Evergreen Solar Heads To China 'As Quickly As We Can'

If you can't beat China and can't get the U.S. government to understand what you're up against, then you may as well join them.

That is what Evergreen Solar has decided to do, shifting production of solar fabrication and assembly from its factory in Devens, Mass., to Wuhan, China.

Evergreen Solar CEO Rick Feldt went to Washington, D.C., and met with Energy Secretary Steven Chu and Commerce Secretary Gary Locke. He told them Chinese government policies made U.S. production uncompetitive. But the Obama appointees do "not quite [have] the understanding that we think is necessary about what's actually happening in this industry," Feldt told financial analysts on Feb. 9. "The United States keeps talking about keeping jobs. You go to the President's State of the Union Address and he said, 'I want to keep jobs in the United States.' It's easy if you say it, but you've got to do something to do that."

Without an adequate response from the U.S. government to counter competitive forces working against domestic production, "we are going to China as quickly as we can," Feldt told the analysts. "The issue for us is just how long does it take to get there. We've got the China operations underway as we speak." The company expects to spend $50 million this year on its Wuhan, China, facility.

Evergreen Solar's Massachusetts plant is producing panels at $2.05 per watt, down from $2.24 per watt in the third quarter of 2009. But the 100-megawatt Chinese facility will produce panels for $1.25 per watt, going down to $1.00 per watt by the end of 2012 including wafer costs of about $0.30 per watt, Feldt told analysts. The company is also in the process of hiring engineers in China to conduct R&D, "which will help us reduce costs," added Evergreen Solar CFO Michael El-Hillow.

Virtually all of the company's new hires are taking place in China. "Basically we have a headcount freeze in the United States, maybe doing onesies and twosies, but we're cutting way back," said El-Hillow. "It all comes down to scale. We have got to scale that at the top line of the capacity and that's what we're driving to, that's the drive to China….We're in a growth phase and we have to treat it as such.

"The fact is, if the Chinese are going to continue to sell near marginal cost because they get the support of the Chinese government, that's just the way the world is. Either you get German ministers talking about it, you get the United States talking about it, but all we can hope for is this: that the U.S. government will not let the Chinese replace the Middle East for access to solar energy," said El-Hillow.

In response to the Chinese competitive challenge, Evergreen Solar has two options. It can try to counter China's advantage by reducing its costs in Massachusetts as low as possible, or "get to China as fast as we can," said El-Hillow. "We've tossed internally about becoming more aggressive in Washington, trying to get them to understand the situation that we face as a solar manufacturer and leveraging our wafer technology. There's no silver bullet here. It's an incredibly tough situation." Added CEO Feldt: "The issue for us is just how long does it take to get [to China]."

The company's Wuhan, China, wafer fab building is almost complete and the company will soon be installing furnaces. "We have a strong management team in place and we are hiring experienced engineers and other essential support staff needed for the initial 100-megawatt facility," said Feldt. "We are well positioned to prove again that our wafer manufacturing technology will scale quickly and successfully, this time in the low-cost manufacturing region of Wuhan."

The company expects to produce 20 to 25 megawatts of solar cells per quarter in China by early 2011. During that time, the company expects to reduce costs at its Devens facility to about $1.50 per watt "as we transition panel assembly to China," said Feldt. The Devens facility is one of the most advanced solar facilities in the United States, Feldt told the analysts, and the company expects it to remain its center of excellence for wafer and cell technology, process development and advanced R&D.

For now, the company will keep cell manufacturing in Devens. "We think we're extremely competitive making wafers any place in the world," said Feldt. "We have this fixed investment in cell manufacturing so it comes down a little bit to cash versus GAAP accounting depreciation [and] amortization." Even if the company continues to improve its Devens, Mass., plant "it's not all clear to us that we'd be better off by buying a whole new set of equipment in a salvaging operation in China and scrapping the equipment we have here. These cell lines are not easy just to pick up and move -- of course it's possible -- so we'll have to play that one by ear. We think that we will continue to reduce wafer and cell costs efficiently that would make sense given our fixed investment here. Of course if it doesn't we would take other action."

