Saturday, April 3, 2010

Manufacturing Leading the US, World Out of Recession; Campaigning Pols Don't Care

The Wall Street Journal reports some good news about US and global manufacturing:
Factories around the world are ratcheting up production, fueling optimism that the global economic recovery has legs.

The U.S. manufacturing index in March registered its best reading since 2004, and China's manufacturing sector grew for the 13th straight month. Most euro-zone nations also have seen strong factory expansion, with Germany last month posting its best manufacturing growth in a decade. Only Greece, which is struggling with debt problems, contracted....

This growing manufacturing muscle is one reason that most economists now dismiss the possibility that the U.S. or other major economies will experience a double-dip recession.

"We're carrying a lot of momentum into the second quarter," says Norbert Ore, head of the U.S. manufacturing survey, who says increasing exports and imports mean growth is spilling across borders. "Barring anything that really becomes a major challenge to the economy that we don't know about right now, I think we can carry this momentum through the balance of 2010."...

Meanwhile, General Motors Co. and Honda Motor Co. each reported a jump of more than 20% in new-vehicle sales last month, while sales at Ford Motor Co. and Toyota Motor Corp. climbed about 40% each....

Evidence of the factory revival came in surveys of purchasing managers, who buy goods and raw materials needed to churn out products. In the U.S., the Institute for Supply Management's manufacturing index rose in March to 59.6, from 56.5 the month before. China's index rose to 55.1 last month, from 52 the month before. Figures above 50 indicate expansion....

U.S. manufacturers remain dependent on foreign demand. "The world has gotten smaller, and a lot of us are much more global," says Tim Sullivan, chief executive of Bucyrus International Inc., a Milwaukee-based manufacturer of mining machinery. The company, which is adding about 500 workers to its 2,500 U.S. employees, is drawing about 80% of its business from abroad, mostly Brazil, Russia, India and China....

In the 16-nation euro zone, Europe's economic heartland, the purchasing managers' index for manufacturers rose to 56.6 in March, from 54.2 in February, reaching a level not seen since late 2006, according to figures released Thursday. Germany, which accounts for about 30% of euro-zone industry, led the way, with its individual index rising to 60.2 in March, from 57.2 in February.

Within Europe, German industry is benefiting disproportionately from the global manufacturing recovery thanks to its specialization in capital goods. Beumer Group, which makes material-handling and sorting machinery, is seeing "a much bigger improvement than we hoped at the beginning of the year," says sales director Thomas Borghoff.

New orders are coming from logistics sectors in Germany and the U.S., and from the chemicals and cement industries in Asia and Latin America. Beumer's work force has resumed working full shifts, and the company is looking to hire engineers again.
To summarize: global manufacturing is expanding rapidly; that expansion is helping to pull the world out of the Great Recession; and much of it is based on cross-border trade.  This is a perfect example of how the global economy, and the manufacturing sector in particular, is no longer some sort of adversarial, "us versus them" system.  It's complementary, wherein success and growth abroad fuels success and growth at home.  So everybody wins, right?

Well, not everybody.  You see, pandering politicians can't campaign on such kum-bay-yah happiness.  They need scary bogeymen, from which they can save their constituents.  And, of course, there's no better bogeyman these days than China.

Just ask Sen. Arlen Specter (DRD-PA).  On Thursday, the good Senator released his Workers Bill of Rights - a laundry list of protectionist policies that Specter claims is absolutely necessary to save the US manufacturing sector from China.  (Apparently, Specter doesn't read the Wall Street Journal.  Shocking, I know.)  To justify the Bill, Specter throws out pretty much every protectionist myth out there.   Here's just a sample of this anti-trade goodness:
China is guilty of international banditry. China violates our trade laws with impunity, robs American workers of their jobs, takes our money and lends it back, and now owns a big part of America.

The American Association of Manufacturing along with U.S. Steel and the United Steelworkers reported last week that since 2001 the United States has lost 2.4 million jobs to Chinese trade practices. Almost 100,000 of those jobs were in Pennsylvania, which ranked sixth among states in jobs lost.

China’s export-oriented economy and soaring trade surpluses are fueled by repressive labor policies and depressed wages at home. Chinese wages are a fraction of those paid workers in most western states.

China also provides direct government subsidies in many key industries and maintains strict, non-tariff barriers to imports. As a result, China’s exports to the United States of $337.5 billion in 2008 were more than five times greater than U.S. exports to China, which totaled only $67.2 billion.

This imbalance is not sustainable. The United States needs to take steps now to reverse it or face a continuing loss of manufacturing jobs and economic inferiority.
Myth-tastic!  In this short passage, Specter alleges that (1) US manufacturing job losses are indicative of a weak American industrial sector and pernicious Chinese cheating; and (2) the US-China trade balance is somehow proof of point 1.  Of course, this is nonsense, and the WSJ article above makes reality quite clear.  I've also been debunking these two particular protectionist myths - manufacturing job losses and the trade deficit - for months now.  (See here and here, in particular.)  Specter even uses those bogus "job loss statistics" from the Economic Policy Institute as if they haven't been debunked by pretty much everyone on the planet (except the unions, of course!).


But hey, it's not like any of this is in any way surprising.  Specter is in the middle of a tough re-election campaign, and he needs every Union vote and Big Steel dollar that he can get his party-switching hands on.  And if his protectionist fearmongering can scare a bunch of other Pennsylvanians into supporting him, then all the better!

(For him, not the country.)

UPDATE:  As Mark Perry notes, US manufacturing employment has increased in each of the last three months.  Good for America.  Bad for Specter's protectionist narrative.

No comments: