, that even though that was only 5 percent of the imported steel, it raised the price of almost all steel in the United States. [Bush’s tarriff’s were unilateral – not targeted]
THE PRESIDENT: Lamar, it didn’t work for Bush, but nothing worked for Bush. It didn’t work for Bush but it worked for others. It did work for others.
SENATOR LAMAR ALEXANDER (R): Well, it’s a — I’m not recommending any solution. I’m just saying it’s worth looking at what happened because it backfired, raised prices, and lost jobs. But if we put a tariff on the ingots that come in from overseas, that will raise the prices and that will hurt. Our aluminum comes from Canada. None from China. So I hope you’ll look carefully at where the aluminum comes from.
THE PRESIDENT: And you’re right. Now, I have to say this: Canada has treated us very, very unfairly when it comes to lumber and timber. Very unfairly. So we have to understand that. You know, it’s not just one thing or another. Canada has been very tough on this country when it comes to timber, lumber, and other things.
And they have not been easy when it comes to Wisconsin and our farmers. Because you try and ship product into Canada, if you’re a farmer — if you are a farmer up in Wisconsin and other places — you try and ship your things up to Canada, it’s been a very tough situation for them.
But I agree with what you’re saying. It’s very much a double-edged sword.
SENATOR RON JOHNSON (R): What we have is the basic root cause of this problem is a massive overcapacity — primarily China, that’s true. How do you address that? And I think we need to be very cautious without raising increase — without raising prices.
In Wisconsin, a big manufacturing state, in seven years I have not visited one manufacturer that could hire enough people. So we do need to be concerned about, in such a tight labor market, do we have enough workers in manufacturing.
It makes no sense for me to try and bring back high labor-content manufacturing to America. We need to do the value added things. And so I would just say, proceed with real caution there.
THE PRESIDENT: I do have to say that we do have a pool of 100 million people, of which some of them — many of them want to work; they want to have a job. A lot of them do better not working, frankly, under the laws. And people don’t like to talk about it. But you’re competing against government. And they have great potential. They sort of want to work, but they’re making less if they work than if they stay home and do other things.
So we have to address that situation. That’s a big problem.
SENATOR ROB PORTMAN (R): AK Steel is the last electrical steel manufacturer; 101 percent increase over the last year in electrical steel coming into our country. It’s a small market, but it’s a critical market. They tell us that if they don’t get relief, they’re going to pull out of this business, so we won’t have the steel that goes into our transformers and our grid.
Any response here needs to be targeted, and electrical steel is the place to target it. The other place, I think, is the oil country product that was talked earlier. This is pipe and tube. Eighty-two percent increase there. And, frankly, most is coming from Korea, and Korea doesn’t have a single rig. In other words, they’re taking Chinese steel for the most part, and it’s, in effect, transshipping it to us.
THE PRESIDENT: They’re doing a lot of transshipping.
SENATOR ROB PORTMAN (R): And that’s hurting our ability to continue to have this energy independence we talked about. If a country transships — in other words, sends their steel, say, to Malaysia, which we believe happens with regard to Chinese steel, puts a different stamp on it, “Made in Malaysia,” and then sends it here — we need to be more aggressive in going after them.
I think 232 is part of the overall response, but it needs to be targeted. I agree with what Senator Alexander and others have said about the balance, Senator Toomey and others. You got to be careful because we don’t want to increase the cost to our consumers of all these steel products that go into our other manufacturing.
THE PRESIDENT: Well, you know, Rob, we have steel coming into our country from countries that don’t even know what steel is. They don’t make it, they never made it. It’s transshipping. It’s coming from China and some others, but mostly from China. And they send it through countries that don’t make steel, and it comes pouring into our country.
REPRESENTATIVE KEVIN BRADY (R): 232 is a little like old-fashioned chemotherapy. It isn’t used as much because it can often do as much damage as good…And so my point is — so we have to be really targeted. You have to be really targeted here. Also, we’ve got allies with us against China’s unfair trade practices. We have to be careful, as you look at these decisions, to target it, to make sure our allies are with us as we do this.
THE PRESIDENT: Okay. Very good. Thank you, Kevin.
SENATOR GARY PETERS (D): Hello, Mr. President. I appreciated your comments about Michigan and the auto industry. I’d like to say that a big reason why those jobs are coming back is because we have the best workers anywhere in the world here.
THE PRESIDENT: Well, that’s also true. I agree.
SENATOR GARY PETERS (D): That’s why we’re here. And they can build it on time and build it with outstanding qualities, as long as the rules are fair.
THE PRESIDENT: You do have great workers. The problem is you didn’t have good policy, and that’s why so many jobs left. But now they’re coming back.
