1. Manufacturing and Trade Why activism is essential

2. The Manufacturing Sector By itself – the 5 th largest “economy globally By itself – the 5 th largest “economy globally Employs 14.3 million directly, millions more indirectly. (Impacts 44 million jobs) Employs 14.3 million directly, millions more indirectly. (Impacts 44 million jobs) Consumes over 60% of R&D in U.S. Consumes over 60% of R&D in U.S. Is the country’s engine of growth and wealth Is the country’s engine of growth and wealth And, the sector is in big trouble And, the sector is in big trouble

3. The Problem Statement Manufacturing in this country is subject to massive regulation, pays for social issues handled by governments elsewhere, is under attack by well orchestrated offshore opponents. Only recently is appropriate attention being paid to this sector of the economy. The problems have been studied to death and the time for action is now. We are running out of time.

4. The Evidence Studies point to several critical issues Studies point to several critical issues –Department of Commerce Study –National Association of Manufacturers Study They partially address massive job loss issues in U.S. manufacturing They partially address massive job loss issues in U.S. manufacturing

5. U.S. Manufacturers Have Suffered Massive Job Losses Source: Bureau of Labor Statistics, Series CES3000000001.

6. Department of Commerce Study Developed via “field” hearings and academic input – parallels NAM findings but puts government spin on solutions Developed via “field” hearings and academic input – parallels NAM findings but puts government spin on solutions Highlighted recommendations – Economic environment Highlighted recommendations – Economic environment –Make tax cuts permanent –Reduce tax complexity and compliance costs –Permanent tax credit for R&D –Expand access to low cost capital

7. DOC Study “Investing in innovation” “Investing in innovation” –Strengthen patent system –Review federal R&D emphasis –MEP enhancement (manufacturing extension partnership) –Promote technology transfer –Cooperative research programs Lowering Costs Proposals Lowering Costs Proposals –Regulatory review –Health care costs –Legal reform –Energy legislation

8. DOC Study Education, Retraining, Economic Diversification Education, Retraining, Economic Diversification –Training partnership initiative –Analyze adequacy of existing training –Personal re-employment accounts (to finance retraining) –Economic adjustment programs for communities in transition –“Transform” workforce development programs

9. DOC Study Promote open markets/level playing field Promote open markets/level playing field –“Encourage” economic growth, open trade, capital market access –“Negotiate” trade agreements that benefit US manufacturers –“Enforce” trade agreements/combat unfair trade –“Reinforce promotion” of American goods globally

10. The DOC Study “Enhancing” Government’s Focus on Manufacturing Competitiveness “Enhancing” Government’s Focus on Manufacturing Competitiveness –Establish manufacturing council –New office of Industry Analysis and Trade Compliance –Foster government coordination But – something BIG is all but missing.

11. What Did the DOC Report Really Say? The Critic’s View The Critic’s View –Emphasis on retraining, re-education, re-adjustment for communities impacted by closure, educational partnerships –Words like explore, study, support, promote and leverage are used throughout recommendations –Requires legislative changes on health care, tort reform, establishing new czars and oversight groups –Opponents don’t want to address the nasty currency issue and it is also a difficult issue to address given geo-politics – but to do nothing courts disaster

12. NAM Study (National Association of Manufacturers) High Corporate Tax Rates High Corporate Tax Rates Cost of Health Benefits Cost of Health Benefits –Health Care –Private Pensions Cost of Litigation Cost of Litigation Cost of Regulatory Compliance Cost of Regulatory Compliance Energy Costs Energy Costs Something BIG is missing Something BIG is missing

13. Quantified Findings - NAM US manufacturing is “penalized” for being here to the tune of a 22.4% cost disadvantage versus major competing countries US manufacturing is “penalized” for being here to the tune of a 22.4% cost disadvantage versus major competing countries The trade playing field is not level whether related to subsidy/dumping or export incentives The trade playing field is not level whether related to subsidy/dumping or export incentives Continued lack of correction is creating a serious talent drain from manufacturing Continued lack of correction is creating a serious talent drain from manufacturing The damage to manufacturing will impact the industries that depend on manufacturing as a customer The damage to manufacturing will impact the industries that depend on manufacturing as a customer NAM has numerous recommendations and steps to address the issues NAM has numerous recommendations and steps to address the issues

14. The Understated Issue Currency manipulation and intervention overwhelms other self imposed cost disadvantages Currency manipulation and intervention overwhelms other self imposed cost disadvantages Currency manipulation and intervention corrupts any concept of comparative advantage (technology, efficiency, location, cost) Currency manipulation and intervention corrupts any concept of comparative advantage (technology, efficiency, location, cost)

15. The Understated Element Currency Intervention and Manipulation What is it and what does it do?

16. Pic of China Pic of China © 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada. Permission is granted to reproduce the above image provided that the source and copyright are acknowledged. !

