FacebookTwitterGoogle+RedditEmail

We Didn’t Offshore Manufacturing?

by

Is an iPhone made in China and exported to Europe a U.S. export?

Is an Apple executive a manufacturing worker?

Yes, and yes.  At least those could become the answers if a new proposal afoot among some in the administration is allowed to take effect.  Federal agencies grouped under the bland-sounding Economic Classification Policy Committee (ECPC) are proposing to radically redefine U.S. manufacturing and trade statistics.

Under the proposal, U.S. firms that have offshored their production abroad – like Apple – would become “factoryless goods” manufacturers.  The foreign factories that actually manufacture the goods – like the notorious iPhone-producing Foxconn factories in China – would no longer be manufacturers, but “service” providers for the rebranded “manufacturing” firms like Apple.

It appears the administration has been reading Orwell.

But the problem with this proposed redefinition is not merely that it offends common sense.  The “factoryless goods” proposal would deceptively deflate the size of reported, but not actual, U.S. manufacturing trade deficits, while artificially inflating the number of U.S. manufacturing jobs overnight.

While some details of the proposal remain open-ended, one thing is clear: this maneuver would obscure the erosion of U.S. manufacturing.  It would disguise the mass-offshoring of U.S. middle-class factory jobs incentivized by NAFTA-style trade deals.  It would undermine efforts to change the unfair trade and other policies that have led to such decline.

To boost U.S. manufacturing jobs and production, we need to switch our policies, not our numbers.

The ECPC is accepting comments on their “factoryless goods” proposal until July 21.  If you’d care to offer your thoughts, click here.
The 3 Big Distortions of the “Factoryless Goods” Proposal
1.  The proposal would result in a fabricated reduction of the U.S. manufacturing trade deficit by rebranding imports of U.S. manufactured goods as “services” imports, according to recent explanations offered by officials of ECPC member agencies.  The redefinition would not affect all U.S. trade statistics, but it would distort some of the most widely-reported numbers (those calculated on a balance of payments basis), misleading the public and policymakers alike.

Take, for example, a scenario in which Apple ships iPhone parts to China to be assembled in a Foxconn factory and then sent back to the United States to be sold here.  Currently, the value of the imported iPhone minus the lesser value of the exported parts counts as a net U.S. import of a manufactured good.  This reflects the fact that Apple offshored its iPhone manufacturing to China.

But under the ECPC proposal, Foxconn, now called a “manufacturing services provider,” would not be described as having manufactured the iPhones but as having provided services to Apple.  As a result, the net U.S. import of manufactured goods resulting from Apple’s decision to offshore would be reduced. In its place would be an import of Foxconn’s factory “services.”
2.  The proposal would treat some goods exported by foreign factories asU.S. manufactured exports.  Take a scenario in which Apple ships iPhone parts to China that are assembled by Foxconn and then shipped to the European Union (EU).  Currently, Apple’s export of parts to China counts as the only U.S. export in this scenario.

But the ECPC proposal, according to officials of ECPC member agencies, would instead count China’s export of the fully-assembled iPhones to the EU, less the cost of any imported parts, as a “U.S. manufactured goods export.”

The absurd logic of this rebranding is that while China manufactured and exported the iPhones, they count as U.S. manufactured exports because they were under the control of a U.S. brand.  This Orwellian proposal would spell an artificial increase in U.S. manufactured exports (on a balance of payments basis), further belying the real U.S. manufacturing trade deficit.
3.  The proposal would spur a disingenuous, overnight increase in the number of U.S. “manufacturing” jobs as white-collar employees in firms like Apple – now rebranded as “factoryless goods producers” – would suddenly be counted as “manufacturing” workers.

This change would also create a false increase in manufacturing wages, as many of the newly-counted “manufacturing” jobs would be designers, programmers and brand managers at “factoryless goods producers” like Apple.

Reported U.S. manufacturing output would also abruptly and errantly jump, as revenues from firms like Apple would be lumped in with the output of actual manufacturers.
This proposal defies common sense.  It would dramatically distort U.S. trade, labor and gross domestic product statistics.  Goods manufactured abroad and imported into the United States are not something other than manufactured goods imports.  Goods exported from foreign factories do not become “U.S. exports” when they are produced for U.S. brands.  And jobs in which workers spend zero time actually manufacturing anything are not “manufacturing jobs.”