In 2007, the company received $23 million in grants from the State of Massachusetts to build its facility on state-owned property in Devens. It also received $17.5 million in low-interest loans along with a 30-year lease on the property.

Evergreen spent $8.5 million in its fourth quarter on the transition of panel assembly operations from Devens, Mass., to China. It expects to reduce costs by $4 million to $5 million per quarter in 2010 "consisting mainly of non-cash accelerated appreciation charges associated with transitioning panel assembly to China," said El-Hillow.

The company expects its production capacity to be about 175 megawatts in 2010, up from 104 megawatts in 2009, an increase of 70 percent. The company shipped 32 megawatts of solar systems in its fourth quarter. Product sales for the fourth quarter of 2009 were $74.5 million, compared to $75.5 million for the third quarter 2009. Sales declined slightly due to a 3.7 percent decline in average selling price, which was $2.32 per watt in the fourth quarter of 2009, down from $2.41 per watt in the third quarter. Prices are expected to drop by another 15 percent in 2010. The company sold 68 percent of its output in Europe, and only between 15 percent and 20 percent in the United States.

U.S. Precision Machine Tool Industry Is No Longer A Global Competetitive Force

U.S. producers of some of the most technologically advanced machine tools are in trouble, according to an assessment by the Department of Commerce. Sales of high-precision five-axis machine tools are declining. U.S. share of global exports is in a freefall. Foreign companies in China and Taiwan have caught up with U.S. technical capabilities, rendering stringent U.S. export controls moot. U.S. companies are being purchased by foreign rivals. A lack of training programs has created a shortage of skilled workers able to use the complex machinery. Commercial and U.S. government customers prefer foreign machine tools. Export controls are hampering foreign sales. The entire U.S. machine tool industry spends only $1 million a year on research on five-axis machine tools.

These are some of the findings from a "Critical Technology Assessment" conducted by the Commerce Department's Bureau of Industry and Security.

U.S. producers of five-axis machine tools had sales of $253 million in 2008, down 11 percent from 2005 sales of $284 million. That was before the U.S. machine tool industry suffered a meltdown in 2009, when domestic consumption tumbled by 60.4 percent, according to the Association of Manufacturing Technology.

Sales of five-axis machines to domestic customers from U.S. producers declined by 19 percent from 2005 to 2008, from $242 million in 2005 to only $195 million in 2008. There are six American companies dedicated to producing five-axis machine tools, and at least 20 in China. Five-axis tools are used for the production of precision components in the aerospace industry, in making gas and diesel engines, automobile parts, and throughout the medical, textile, oil, glass, heavy industrial equipment and tool industries. "Many other industries are discovering the advantages of these machines," says the Bureau of Industry and Security (BIS).

Yet "only a handful of U.S. producers actually manufacture five-axis machine tools in high volume and most generate less than 10 percent of their annual net finished machine tools sales from five-axis machine tool business lines," according to the market and technology research report from BIS.

U.S. producers of five-axis machine tools exported only $58 million worth of equipment in 2008. In a tally of global exports of all machine tools, the United States -- with exports of $740 million -- accounted for only 4.3 percent of global exports in 2007.

In its survey of 61 American end-users that purchased 502 five-axis machine tools worth a combined $900 million, imports accounted for 70 percent of purchases. "Across model types, the number of imported models greatly surpasses the number of domestic models for grinders, mill/turns [and] machining centers," says BIS. "However, domestic-produced mills slightly outnumbered imported mills." The average purchase price for a five-axis machine tool was $330,000.

BIS also surveyed 109 U.S. machine tool distributors. It found that 80 percent of the five-axis machine tools they sold in the United States between 2005 and 2008 were imported, with Japanese and German machines making up the majority of models. "Five-axis machine tool distributors, most of which are selling only non-U.S. five-axis machine tool models, have clearly positioned themselves more effectively in the domestic market," says BIS. "The growth rate of distributor domestic five-axis simultaneous control machine tool sales in 2005-2008 was 3 percent," says the study. "This compares to a precipitous decline of 20 percent in domestic sales among U.S. producers over the same 2005-2008 period."

