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AFL-CIO's Trumka asks Obama for stronger action on China
Howard Richman, 5/27/2010

The AFL-CIO may be changing course. Back in November 2008, AFL-CIO policy director Thea Lee approved President-elect Obama's plan to ignore the trade deficits. She told Reuters: “Starting at home will be the key to unlocking any forward movement on the trade agenda.”

Back then, there were 13.1 million workers employed in American manufacturing. Now there are only 11.6 million. Now, AFL-CIO President Richard Trumka is starting to get restive. TradeReform.org reports the  text of his May 3 letter to President Obama. In that letter, he comes out strongly against China's currency manipulations:

I wanted to let you know that the AFL-CIO intends to consult with our coalition partners and take steps to refile our Section 301 case on currency manipulation if the Chinese government does not act to reverse the undervaluation of the yuan in the next several months. Going forward, market forces must be allowed to determine the exchange rate between the United States and China - not systematic and one-sided intervention....

But he is not especially concerned with the loss of 1.5 million more American manufacturing jobs. His strongest words object to President Obama's acquiescence to the Chinese government's suppression of workers' rights:

We have been disappointed that your administration has not chosen to press the Chinese government to address this crucial issue as a priority. In our view, the systematic and egregious violation of Chinese workers' basic rights is at the center of what is wrong with our trade relationship with China. If workers cannot exercise their basic rights, they can neither build a democracy nor join the middle class - and our trade relationship is destined to remain out of balance.

The above argument has an element of truth in it. As part of China's mercantilist policy, the Chinese government does suppress domestic wages. But the last sentence, which attributes our trade deficit with China to their lack of a middle class, is total nonsense. Japan and Germany have wages every bit as high as ours, but they do not run trade deficits. Our trade deficits with China are caused by China's mercantilist strategy, not by our higher wages.

Still, this is a step forward for the AFL-CIO. Perhaps, someday, Trumka might even get behind something that would restore his members' manufacturing jobs, such as Import Certificates (ICs) to balance trade.

As I noted in a recent commentary, an Economic Policy Institute December 2009 working paper (Addressing Balance of Payments Difficulties Under World Trade Organization Rules) agreed with my father, son, and me (Trading Away Our Future, 2008) that auctioning ICs would be consistent with WTO rules.

Not only would ICs restore millions of American manufacturing jobs, but auctioning them would also bring in plenty of government revenue.