IN THIS ISSUE:
* ADVOCACY
Pressure Continues to Mount on China for Meaningful Yuan Reform
Mid-America Chapter Holds Successful Town Hall Meeting
Nucor’s Dan DiMicco Added to South Atlantic Speaker List
* CONFERENCES
Hotel Deadline Nears for MSCI Aluminum Conference Rooms
* BRIEFINGS
Items of Interest to MSCI Members
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ADVOCACY
Pressure Continues to Mount on China for Meaningful Yuan Reform
Congressional patience with China over its miniscule response to revaluation of the yuan was wearing increasingly thin this week as the number of House members signed on as co-sponsors of a pivotal bill rose to 127.
Support for H.R. 1498 is bipartisan, with 69 House Republicans (four of them committee chairs), 57 Democrats and one independent supporting the WTO-compliant legislation that would make currency manipulation, even by non-market economies such as China, actionable under U.S. trade law.
A continuing study by Georgetown Economic Services, which has tracked the yuan’s value since the Chinese government removed the peg of the yuan to the U.S. dollar, finds that its value has increased by just 0.1% since it became, in theory, more responsive to market currency-valuation forces. China’s initial revaluation upwards of the yuan in July was about 2.1%.
MSCI is among the many organizations and growing number of lawmakers who believe China, for the last decade, has deliberately restrained the value of the yuan to the point that it is undervalued by as much as 40%. That undervaluation serves as a barrier to North American exports to China and as a subsidy for Chinese exports to the rest of the world.
Morici Commentary
Reviewing the situation this week, Dr. Peter Morici, the University of Maryland economist who has closely followed the impact of the yuan’s undervaluation on the U.S. economy, said the artificially weak yuan “creates an annual subsidy on exports (by China) of about $250 billion, or 12% of China’s GDP. In addition, through its banking system, provincial governments, tariffs, and regulations China provides all manner of subsidies and protection that have fostered rapid growth in industries, from automobiles to steel, where China has little comparative advantage and should be a large importer.”
Even so, Professor Morici said, “the Bush administration has failed to label China a currency manipulator or embrace proposals for direct action with teeth. It does not apply U.S. WTO-compliant subsidy and countervailing duty laws to imports from China or other centrally planned economies, and it seems intent on abandoning these valuable laws in the Doha Round of WTO negotiations.
He adds: “White House policymakers seem intent on pursuing only those Chinese trade practices that support U.S. multinational corporations invested in China.”
China Generates Surplus
Of course, China’s policy is working with spectacular impact. The U.S. is headed for another huge trade deficit with China this year. And in a comment yesterday (Thursday), China’s Commerce Ministry said the nation’s trade surplus this year will be $90 billion to $100 billion, with its two-way foreign trade (imports and exports combined) expected to reach $1.4 trillion.
China’s trade surplus through the first eight months of the year totals $60.2 billion. Xinhua, the official Chinese news agency, says this “booming trade performance” continues “despite a landmark 2.1% revaluation of the yuan on July 21… Chinese officials have made it clear that Beijing would tread carefully before allowing the yuan to climb much further.”
That’s not news, but it is renewed confirmation of China’s intent to continue to follow policies that give it tremendous mercantile advantage.
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ADVOCACY
Mid-America Chapter Holds Successful Town Hall Meeting
About 85 people, including representatives of two congressmen, attended the Mid-American Chapter’s town hall on manufacturing this week.
Speaker James Schollaert, director of industry and grass roots relations, American Manufacturing Trade Action Coalition, described the U.S. trade deficit, the severity of the crisis in durable goods manufacturing, and what steps should be taken to help alleviate it.
Craig Schroer, president, Unitech, Inc., said the U.S. is rapidly losing its ability to create wealth by making things. He showed the audience a metal bar that his company used to machine for a Kansas manufacturer. The metal for the bar cost Schroer’s company $1.63. The same bar is now purchased, machined and shipped to his former customer by a South African company for $1.68, all in.
Phillip Cross, vice president, Technics 2000, Inc., spoke of a recent trip to China and what he learned there. “They don’t really need us,” he said. He visited 11 factories, and while they said they were ISO 9000 compliant, it did not appear to Cross that they were compliant with that standard in the same way that U.S. manufacturers practice it.
Copies of slides presented to the meeting have been posted on the MSCI web site at:
http://www.msci.org/chapters/mid_america.aspx
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ADVOCACY
Nucor’s Dan DiMicco Added to South Atlantic Speaker List
Dan DiMicco, vice chairman, president and CEO of Nucor Corp., has joined the list of speakers for the South Atlantic Chapter’s town hall meeting on manufacturing on November 7.
DiMicco joins Bill Hickey, president of Lapham-Hickey Steel Corp., and MSCI President and CEO Bob Weidner as speakers at the dinner event.
The chapter has scheduled a 5:30 p.m. reception, followed by a 6:30 p.m. dinner and the 7:15 p.m. town hall meeting. It will be held at the Renaissance Charlotte Suites Hotel, 2800 Coliseum Centre Drive, Charlotte, North Carolina.
For more information or to download a registration form, see:
http://www.msci.org/EventCalendar/details.aspx?EventID=191&cat=28
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CONFERENCES
Hotel Deadline Nears for MSCI Aluminum Conference Rooms
The deadline for securing rooms at the MSCI-negotiated rate for the 2005 Aluminum Products Division Conference is rapidly approaching.
Members who want to lock in that rate have until October 14 to make arrangements with Loews Ventana Canyon Resort in Tucson, Arizona. The conference runs at the resort from November 16-18.
Also expiring on October 14 are substantial fee discounts offered for early registration.
Find complete information and conference registration links at:
http://www.msci.org/aluminum/apd2005/index.aspx
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BRIEFINGS
Items of Interest to MSCI Members
SENIOR OFFICERS OF TWO MULTINATIONAL CORPORATIONS have been elected by the National Association of Manufacturer’s board as the new chairman and vice chairman of the group. As of January 1, the new chairman of NAM will be James G. Berges, president of Emerson Electric Co., and the new vice chairman will be Charles E. Bunch, chairman and CEO of PPG Industries, Inc. John Engler, NAM’s president, said the two “will bring a record of success in the global marketplace…” to their work with the trade association. There was no word about what the two will do for domestic manufacturing.
DAVID LOEVINGER, now deputy assistant treasury secretary for Africa, the Middle East and Asia, has been named the department’s financial attaché in China. Loevinger will be responsible for direct engagement with China on a broad array of economic issues including banking, capital markets, financial regulation, monetary policy and exchange rate policy.
STEEL PRICES CONTINUE TO DROP IN CHINA, where an expert says the reason is simple supply and demand. “Domestic steel output continues to grow, and so does demand, but the output increases even faster,” said Wu Xichun, former chief of the China Steel Industry Association and now an advisor to that group. Wu said China’s daily steel output reached 982,500 tons in August, equal to an annual run rate of 358 million tons, which is a lot of tons. China also imported 110,000 tons of steel and billets in July and 580,000 tons in August, with Wu figuring total imports this year will reach 26 million tons. Wu blamed “disorderly competition” for the significant increases.
WINSTON & STRAWN, MSCI’s law firm, has issued a briefing about more than a dozen changes to labor rules that the federal government has put into effect to help the people and companies harmed by Hurricane Katrina. For example, employers can assist employees by donating to the victims of the hurricane; filing extensions are in effect for affected employee benefit plans; special rules have been established for loans and hardship distributions from tax-qualified plans; no penalty will be assessed for victims on premature distributions from qualified retirement plans, and so on. Employers should consult with the IRS, Labor Department and others to determine which changes apply to them and their employees.
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