There are not many U.S. producers of five-axis machine tools. Only six of the 109 U.S. machine tool companies surveyed devote 25 percent or more of their current production capacity to these high-end machines. The remaining producers of machine tools have either shifted production to other machine tool lines, or have moved production offshore. Other producers say U.S. export restrictions have forced them out of the business.

Companies making five-axis machine tools in the United States take a lot longer to build them than foreign rivals. BIS gathered information on 477 five-axis models, 96 of which were produced in the United States and 381 of which were imported. "BIS found that U.S. producers take almost twice as long as foreign producers to manufacture custom-built models, on average," says the study. "However, U.S. producers were able to manufacture standard models 25 percent faster than their foreign competitors."

Custom-built American models contain 84 percent U.S. content (with eight models reporting 100 percent U.S. content). "In contrast, 87 percent of reported imported machine tool models contained an average level of only 3 percent U.S. content," says the study.

BIS asked end users to assess U.S. and non-U.S. producers on 21 purchasing factors, including such things as spindle speed, machine durability and precision and repeatability. "The United States has a competitive advantage in only one -- service/support," says BIS. "These findings are consistent with U.S. customers' high demand for non-U.S. produced five-axis simultaneous control machine tools….A majority of purchasers do not have any domestic produced machine tools of this type in their capital stock. Several end-users claimed that they were not aware of any domestic producers capable of meeting their purchase needs. One commercial end-user responded in the survey that, 'The overall precision, accuracy, machine tool features and control capability is not available in the United States with reasonable delivery or cost."

BIS found that half of the commercial five-axis machine tools are purchased for government contracts. The majority of these purchases are used solely for the purpose of government work. "Non-U.S. produced models made up 64 percent of five-axis simultaneous control machine tool models in the inventory of U.S. government contractors," says BIS.

BIS also assessed foreign producers of five-axis machines. It found that not one of the 45 companies that are indigenous to Brazil, China, India, Russia and Taiwan use U.S. technology, parts, components or materials. China has 20 indigenous five-axis machine tool companies; Taiwan has 22. None of these companies have to deal with the types of export restrictions facing American firms. As a result, these companies are able to produce all the machine tools that are in demand in China and Taiwan, plus they are "able to produce in sufficient quantity to export to other LRCs," says BIS.

One of China's five-axis machine tool makers has 24 distinct models. China now has 28 companies capable of building more than 1,000 CNC machine tools. There are 130 Chinese companies with annual capacity of more than 100 machine tools. The country is now supplying most all of its own demand, with only 10 percent of the market being supplied through imports. "In 2005, approximately 59,600 units of CNC machine tools were produced in China," according to the BIS report. In 2007, the combined amount of CNC metal-cutting and forming tools produced in China was 126,268, more than double the amount produced in 2005. China is now supplying its own demand for five-axis machine tools used throughout its military.

The BIS quotes the Export Compliance Working Group of the American Chamber of Commerce in the People's Republic of China as saying: "Given the existing domestic and joint venture development and the foreign availability of high-level machine tools, U.S. companies could not make a material contribution to China's military development. China's military demands are already satisfied by domestic and foreign supply."

The United States exported 515 five-axis machine tools between 2005-2007, and only 12 of these went to China. DMTG, China's largest producer of machine tools, exports products to more than 100 countries.

The Bureau of Industry and Security is in charge of licensing the sale of five-axis machine tools for export. From 2004 to 2007, it issued licenses for the sale of 148 machines, but only 34 of them were sold and delivered. BIS asked the U.S. producers and distributors who applied for the export licenses why so few of the orders were fulfilled. "Many respondents indicated that the customer cancelled the sale after the export license was obtained or bought a competitor's product," says BIS. "One Chinese customer cancelled a sale because it took the U.S. company seven months to obtain an export license, and in the end, the license conditions were too extreme in the customer's view."

