Washington, DC, March 15--David W. Johnson's tile company in Ohio once boasted 650 workers at four factories and 11 distribution centers that shipped ceramic tiles in 10,000 colors, shapes and sizes to customers around the world, including the White House.
Now, after filing for bankruptcy, the company has shrunk to two factories that employ 250 people. Johnson and other managers have taken a 30 percent pay cut, and workers' wages have been frozen for three years.
"We're not in a battle to see how much money we can make. We're in a battle to survive," said Johnson, president and CEO of Summitville Tiles Inc. and chairman of the Ohio Manufacturers'Association. "There are companies like mine all across the country."
The problems, they say, stem from China's undervalued currency.
U.S. manufacturers, unions and a growing number of lawmakers say the manipulation is to blame for the country's large trade deficit with China and the extremely low prices for products imported from China, from stepladders to bargain couches and candles.
"I compete on the quality and the uniqueness of my product. There's no way I could compete on price," said Johnson, whose company in Summitville in northeast Ohio is best known for making the wood-colored flooring installed at thousands of McDonald's restaurants. The business also made the roofing tiles that adorn the East and West Wings of the White House.
U.S. manufacturers and economists contend that China's practice of pegging their currency at the fixed rate of 8.28 yuan per U.S. dollar has led the Chinese currency to be undervalued by as much as 40 percent. That gives Chinese products a tremendous competitive advantage, costing about half-price in the United States while American goods cost double in China.
"If you look at the economics and add it up, it's ridiculous that they are being allowed to do this," said George Dykhuizen, president of Extruded Metals Inc. in Belding, Mich., which produces brass rod for faucets and locks. "Once plants close and screw machines are dismantled and sold, it's hard to turn that around."
More than 30 members of Congress and a coalition of about 35 labor unions sought separately last fall to bring a World Trade Organization case against China for manipulating its currency. The Bush administration rejected both requests, saying a trade investigation would undermine diplomatic efforts.
The administration has been lobbying China for two years to change its currency practices, but Chinese officials say they cannot allow the value of China's currency to be set in currency markets until they have made reforms in the country's banking and financial systems.
Treasury Secretary John Snow told Congress last month that he believed the administration's efforts to prod China to develop a more flexible currency system were bearing results, but a permanent resolution would take time.
The U.S.-China Economic and Security Review Commission, an independent, bipartisan panel that reviews the national security implications of U.S. trade with China, urged Congress and the administration last year to urgently address China's currency issue.
The U.S. manufacturing industry has lost 2.9 million jobs over the past four years as companies have been battered by increased competition from foreign imports.
A report from the Economic Policy Institute found that 1.45 million jobs, including about 58,000 in Ohio, have been lost since 1989 because of the growing trade deficit with China.
The U.S. trade deficit with China ballooned 30.5 percent last year to $162 billion, the highest ever with any country. The nation's overall deficit was a record $617.7 billion.
"What's the administration waiting for? The president is now in his second term and he's been talking about this since the early part of his first term," said Bill Hickey, president of Lapham-Hickey Steel Corp. in Chicago.