The offshoring of U.S. manufacturing under years of unfair trade policies cannot be undone with a data trick.  The hoped-for “renaissance” of U.S. manufacturing will come through new policymaking informed by accurate data, not politically convenient distortions.

Ben Beachy is the Research Director for Public Citizen’s Global Trade Watch.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

March 29, 2017
Jeffrey Sommers
Donald Trump and Steve Bannon: Real Threats More Serious Than Fake News Trafficked by Media
David Kowalski
Does Washington Want to Start a New War in the Balkans?
Patrick Cockburn
Bloodbath in West Mosul: Civilians Being Shot by Both ISIS and Iraqi Troops
Ron Forthofer
War and Propaganda
Matthew Stevenson
Letter From Phnom Penh
James Bovard
Peanuts Prove Congress is Incorrigible
Thomas Knapp
Presidential Golf Breaks: Good For America
Binoy Kampmark
Disaster as Joy: Cyclone Debbie Strikes
Peter Tatchell
Human Rights are Animal Rights!
George Wuerthner
Livestock Grazing vs. the Sage Grouse
Jesse Jackson
Trump Should Form a Bipartisan Coalition to Get Real Reforms
Thomas Mountain
Rwanda Indicts French Generals for 1994 Genocide
Clancy Sigal
President of Pain
Andrew Stewart
President Gina Raimondo?
Lawrence Wittner
Can Our Social Institutions Catch Up with Advances in Science and Technology?
March 28, 2017
Mike Whitney
Ending Syria’s Nightmare will Take Pressure From Below 
Mark Kernan
Memory Against Forgetting: the Resonance of Bloody Sunday
John McMurtry
Fake News: the Unravelling of US Empire From Within
Ron Jacobs
Mad Dog, Meet Eris, Queen of Strife
Michael J. Sainato
State Dept. Condemns Attacks on Russian Peaceful Protests, Ignores Those in America
Ted Rall
Five Things the Democrats Could Do to Save Their Party (But Probably Won’t)
Linn Washington Jr.
Judge Neil Gorsuch’s Hiring Practices: Privilege or Prejudice?
Philippe Marlière
Benoît Hamon, the Socialist Presidential Hopeful, is Good News for the French Left
Norman Pollack
Political Cannibalism: Eating America’s Vitals
Bruce Mastron
Obamacare? Trumpcare? Why Not Cubacare?
David Macaray
Hollywood Screen and TV Writers Call for Strike Vote
Christian Sorensen
We’ve Let Capitalism Kill the Planet
Rodolfo Acuna
What We Don’t Want to Know
Binoy Kampmark
The Futility of the Electronics Ban
Andrew Moss
Why ICE Raids Imperil Us All
March 27, 2017
Robert Hunziker
A Record-Setting Climate Going Bonkers
Frank Stricker
Why $15 an Hour Should be the Absolute Minimum Minimum Wage
Melvin Goodman
The Disappearance of Bipartisanship on the Intelligence Committees
Patrick Cockburn
ISIS’s Losses in Syria and Iraq Will Make It Difficult to Recruit
Russell Mokhiber
Single-Payer Bernie Morphs Into Public Option Dean
Gregory Barrett
Can Democracy Save Us?
Dave Lindorff
Budget Goes Military
John Heid
Disappeared on the Border: “Chase and Scatter” — to Death
Mark Weisbrot
The Troubling Financial Activities of an Ecuadorian Presidential Candidate
Robert Fisk
As ISIS’s Caliphate Shrinks, Syrian Anger Grows
Michael J. Sainato
Democratic Party Continues Shunning Popular Sanders Surrogates
Paul Bentley
Nazi Heritage: the Strange Saga of Chrystia Freeland’s Ukrainian Grandfather
Christopher Ketcham
Buddhism in the Storm
Thomas Barker
Platitudes in the Wake of London’s Terror Attack
Mike Hastie
Insane Truths: a Vietnam Vet on “Apocalypse Now, Redux”
FacebookTwitterGoogle+RedditEmail