IMPACT REPORT 2018

China Trade Deficit Reduction Through Trump’s Buy American and Hire American Executive Order

Over these past few months, the Trump Administration has learned that negotiating with the Chinese to reduce the $375 billion U.S. trade deficit is more complicated than they may have expected. In 2017, our exports to China were only $130 billion while imports from China were over $505 billion. The complexity of tariffs and national interdependence have reduced clarity along lines of winners and losers. Last year, on April 18, 2017, President Trump signed the “Buy American and Hire American” Executive Order, and many U.S. manufacturers saw this as a win for their businesses and the American economy. The intent of the Executive Order was to create more U.S. jobs in manufacturing by directing U.S. federal agencies to purchase American made products over imports. With more than 3 billion square feet of federal real estate and annual spending of over $4 trillion, the U.S. government has massive buying power. The Executive Order calls for purchasing U.S. goods in accordance with prior trade agreements, but the strategy is more clear than the execution to date.

Report Date: 06.14.18. This online posting includes the extended report and research source information below the graphic

By Charlie Szoradi, CEO of Independence LED Lighting & Chairman of the Leadership Council for the American LED Alliance

Charlie@IndependenceLED.com

 

 

 

trade deficit

The complexity of government procurement is compounded with the difference in the Buy American Act (BAA) and the Trade Agreements Act (TAA). BAA calls for products with over 50% domestic U.S. components while TAA accepts products with a majority of components that are made in trade partner countries such as Canada, Mexico, and now Taiwan. To meet the Executive Order’s job creation goal, the Trump Administration should encourage BAA Compliance to maximize economic impact.  Annual reporting to the public would also provide clarity into the levels of adherence by the agencies.

A manufacturing job ripple effect will come with BAA Compliance. In many cases, jobs are created beyond those inside factories through the supply chain of cardboard box production to installation. The breadth of blue-collar and white-collar jobs is extensive, especially in the latest clean-technology sectors such as energy-efficient lighting, solar, and wind power. Added domestic employment for engineering, intellectual property, account management, and software development are part of the Science, Technology, Engineering, and Math (STEM) family of jobs related to 21st century manufacturing.

The U.S. government can take a bite out of the China trade deficit through daily small purchases as well as large procurements.  As an example, across the 3.4 billion square feet of federal real estate, the government may have up to 90 million fluorescent tubes in the ceilings. Fluorescent tubes are almost all made in China and cost about $2 each. This adds up to $180 million in spending, and each tube lasts about 5 years. Each year the government may be spending $36 million on Chinese tubes. This translates to about $100,000 per day that the government is spending to replace old Chinese products with new Chinese products. This is just for lights, and it is in direct breach of Trump’s Buy American and Hire American Executive Order.  For context, the U.S. government spends about $600 million per year on office supplies, which is over $1.5 million per day, and it is not clear what percentage of those products are manufactured in America.

As the Chairman of the Leadership Council for the American LED Alliance, and the CEO of Independence LED Lighting, I know what it takes to make lights vs staplers or big ticket items like fighter jets. We moved our light emitting diode (LED) fixture manufacturing from China to southeastern Pennsylvania in 2010, and Independence LED became one of the first Buy American Act (BAA) Compliant LED fixture manufacturers. Adhering to the Executive Order for lighting will not make much of a dent in the $375 billion trade deficit with China, but changing to efficient LED lights will save 50% or more on energy consumption for tax payers and create tens of thousands of jobs along the way.

Manufacturing jobs in the U.S. are at a current trough relative to World War II and 20TH century levels. Jobs peaked at 19.4 million in 1979 for U.S. manufacturing and are now at 12.5 million, which is 8.5 percent of the 147 million U.S. workforce. The new tax landscape has created a more level playing field, so more U.S. manufacturers may bring more jobs back to the U.S.