SECRETARY WILBUR ROSS: There are limitations to what a conventional trade case can do, and the main limitation is it doesn’t prevent people from the transshipment through other countries. And of lot of what 232 can do for us is to solve that problem.
And 232 doesn’t have to mean the same tariff on every single country. It doesn’t have to mean the same tariff on every single product. It can be applied in a much more surgical way. And we presented the President with a range of alternatives that goes from a big tariff on everything from everywhere, to very selective tariffs from a very selective group of countries.
What the 232 would let us do is to have quotas on the countries that we weren’t putting a tariff. (Inaudible) at what they’re shipping in now. So it’s not going to restrict supply, but it would prevent the evildoers from transshipping more goods through that country.
THE PRESIDENT: Evildoers. That’s a good word. Of which there are many.
SECRETARY WILBUR ROSS: Yes, there are — there are, Mr. President.
REPRESENTATIVE BILL JOHNSON (R): Mr. President, the comments that have been made here — been made today about balance is absolutely essential. I mean, managing job creation and controlling cost at the same time has got to be the major factors in this mix.
THE PRESIDENT: You know, there are some people who don’t believe in deficits. They think it doesn’t matter. To me, I think it matters a lot.
REPRESENTATIVE BILL JOHNSON (R): You’ve made a big case, and I think you have, rightfully so, told the world that America is open for business. And the regulatory reforms that you’ve done, the tax reforms that you have done, has put America back in business.
One of the biggest businesses that is promoting job creation today is the oil and gas industry.
We’ve got to make sure that whatever we do in this formula keeps cost down because those projects are huge. I mean, they are massive. You’re talking about $6- to $8-billion projects, and big cost increases in steel could be a big deal.
So we got to balance the job creation with the cost.
THE PRESIDENT: Because of what we’ve done, our energy prices are going so low, our electric costs are going so low, that other countries aren’t going to be able to compete with us. We’re really doing a great job of bringing them down. And a lot of that had to do with the tax cuts, but it has to do with lots of other things, too.
REPRESENTATIVE JASON SMITH (R): If you just look at the numbers of the aluminum production in China that in 2000 was 10 percent of the world’s production, and in 2015 was 54 percent, there’s a problem, Mr. President. And I believe that we can have the production back, and we have a vacant facility in New Madrid, Missouri that we want to open, and we want to create more jobs.
And I applaud you for looking at 232, and looking at a reasonable approach to make sure that we’re open for business in all industries, not just one.
THE PRESIDENT: Well we all have to remember that there is no tax or there is no tariff, if they come in and build plants in this country.
Steel is a little bit different than a car. It’s a little bit different than a washing machine or any of the other things that we’re doing or talking about doing. But nevertheless, you build your factory, you build your plant in the United States, there is no tax. A lot of companies are coming back, and they’re coming back to areas that you represent. That’s a really good feeling.
SENATOR ROY BLUNT (R): It’s going to take a long time to either expand or have more competitors here. So we need to be very thoughtful about all the other buyers of that product that has only one American source.
Because China’s excess capacity has, in some ways, affected steel production — or steel sales, not production — throughout the world, it’s important that 232 be aimed at China’s excess capacity and countries all over the world.
THE PRESIDENT: Right. I agree with that. Maybe you could just — a very brief discussion of where you are with NAFTA.
AMBASSADOR ROBERT LIGHTHIZER: NAFTA has not served the United States well in all respects. It has served some people very well, but other people and overall it has not done a good job.
THE PRESIDENT: Well, I want to thank everybody very much. I really would like to see you come back with a counterproposal on the infrastructure. It’s something we should do. We have to fix our country. We have to fix our roads and our tunnels and bridges and everything.
There are two sides to this argument.
Our Chamber of Commerce-driven Congress:
It makes no sense for me to try and bring back high labor-content manufacturing to America. – Senator Ron Johnson
The availability of those imports and the absence of additional duties means that those goods can be manufactured and sold more cost effectively. – Senator Mike Lee
We’ve got to make sure that whatever we do in this formula keeps cost down…big cost increases in steel could be a big deal. So we’ve got to balance the job creation with the cost. – Representative Bill Johnson
And the jobs-driven Trump Administration:
You may have a little bit higher price, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs. To me, jobs are very important. – President Trump
They’ll end up not charging a tax and we won’t have a tax. And that becomes free trade. – President Trump
NAFTA has not served the United States well in all respects. It has served some people very well, but other people and overall it has not done a good job. – Robert Lighthizer
I want to keep prices down, but I also want to make sure that we have a steel industry and aluminum industry. – President Trump
For me, one of the best arguments in this trade discussion falls back to the percentage of Americans who pay federal income tax.
When 45% of Americans are not paying any federal income tax that’s a flashing indicator that we have an under-employment problem.
A cashier job at McDonald’s should not be a career.
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