Business

A tale of two factories: Is China taking US jobs?

Cameron Redd
Image caption Cameron Redd feels China's dumping of aluminium is partly to blame for him losing his job

Cameron Redd has cut off the cable television and traded down to a cheaper car.

Since losing his job at an aluminium smelting plant in this southeast corner of Missouri, he's had to tighten his belt.

And despite finding some temporary work, he's still much worse off than he was.

"Unless I find another above-average paying job for this area, my style of living will continue to change," he says.

"Or I'm going to have to move."

Community impact

Mr Redd was one of 847 workers laid off when the smelter, run by Noranda, closed earlier this year.

And while it has been bought by a Swiss firm, the future is unclear, with a huge knock-on effect for the people of New Madrid county, a community that's already poor by US standards.

Some people have already moved out of the area. Others are trying to retrain.

The coal-fired power station next to the plant is running at reduced capacity, because it no longer needs to feed the massive demands of the aluminium plant, which sucked up as much energy as a medium sized city. And the local schools are suffering, as revenues from the area's best jobs dry up.

They feel like local problems, but Mr Redd feels his misfortune can be partly blamed on China, which has been accused of dumping massive quantities of aluminium onto the global market, forcing prices down to levels that are simply too low for US rivals to compete against.

Image caption The Noranda smelter has been bought by a Swiss firm but its future is unclear

It's an issue that both candidates have raised during this year's US presidential election campaign.

Republican nominee Donald Trump has taken an aggressive stance, accusing China of manipulating its currency. Hillary Clinton has promised to more vigorously enforce existing trade laws.

So is China to blame for America's problems?

Manipulation mindset

Well this area is not alone. The Economic Policy Institute says 3.2 million jobs left the US for China between 2001 and 2013. The lead author, Robert Scott, is working on follow up research, and he's certain the numbers have only grown, with manufacturing and construction hardest hit.

"Those are the two sectors that pay really well for those kinds of workers. The jobs that we have gained have been in services, such as retail trade, restaurants and home health care, where wages are much lower - on average about 30% lower in total compensation. So what's happening is we're trading in good jobs for bad," Mr Scott said.

The great fear is that the middle is being ripped out, leaving the US as a nation of accountants and retail assistants. And while the professional class enjoys the benefits of cheaper Chinese goods, laid-off factory workers like Cameron Redd are too busy making ends meet to feel any real gain.

Robert Scott argues that currency manipulation is the single biggest factor. He says China has kept its currency artificially low for years, which makes its exports cheaper overseas - acting as a massive subsidy for its own manufacturers.

Image copyright Getty Images
Image caption The US Treasury has said China's currency is "significantly undervalued" but stopped short of labelling it a "currency manipulator"

It's a theme that Donald Trump has picked up on, promising to declare China a currency manipulator on the first day of office, and to take retaliatory action.

That's a controversial claim. The yuan has declined against the dollar this year - but that is at least in part due to the dollar's growing strength. And over the longer term the yuan has been on an upward trajectory.

A number of experts dispute the claim of dirty tricks, and the US treasury won't label China a currency manipulator. This year, China has been more inclined to prop up the yuan, rather than push it down.

And with its maturing economy, it's also losing its edge when it comes to labour costs.

Offshore rethink

A few Chinese companies have even set up shop in the US, including Fuyao, China's largest automotive glass manufacturer. Its highly-automated production line in Ohio employs more than two thousand people and sits in what was once a GM factory, in a town that has seen its fair share of factory closures.

"Delphi was here, National Cash Register was here. Big operations and big companies that moved from here. So when this opportunity presented itself, this community really welcomed Fuyao with open arms," said John Gauthier, president of Fuyao Glass America.

Image caption Some Chinese companies have now opened up in the US

Labour is still much cheaper in China, and the factory needs more automation and higher productivity to stay competitive. But Mr Gauthier says energy is much cheaper here. And the factory's proximity to its customers keeps them happy while eliminating freight costs, travel and tariffs. In short, it makes good business sense.

The Reshoring Initiative, a nonprofit aimed at bringing manufacturing back to the US, thinks cases like this are an encouraging sign. Harry Moser, the organisation's chief executive said that if companies factored in all the costs instead of just focusing on cheap labour, a quarter of them would think twice about offshoring. And the US doesn't necessarily need to wait for China to change, to become more appealing to the remainder.

It's an optimistic outlook, and few would argue that the future of manufacturing in the US is secure. Then again, the same might be said of China.

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