The number of licenses issued for export of five-axis machine tools to China dropped from nine in 2006 to only three in 2007. "As one exporter noted, 'the costs associated with the uncertainty of obtaining a license [and] the protracted process and impact on customer relations offset the financial rewards of pursuing the [five-axis] business.' "

The few remaining U.S. producers all said that export controls are impacting their ability to remain competitive globally. Foreign customers can obtain the comparable systems much faster from European and Japanese companies. European and Japanese governments process export licenses twice as fast as U.S. export control agencies. One U.S. five-axis machine tool producer told the BIS analysts: "Foreign entities with knowledge of the multi-axis simultaneous control machine tool industry view the U.S. export control policies and requirements as an additional burden to consider when dealing with U.S. multi-axis machine tool manufactures." As a result, they no longer even consider U.S. producers when shopping for five-axis machine tools.

The report is located at http://www.bis.doc.gov/defenseindustrialbaseprograms/osies/defmarketresearchrpts/final_machine_tool_report.pdf.

Members Of House Push For A Comprehensive Manufacturing Strategy

Almost 30 members of the House of Representatives want the federal government to develop a far-reaching national manufacturing strategy to lead to the rebirth of American industry. Rep. Dan Lipinski (D-Ill.) has introduced legislation that would create a Manufacturing Strategy Task Force of government officials and a Manufacturing Strategy Board of 21 executives from small and large companies, academia and labor "to harmonize manufacturing policy across the government and ensure that it is unified, coherent, forward looking and results-oriented," according to sponsors of the National Manufacturing Strategy Act (HR-4692).

The strategy would be conducted every four years and would assess the domestic and international environment in which the manufacturing sector must compete. It will analyze why companies have "relocated manufacturing operations overseas or relocated overseas operations to the United States, and the factors involved in such relocations," according to the bill.

Lipinski continues to seek co-sponsors "and there is increasingly strong interest in Congress in bolstering America's manufacturing base and increasing America's competitiveness," says one of his aides. "More and more people realize how important a strong manufacturing base is for creating jobs and helping the middle class."

The bill, referred to the Energy and Commerce and Budget committees, requires those developing the strategy to address the central questions associated with the manufacturing sector's decline.

Those developing the strategy will investigate issues related to the workforce, manufacturing research and development, exports, trade balances, overseas barriers, availability of financing for manufacturing, the role of domestic manufacturing in national security and the impact taxes, regulations procurement policies and domestic sourcing requirements have on American manufacturing.

Analysts will assess the impact of tax credits on imports of foreign manufactured goods, "including the amount of funds expended on, and identification of, products in defense, energy, communications, infrastructure and other critical technologies that are imported." They will identify emerging markets and technologies "and products that the nation's manufacturers could compete for"; pinpoint specific manufacturing industries in the United States "that are facing critical challenges"; identify technologies that are required to sustain national defense; establish "minimum manufacturing capability baselines needed to rapidly respond in times of national emergencies"; describe problems facing small- and medium-sized manufacturers; assess global supply chains and availability of natural resources; describe the interaction between federal government policies that impact manufacturing, the workforce and manufacturing-dependent communities; investigate state and local policies that impact manufacturing including interstate competition and public subsidies for facility siting and relocation; develop comparisons of manufacturing policies in the United States and foreign nations; describe how international trade agreements are impacting U.S. markets; provide a status on international intellectual property protection; develop short- and long-term forecasts for the nation's manufacturing sector and the impact of international trends; and look at how the Defense Production Act could help implement a National Manufacturing Strategy.