17. U.S. Trade Balance with China Source: U.S. Census Bureau. 199219931994199519961997199819992000200120022003

18. © 2003 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada. Permission is granted to reproduce the above image provided that the source and copyright are acknowledged. !

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22. Market fundamentals have historically not set the value of the Asian currencies. Governments have! Market fundamentals have historically not set the value of the Asian currencies. Governments have! China’s growing trade surplus and huge foreign investment inflows would suggest one thing – a stronger yuan – reality is vis- a-vis the U.S. dollar there’s been no change China’s growing trade surplus and huge foreign investment inflows would suggest one thing – a stronger yuan – reality is vis- a-vis the U.S. dollar there’s been no change Currency Manipulation

23. Manipulated Currency Reserves AWASH IN DOLLARS Asia’s growing foreign reserves, in billions of dollars Country Year-End 2003 % Change From 2002 $673.5 43% $403.341% $206.628% $155.428% $118.4 6% $100.6 43% $96.3 17% $44.9 30% $42.1 6% $36.3 15% $16.7 5% Source: Reuters

24. The United States’ Current Account Deficit

25. The Effects of Intervention and Manipulation On Manufacturing On Manufacturing On Steel On Steel –Imports –Pricing On Other industries On Other industries

26. The Dollar goes up; Manufacturing Profits go down The Dollar Goes Up Manufacturing Profits Go Down The Dollar goes up; Manufacturing Profits go down The Dollar Goes Up Manufacturing Profits Go Down Sources: Federal Reserve Statistical Release H.10; U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts Broad Real Dollar Index (right scale) Profit Share of National Income in Domestic Manufacturing (left scale) 19951996199719981999200020012002 28 24 20 16 12 8 4 130 115 100 85 70 55 40

27. One Trillion Dollars ! - $80 billion Change in: Stable Dollar (‘91-’96) Strong Dollar (’97-’02) Trade Deficit - $176 billion - $468 billion ImportsExports $800 billion + $204 billion “Six Years After” Coalition for a Sound Dollar March 2003 Overvalued Dollar Devastates U.S. Manufacturing

28. When the Dollar goes up so do US Steel Imports 150 140 130 120 110 100 90 80 35 30 25 20 15 10 5 0 19951996199719981999200020012002 Steel Import Share (right scale) Fed’s Broad Real Dollar (left scale) Sources: Federal Reserve Statistical Release H.10; U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts

30. Change in: Stable Dollar (‘92-’96) Strong Dollar (‘97-’02) Exports: Up $20.9 billion Down $2.6 billion Imports: Up $9.2 billion Up another $7 billion Trade Surplus: Rose to $27 billion Fell to $11 billion Overvalued Dollar Hits U.S. Agriculture

31. Overvalued Dollar Hits U.S. High Tech Change in: Stable Dollar (’92-‘96) Overvalued Dollar (’97-‘02) (’97-‘02)Exports + $25 billion - $31 billion* Imports + $17 billion + $50 billion Trade Deficit + $35 billion (‘96) -$17 billion (‘02) Projection for 2002 based on YTD 9/02 figures. *Since 2000 peak. “Six Years After” Coalition for a Sound Dollar March 2003

32. U.S. Trade Balance in Advance Technology Source: U.S. Census Bureau. 20022003

33. Investments Are Down … $37 Billion

34. Status Report on the Dollar Issue Administration negative on Fair Currency Alliance 301 Petition Administration negative on Fair Currency Alliance 301 Petition –Says they want to deal with issue in a different manner –Petition currently on hold, but will not be held indefinitely –Filing of 301 petition dependent on real progress (can be filed at any time up to bout 60 days prior to election to be effective)

35. Status Report on the Dollar Issue Administration actions to date Administration actions to date –“Jawboning” –Assigned special treasury representative to China situation –Has offered technical support to China to deal with loan problems, banking infrastructure problems, economic policy –China is sending mixed messages

36. Status Report on the Dollar Issue Industry reactions generally skeptical Industry reactions generally skeptical FCA will file if no real progress made FCA will file if no real progress made Mission is to keep the heat on the issue Mission is to keep the heat on the issue

37. Nucor Trade Position – Trade Laws Background Background –Prior to 1997/98 –The Impact on Nucor of the Beam Case The “201” Case The “201” Case –What is a 201 –Trade law abuse prior to 201 –Results of 201 (even though terminated early) Curtailed illegal trade Curtailed illegal trade Stabilized markets Stabilized markets Fostered environment for consolidation Fostered environment for consolidation Created mechanism for global subsidy negotiations Created mechanism for global subsidy negotiations

38. Trade Law Reform What are the weaknesses in current laws? What are the weaknesses in current laws? –Repeat dumping (country/product switching) –Major offenders provided special consideration that encourages repeat behavior –The WTO “legislation” problem What are the solutions? What are the solutions? –H.R. 2092 and S. 136 (Berry/Lincoln) –H.R. 3716 (English), S.2212 (Collins, Bayh) –H.R. 2365 (English, Levin, Houghton, Cardin) and S. 1258 (Bayh) & S. 676 (Baucus) and H. Con. Res. 243 (Levin)

