American manufacturing jobs are under pressure because of the dollar's value

These are significant factors that do play into decisions. And once those decisions are made, those investments are made, companies want those investments to be profitable. They’re going to keep capacity as fully used as they can, and we’ve lost that production forever. That’s been our experience over the last 20 years and that pressure continues today.

It also forces U.S. companies to compete in whatever way they can to lower costs, and unfortunately, in most instances, that means trying to eliminate compensation for their workforce. As a result, wages in the auto parts sector in the United States and many other sectors that are facing increased intense international competition has been to lower compensation for workers. That’s not good for the US economy. It’s not good for equity in this country. And it’s certainly not good for our members.

We face these same problems on the export side. In US companies that are big exporters in the construction machinery, mining equipment manufacturers, where we also represent quite a few workers, they face the same problems on the export side from the strength of the dollar. Many of these companies used to be sitting on panels like this when the dollar got this level, advocating changes. Many of them, in the course of the past 50 years, have built up their foreign facilities enough so that they’re just making decisions about where to allocate production internationally based on their profitability. And if the dollar is going to be strong, they’re not going to make those products in the United States. They simply aren’t. And they have the capacity elsewhere. They will make investments elsewhere to increase capacity to produce those products in other countries and ship them to the United States. Barriers to entry here are not very large. So the UAW faces this problem and this economic difficulty on both sides of the trade equation, both on the export side and on the import side.

One other issue that I think is going to be relevant - people talk about the - well, there are two things I want to mention. One is people talk about the huge trade imbalance we have with China and the continuing growth in that trade imbalance, and the exchange rate has not been a problem there.

There have been a couple of devaluations but there’s been a maintenance of a pretty stable exchange rate for the past several years. But given that there have been huge devaluations in many of China’s competing countries in Asia that are directing their production to the United States, it’s not in any way unlikely to find growing pressure on China to devalue in order to compete with the other countries in Asia that have focused on exports to the United States market. A devaluation of China’s currency would be that much worse for conditions of competition in the United States, that much more of an incentive for US companies to move to China to produce for the U.S. market.

One other thing I want to mention, though, is, in the past 10 years, the US. trade deficit with China has gone up by $70 billion. Seventy billion dollars is a lot. Over the past 10 years, the United States trade deficit with Europe has gone up by $70 billion.

Now, if you look at trade over the long term with Europe, you find tremendous fluctuations. We run surpluses some years. We run deficits other years. The exchange rate plays an important role in where the trade balance between the United States and Europe lies, not so much the case with Japan and not so much the case with some of our other competitors. But the trade imbalance with Europe has been growing dramatically and it is very much driven by the exchange rate. It’s a serious problem for those of us who are trying to maintain decent living standards for our members, trying to maintain communities with decent-paying jobs, with resources that provide for improving living standards. Unless there is some significant action to reduce the value of the dollar, to establish an international regime that sets a reasonable balance in international markets, in goods but also in capital, there are going to be serious problems ahead here in the United States and internationally. The kinds of international flows and imbalances that are building up are certainly not sustainable.

Whether the crash happens tomorrow or the crash happens a year from now or two years from now, as Gerard Baker was saying, the threat is that it just gets worse as time goes on. We don’t want to see that happen. We would like to see a reasoned, negotiated, well discussed international agreement to move toward sustainable exchange rates and that will, in fact, include reductions in the value of the dollar.