Cosponsors of the National Manufacturing Strategy Act include Reps. Bruce Braley (D-Iowa, Chair, Populist Caucus), Aaron Schock (R-Ill.), Vern Ehlers (R-Mich.), Tim Johnson (R-Ill.), Tim Ryan (D-Ohio, Co-Chair, Manufacturing Caucus), Don Manzullo (R-Ill., Co-Chair, Manufacturing Caucus), Betty Sutton (D-Ohio), Phil Hare (D-Ill.), John Dingell (D-Mich.), Mike Michaud (D-Maine, Chair, House Trade Working Group), Marcy Kaptur (D-Ohio, Co-Chair, Jobs NOW! Caucus), Pete Visclosky (D-Ind., Co-Chair, House Steel Caucus), Charlie Wilson (D-Ohio), Linda Sanchez (D-Calif., Co-Chair, Labor & Working Families Caucus), Steve Kagen (D-Wisc.), Bart Stupak (D-Mich.), Stephen Lynch (D-Mass., Co-Chair, Labor & Working Families Caucus), Dave Loebsack (D-Iowa), Kathy Dahlkemper (D-Penn.), Keith Ellison (D-Minn.), Brad Ellsworth (D-Ind.), Tom Perriello (D-Va.), Dale Kildee (D-Mich.), Gary Peters (D-Mich.), Carol Shea-Porter (D-N.H.), Gene Taylor (D-Miss.) and John Sarbanes (D-Md.).

Obama Proposes Home Energy Retrofit Rebate Program

President Obama has proposed a program to provide rebates to homeowners who invest in making their homes more energy efficient. "Consumers looking to have simple upgrades performed in their homes would be eligible for 50 percent rebates up to $1,000 to $1,500 for doing any of a straightforward set of upgrades including insulation, duct sealing, water heaters, HVAC units, windows, roofing and doors," according to a White House description of the Homestar Energy Efficiency Retrofit Program. "A small array of vendors, from small independent building material dealers, large national home improvement chains, energy efficiency installation professionals and utility energy efficiency programs would market the rebates, provide them directly to consumers and then be reimbursed by the federal government." Consumers will be able to chose a combination of upgrades for rebates up to a maximum of $3,000 per home. http://www.whitehouse.gov/the-press-office/fact-sheet-homestar-energy-efficiency-retrofit-program.

As Wind Installations Soar, U.S. Wind Manufacturing Sector Shrinks

It was a record year for installing new wind turbines in the United States in 2009, but most of them were not produced in U.S. manufacturing plants.

The country installed nearly 10,000 megawatts of new wind turbines in 2009, bringing total wind energy capacity to 35,000 megawatts. The increase was the result of government spending through the $787-billion American Recovery and Reinvestment Act passed last February. Without that money, the industry was expecting to install half the number of turbines. "Were it not for the Recovery Act, we estimated a loss of as much as 40,000 jobs," says the American Wind Energy Association (AWEA).

But government funding did not help the U.S. wind energy manufacturing sector. The number of wind-turbine manufacturing facilities declined by one-third in 2009, and there was a net loss in the wind manufacturing sector of about 1,500 jobs, according to AWEA. "The continuing lack of a long-term [federal energy] policy and market signals allowed investment in the manufacturing sector to drop compared to 2008," says the association. The final figures for the year will not be available until April.

As much as $850 million of the U.S. government's stimulus funding provided for wind energy projects or 84 percent, has gone to foreign turbine producers, claims the Investigative Reporting Workshop at the American University. In a study of how stimulus funds have been spent, the workshop found that Spanish utility Iberdrola SA collected $545 million through its American subsidiary.

"Even more striking is the fact that there are few restrictions on how the grants can be used," says the Investigative Workshop. In reviewing a transcript from a Treasury Department briefing on federal stimulus projects, the Workshop found that more than $800 million "has been given to firms for wind farms that were already producing electricity before they received the grants."

Dan Tangherlini, assistant secretary for management at the Treasury Department, was asked if the federal stimulus funds to foreign companies could be used to pay shareholders. "You know, that's possible," he responded. Stephen Ellis, vice president of Taxpayers for Common Sense, said that funding under the program has "virtually no strings attached. These stimulus dollars could just pad the bottom line of companies and the majority of funding is going to the subsidiaries of foreign firms. Overseas firms raking in precious taxpayer cash is not going to have the big returns domestically that we were promised."

