In an eleventh hour attempt to shore up the sagging US steel industry, President Bush is calling for hefty tariffs on foreign steel imports. Although George W. is turning down industry appeals for direct Federal assistance for the steel workers themselves, unions welcome tariffs as a way to preserve American jobs.
It's clear that the tariff posture will keep quite a few beleaguered US steel mills and foundries up-and-running. Can tariffs help semiconductor fabrication "foundries" and the American electronics industry as well? I think so.
A recent US-China Security Review Commission report, for example, confirms what most of us already know. American companies---many of them leading technology firms with familiar names---are increasingly investing in China. Many are opening fab and production facilities there, taking advantage of low wages, no employee benefit burdens, and the ability to dodge environmental and job-safety issues.
Overall, US companies invested nearly $8 billion in China in the year 2000, and that number is growing. In our corner of the world, the American Electronics Association continues to apply pressure on Congress in order to decree trade legislation favoring China. Many US technology companies, large and small, bolster the AEA's lobbying efforts. At the same time, some Japanese companies are shifting production facilities out of the US and into China.
As I mentioned about a year ago in this column, the impact of this US trade investment isn't often discussed in the general press, especially not when adversarial military issues are mentioned. Nonetheless, the numbers are there for all to see---and they're awesome.
Trade between the US and China now totals a whopping $80 billion annually. But, China imports only about a third of that value from us. Now a World Trade Organization member, mainland China shapes up as the US's fourth largest trading partner. Only Japan, Mexico, and Canada enjoy greater trade with us than China.
No Quid Pro Quo
Worrisome is that China's huge potential marketplace isn't substantially sucking up American-made goods. Right now, the value of imports from Chinese manufacturers vastly exceeds the value of merchandise that we export to China. We import about six times more than we sell.
As a result, we're suffering a trade deficit of a nearly $90 billion! That's almost a fifth of our entire deficit, and certainly the largest deficit figure with any given foreign country with which we trade.
A 40% Shift
For those of us in the engineering business, just as for those folks working in the steel industry, the US-China trade imbalance translates directly into lost jobs. In fact, the electrical and electronics sectors account for nearly 40 percent of the shift of production from the US to China. As production jobs go away, can engineering-level jobs be far behind?
Some industry watchers conservatively estimate that the number of overall jobs lost to China exceeds 35,000. Others estimate the figure to be twice that size. It's no coincidence that California has lost the greatest percentage of jobs in electronics.
Moreover, as high-tech jobs migrate from Silicon Valley, Phoenix, and Route 128 to Shanghai, Harbin, and Wuhan, wages in the US are exposed to increasing downward pressure, and unions (such as they are in the electronics industry) lose what little power they have left. They can't push for better working conditions and benefits.
As production-level electronics workers suffer curtailed income, tax bases also suffer. This process is accompanied by other losses. For one, fewer American production workers remain current with the newest technologies being implemented offshore.
Technology Pirates!
Layer on the fact that communications, entertainment, and media industries are a major part of the overall China syndrome. The added value in these industries comes from content, yet China fails to protect intellectual property rights, often ignoring internationally recognized patents and copyrights. A lot of Chinese software, video, audio, and multimedia products are pirated.
Surely the recently bolstered Federal budget for domestic military expenditures will be a shot in the arm to the US economy, and the electronics industry in particular, but the best economic drivers have always come from the consumer sector.
Imposing trade tariffs on Chinese imports would be a good way to start to regain our competitive edge on a variety of fronts. Some of you may accuse me of China bashing, but I think there may be mechanisms by which US electronics workers can regain the high ground, and continue to work with the Chinese.
The US doesn't have to risk becoming an isolationist nation in this world of globalization, but if we act now, we may be able to combat the steady downward spiral of job erosion in our all-important high-tech and electronics sectors. Let's level the playing field with China, before it's too late.
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