The profits of US corporations manufacturing in China and exporting goods to the US will likely explode from 44 to 285 percent if the USA becomes a party to the Trans Pacific Partnership (TPP). What chief executive officer’s (CEO’s) wouldn’t want to export millions of US jobs to China under these circumstances?
This is because the TPP will likely force China to manipulate its currency by 15 percent, making this so-called trade agreement a massive US jobs destroyer, and the next income redistribution scam the corporate big boys are foisting on the US public. That’s because US corporations making products in China for export to the USA earn considerably more profits when China manipulates its currency. This most likely hasn’t been lost on supporters of the TPP, including the CEO’s of hundreds of US companies that employ millions of Chinese to make the goods US corporations export to the USA.
China will be compelled to do this because Vietnam is one of the TPP nations and China is not. Vietnamese exporters, including US corporations, face a ten to fifteen percent tariff when their goods enter the USA. If the TPP is approved, the tariffs will be gone, and China will face the prospect of losing millions of export jobs to lower wage Vietnam unless it manipulates its currency vis-à-vis the US dollar.
Currently, $100 will purchase roughly 600 Yuan. Say, for example, a US company makes shoes in China, exports them to the US, and sells them for $100, with $25 profit per pair of shoes. When China manipulates its currency by 15 percent, $85 will purchase 600 Yuan. The shoes should cost $85 in the USA, rather than $100, but such price declines rarely occur. The shoes will likely still be sold for $100. The manufacturer will still get a 25 percent profit on the first $85, which comes to $21.25. Plus the company will pocket another $15, which is the difference between $85 and the retail price of $100. This means the profits from a pair of shoes will surge from $25 to $36.25, or 44 percent. Using the same math, a company earning a 5 percent profit will experience profit growth to $19.25, a 285 increase in earnings under the TPP.
Most studies show manufacturing jobs support as many as three other US jobs, including lawyers, dentists, plant managers, accountants, cooks and retail clerks, not to mention other manufacturing jobs. That means the loss of five million manufacturing jobs to China will cost an additional 15 million jobs, or a total of 20 million. The loss of tax dollars from these jobs will financially gut our social safety nets, schools, fire, police, social security, infrastructure, military, Homeland Security, and much more, but the stock markets will surge.
This will exacerbate US income inequality since the difference in pay between the former higher paying US jobs and the new lower Chinese wages will go into the pockets of billionaires and millionaires via higher corporate profits, rising share prices, and surging dividends. The job losers might get a few months of unemployment insurance.
According to economist Emmanuel Saez, the top 1 percent income earners took 7.8 percent of all US income in 1970. This more than doubled to 18.33 percent by 2007, but slid to 16.88 percent in 2009 due to the Great Recession. Using Saez’s statistics, economist Justin Wolfers came to the conclusion that 99 percent of all income growth from 2010 to 2014 went to the top 1 percent. Wolfers, however, noted that Saez’s figures understated the real gains made by the 1 percent because they did not include capital gains, which mostly go to the rich.
As noted above, exporting jobs redistributes and transforms middle class income into the rich man’s dividends and rising stock prices, which results in capital gains income. This is also why exporting jobs by the millions most likely accounts for the stock market bubble we’ve experience since the end of the last recession. This bubble could not have been caused by the demand for goods and services since wages have declined, job growth has been weak, and credit is more difficult to obtain compared to the period before the Great Recession. It’s also worth noting that the stock markets rose phenomenally immediately after President Bill Clinton signed NAFTA, paving the way for US companies to export US jobs.
The income figures used by Saez and Wolfers are derived from the Internal Revenue Service. However, according to a new report by Oxfam, “An Economy for the 1 Percent,” worldwide the “richest individuals” have stashed $7.6 trillion in overseas tax havens, meaning that money has never been taxed. Since many of these individuals are likely US citizens, the figures used by Saez likely understates the amount of income going to the 1 percent by a vast amount. Assuming the 1 percent have gotten 99 percent of all income gains since 2010, a perusal of the National Income Accounts of the United States, along with a calculator, suggest the 1 percent are possibly taking as much as 37 percent of all US income, which is quite a leap from the 7.8 percent in 1970.
The TPP will make this imbalance grow, leading to more ominous results for the nation. This government policy of redistributing middle class income to the 1 percent via international income redistribution agreements, falsely marketed as trade agreements, has led to a weakened economy. The statistics show the truth of this.
When President Jimmy Carter was in office, 1977-1980, the US population was 70 percent today’s size, and the gross domestic product was less than a third of today. Yet 208,000 jobs were created every month under Carter, with rising average real wages. In the last 48 months, the economy has created only about 172,000 jobs per month, but with declining real wages. Under Carter, US citizens had more pensions per capita, and higher real wages. A recent study by the Pew Research Center reveals that 59 percent of all US adults were considered middle class in 1980, compared to 50 percent today. In 1980, the 99 percent earned 92+ percent of all income, but today only receive anywhere from 78 percent to 64+ percent, depending on the figures you want to use. The demand for goods and services was much greater then than now because the majority of Americans had more money to spend, and the US economy was stronger because of it.
The economic policies pursued by the US government since 1981 have been a disaster for the majority of US citizens. With the TPP, the government is going down the same road. The TPP will make matters worse for the 99 percent, but it will be a boon for the profits, share prices, and rich investors of US corporations destined to export millions of jobs from the USA if the TPP is enacted. That’s why every American should call and urge their congressional representatives to reject the TPP. Every US senator knows this, including Wall Street Senator Ron Wyden, Orrin Hatch and Mitch O’Connell. So does Wall Street President Barack Obama. I know since every US senator and Obama have received this op-ed in the form of a letter.