The Investigative Reporting Workshop says that in the first round of wind energy projects announced last year, of the $502 million provided to wind developers, $343 million went to foreign companies. In the second round of awards, all of the $464 million went to subsidiaries of foreign firms.

"In the case of these 11 wind farms, according to data provided by the companies themselves in regulatory filings and collected by the American Wind Energy Association, 982 turbines were installed -- 695 of them were manufactured by a foreign company," says the Investigative Workshop. "The cash grants were given for the installation of 1,763 megawatts of capacity -- 1,566 megawatts installed by foreign companies. Using the Renewable Energy Policy Project's numbers, as many as 4,500 manufacturing jobs may have been created overseas. It's the production of turbines that matters most economically. In fact, as much as 70 percent of the economic activity generated by investing in wind comes from the manufacture of the modern, highly sophisticated turbines."

Meanwhile, total global installation of wind power last year reached 37,500 megawatts, a growth rate of 31 percent. China accounted for one-third of all these additions with the installation of 13,000 megawatts of capacity. It was "yet another year of over 100 percent growth" for Chinese wind installations, according to the Global Wind Energy Council. Added Li Lunfeng, Secretary General of the Chinese Renewable Energy Industries Association: "Given the current growth rates, it can be expected that even the unofficial target of 150,000 megawatts [of capacity in China] will be met well ahead of 2020."

The total world market for wind installations was $63 billion in 2009. The Global Wind Energy Council market analysis is located at http://www.gwec.net/. The study on U.S. stimulus funds spent on foreign wind companies from the Investigative Reporting Workshop entitled "Blown Away" is located at http://investigativereporting workshop.org/.

Union Membership In 2009 Tracks Economy

Union membership took a dive last year. The number of people belonging to a union declined by 771,000 to 15.3 million. The union membership rate stayed steady, however, at 12.3 percent of U.S. workers.

Union membership is down from 20 percent of workers in 1983 when 17.7 million people were members of unions, according to the Bureau of Labor Statistics. For 2009, there were more public sector workers belonging to a union (7.9 million) than there were private sector workers (7.4 million), "despite there being five times more wage and salary workers in the private sector," says BLS. Union membership for public sector workers was 37.4 percent, compared to 7.2 percent for private industry workers. New York had the highest union membership rate (at 25.2 percent); North Carolina had the lowest (3.1 percent). Union members had median weekly earnings of $908, compared to $710 for people not in unions. The 2009 union membership data is located at http://www.bls.gov/ news.release/union2.toc.htm.

Feds Look To Fund $129-Million Energy Efficiency Building Technology Consortium

Seven federal agencies have issued a "joint funding opportunity" aimed at creating a "regional innovation cluster to accelerate the creation of energy-efficient building technologies." The government is encouraging consortia from across the country to compete for up to $129 million over five years in a pilot project that will provide funding for investments in technology, business development, workforce education and training.

"The Obama administration convened this task force to develop a replicable and sustainable model for coordinated federal and regional efforts that foster and use regional innovation clusters," says the Department of Energy, which will provide $22 million in the first year of the award and up to $25 million for each additional year for four years. The "Energy Innovation Hub" will be based at a university, DOE national laboratory, nonprofit organization or a private firm, and will partner with local and state governments. "Only one consortium proposal will be selected for funding under this [99-page] joint funding opportunity announcement," located at http://www.energy.gov/hubs/documents/ERIC_FOA.pdf.

Advanced Energy Research Agency - Energy Has $100 Million For R&D

The Advanced Research Projects Agency – Energy has announced it will make $100 million available for research into grid-scale energy storage, soft magnetic, high voltage switches, reliable high-density charge storage and for energy efficient cooling technologies and air conditioners: http://arpa-e.energy.gov/About.aspx.