39. Other Trade Related Reforms Import Monitoring, Licensing and Enforcement Import Monitoring, Licensing and Enforcement OECD Update OECD Update The “Byrd Bill” (or CDSOA) The “Byrd Bill” (or CDSOA)

40. What Can YOU Do? Indiana can be a pivotal state in November!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Indiana can be a pivotal state in November!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

41. A Survey of Indiana Voters A summary review of the issues, their importance to voters and their potential influence on candidates and races in 2004 Auburn

42. Profile of the survey sample 100% are registered and likely voters 100% are registered and likely voters

43. Identify the one or two most important issues that the federal government should deal with.

44. Identify the one or two most important issues that the state government should deal with.

45. Have free trade agreements (NAFTA, WTO) been good or bad for the U.S.?

46. Has the emergence of China as economic superpower been good or bad for the U.S.?

47. Do you agree with foreign governments “pegging” currencies to U.S.$, making foreign goods less expensive, and exporting U.S. jobs?

48. Do you agree or disagree that “outsourcing” of U.S. service jobs is inevitable and good for Americans?

49. In today’s economy: Are you worried about a major wage earner losing a job?

50. For each: A major reason, minor reason, or not a reason for U.S. job losses to foreign competitors

51. Indiana voters were asked to rate how well national, state legislatures have done their jobs “lately”

52. Indiana manufacturing job loss 2000-2003 86,000 manufacturing jobs lost since 2000 U.S. Bureau of Labor Statistics

53. The issue and the elections The issue and the elections Indiana can be a pivotal state in November Indiana can be a pivotal state in November 98% of the state’s voters say that the economy is important to their vote 98% of the state’s voters say that the economy is important to their vote Almost 23% of Indiana’s workers are in manufacturing Almost 23% of Indiana’s workers are in manufacturing

54. Indiana voter Almost 90% of eligible voters are registered (4 million out of 4.5 million) Almost 90% of eligible voters are registered (4 million out of 4.5 million) Recent Indiana voter turnout: 56% Recent Indiana voter turnout: 56%

55. Indiana Statewide Analysis 2000 Gubernatorial Race 42% 56%

56. DeKalb County Analysis (92 Counties in Indiana) 49% 51%

57. Your vote can make a big difference For example 843 Nucor employees in DeKalb County 843 Nucor employees in DeKalb County Voting power – 843 people times 1.7 registered voters per household = 1,433 votes Voting power – 843 people times 1.7 registered voters per household = 1,433 votes 537 votes -- The margin of victory in Florida in the 2000 electoral college vote 537 votes -- The margin of victory in Florida in the 2000 electoral college vote

58. How can I make a difference? Four Simple Suggestions 1. Ask your elected officials how they are actively opposing currency manipulation and other unfair trade practices

59. How can I make a difference? Four Simple Suggestions 1. Ask your elected officials how they are actively opposing currency manipulation and other unfair trade practices 2. Ask your local officials to pass resolutions and to write your congressional delegation to urge immediate action

60. How can I make a difference? Four Simple Suggestions 1. Ask your elected officials how they are actively opposing currency manipulation and other unfair trade practices 2. Ask your local officials to pass resolutions and to write your congressional delegation to urge immediate action 3. Spread the word – to friends, business people, your community – on the negative impacts of unfair trade, currency manipulation

61. How can I make a difference? Four Simple Suggestions 1. Ask your elected officials how they are actively opposing currency manipulation and other unfair trade practices 2. Ask your local officials to pass resolutions and to write your congressional delegation to urge immediate action 3. Spread the word – to friends, business people, your community – on the negative impacts of unfair trade, currency manipulation 4. Register to vote. Vote for candidates who will stand up for U.S. jobs

62. How can I make a difference? Seek support of elected officials for a comprehensive, pro-manufacturing platform Tort reform Tort reform Tax reform & tax relief Tax reform & tax relief Containing health care costs Containing health care costs Cost benefit analysis of new regulatory requirements Cost benefit analysis of new regulatory requirements

63. American and Indiana Jobs Make Your Vote Important Some foreign governments and multi-national corporate interests want you to think your vote doesn’t count Some foreign governments and multi-national corporate interests want you to think your vote doesn’t count Turn the trade war around – help us restore fair trade with your votes Turn the trade war around – help us restore fair trade with your votes

64. American and Indiana Jobs Make Your Vote Important Indiana voter survey: 37% see China’s emergence as economic superpower as bad for U.S., and 58% disagree with foreign governments pegging their currency to U.S. dollar Indiana voter survey: 37% see China’s emergence as economic superpower as bad for U.S., and 58% disagree with foreign governments pegging their currency to U.S. dollar Take action and win the trade war Take action and win the trade war