The Trump Administration can lead by example when it comes to purchasing American made products. The Executive Order set the foundation, but a solid roll-out requires more rigor and reporting from the agencies.  The American people deserve to know how their money is spent, and President Trump can ask each agency to report on the percentage of imported vs domestic product purchases. This sets a benchmark, and measurement is the key to management. Establishing a time frame and a goal to increase domestic acquisition levels lets tax payers know the plan. Visibility also lets current manufacturers and entrepreneurs identify opportunities to participate in the mega-machine of U.S. government procurement and eat away at the China trade deficit one bite at a time.

REPORT RESEARCH – SOURCE INFORMATION:

90 Million Fluorescent Tubes in U.S. government ceilings

The volume is based on a typical 4 foot long 32 watt fluorescent tube, that covers between 32 and 42 square feet of floor are. According to the Department of Energy and the U.S. Census, there are over 2.3 billion fluorescent tubes across 87 billion square feet of total U.S. non-residential real estate. The math averages to one tube for every 37 square feet and 91 million fluorescent tubes for the US. Government.

3,402,248,000 sq ft. of Government Real Estate

General Services Administration – Comprehensive report with the size of real estate by agencies: http://www.gsa.gov/graphics/ogp/FY_2010_FRPP_Report_Final.pdf

87,043,000,000 sq. ft. of US Commercial

US Energy Information Administration (EIA) – Comprehensive report with the size of real estate by property type in the private sector: http://www.eia.gov/consumption/commercial/data/2012/index.cfm?view=characteristics#b3

Table B7. Building size, floorspace

Commercial Building Energy Consumption (EIA):

http://www.eia.gov/consumption/commercial/data/2012/bc/cfm/b7.cfm

2,385,399,000 fluorescent tubes in American ceilings:

U.S. Department of Energy (DOE) Report released January 2012: Number and Length of Linear Fluorescent Tubes across major U.S. Property Sectors: Appendix #5:

https://web.archive.org/web/20150218190245/http://apps1.eere.energy.gov/buildings/publications/pdfs/ssl/2010-lmc-final-jan-2012.pdf

Current U.S. Federal Government Spending  – How Congress Really Spends Your Money

5/23/18: https://www.thebalance.com/current-u-s-federal-government-spending-3305763

Current U.S. government spending is $4.407 trillion. That’s the federal budget for fiscal year 2019 (October 1, 2018, to September 30, 2019).  It’s 21 percent of gross domestic product.

U.S. Manufacturing, Statistics, and Outlook – Five Reasons Why America’s Manufacturing Is Growing Again

4/26/18: https://www.thebalance.com/u-s-manufacturing-what-it-is-statistics-and-outlook-3305575

The United States has 12.5 million manufacturing jobs. That employs 8.5 percent of the workforce. These jobs pay 12 percent more than all others.

U.S.-China Trade Deficit Hits Record, Fueling Trade Fight

2/6/18: https://www.nytimes.com/2018/02/06/us/politics/us-china-trade-deficit.html

The gap between Chinese goods imported to the United States and American goods exported to China rose to $375.2 billion last year, up from $347 billion the prior year, data released Tuesday morning by the Commerce Department showed.

Most Americans unaware that as U.S. manufacturing jobs have disappeared, output has grown

7/25/17: http://www.pewresearch.org/fact-tank/2017/07/25/most-americans-unaware-that-as-u-s-manufacturing-jobs-have-disappeared-output-has-grown/

Manufacturing jobs peaked in 1979 at 19.4 million, according to the Bureau of Labor Statistics, and by 1987 had fallen to 17.6 million. What had been a slow decline in employment accelerated after the turn of the century, and especially during the Great Recession. Manufacturing payrolls bottomed out at fewer than 11.5 million in early 2010, and even though more than 900,000 manufacturing jobs have been added since, overall employment in manufacturing is still at its lowest level since before the U.S. entered World War II.

It takes a $500,000 payroll for the government to buy a 10-cent pencil

4/20/16: https://federalnewsradio.com/tom-temin-commentary/2016/04/takes-500000-payroll-government-buy-10-cent-pencil/

No wonder the government spends more than $600 million a year on office supplies using General Services Administration contracts. That’s about 0.15 percent of total government contract spending.