Larry McMurtry's Son's Song Of America

"We Can't Make It Here," a song by James McMurtry, son of American novelist Larry McMurtry, from the album "Childish Things" is located at http://www.youtube.com/watch?v=b_vN0—mHug.

Effort Initiated To Save BLS International Data Program

A online petition has been started to save the Bureau of Labor Statistics' International Labor Comparisons Program. The Obama administration wants to eliminate the $2-million, 50-year-old program, which compiles statistics on global manufacturing wages and productivity. "This program provides the only data available that ensure comparisons are 'apples to apples' and not 'apples to oranges'; that is, they permit valid comparisons of the U.S. labor market with labor markets abroad and reliable assessments of U.S. manufacturing competitiveness," writes Robert Bednarzik, of the Georgetown Public Policy Institute, sponsor of the petition located at http://www.ipetitions.com/petition/saveilc/.

Q&A With Wisconsin MEP Director Mike Klonsinski: A National Manufacturing Leader

It's not often a study predicts the potential demise of 90,000 companies. But that was one of the findings from the American Small Manufacturers Coalition's "Next Generation Manufacturing" study which said: "More than one-quarter of American manufacturers – representing over 90,000 firms – are at risk because they are not at or near world-class in any of the six strategies" that are essential for success.

Even if there is an economic recovery, the U.S. manufacturing sector might be too depleted to capitalize on it, said the study. "We face a real possibility of surviving the downturn but losing the economic future -- if competitors elsewhere in the world are better positioned to capture the next decade's dynamic market growth. The risk is real…"

The man behind the study is Mike Klonsinski, chairman of the American Small Manufacturers Coalition and executive director of the Wisconsin Manufacturing Extension Partnership center. Klonsinski has been one of the nation's leading proponents of American manufacturing, tirelessly fighting for more than a decade to assure the survival of the MEP program run by the National Institute of Standards and Technology.

MEP spent a decade salvaging itself from proposed elimination by Bush political appointees who repeatedly said their priority was fighting the war in Iraq.

Through it all, Klonsinski and his small manufacturing coalition stood firm, constantly having to rally America's small manufacturing CEOs on the MEP's behalf. For the first time in 20 years, the MEP program's federal budget is increasing marginally.

Klonsinski is also a leader in the Wisconsin manufacturing community, where manufacturing is still valued, although suffering like the rest of the country. While in Milwaukee recently, Manufacturing & Technology News editor Richard McCormack sat down with Klonsinski in the Harley-Davidson cafeteria. Here's what he had to say.

Question: Why didn't the MEP system get any money from last year's $787-billion stimulus?
Klonsinski: I was surprised by that. We thought that the stimulus provided a great opportunity to retool and retrain our industrial base. We could keep people employed in quality jobs and give our manufacturing firms a head-start when the recovery began. It would have been logical for MEP to be a distribution system to make that happen, but there were other priorities.

Q: Was it a function of not having the lobbying muscle in Washington?
Klonsinski: I'm not sure why there wasn't a greater investment in the stimulus package in the American industrial base. They wanted to stimulate consumer spending, support the states and drive infrastructure spending. What's troubling is that the goal of maintaining a strong manufacturing base doesn't typically rise to the top in any discussion of top priorities for this country.

Q: Are small- and medium-manufacturers benefiting from the stimulus?
Klonsinski: Most feel that the stimulus has not had much direct effect on them.

Q: The budget for the MEP system increased marginally this year. Is additional funding making up for the difference from what has been lost from the states?
Klonsinski: Given the uncertainty about the economy and state budgets, it's hard to predict the degree to which the increase will offset state cuts. But it is a relatively small percentage increase for the MEP system and makes it difficult to respond to the needs of small and midsize manufacturers in light of the challenges they're facing right now.

Q: What would be needed to have a system that can fundamentally change the prospects for U.S. manufacturers?
Klonsinski: The President's plan to double MEP is a good start. We should also recognize that the MEP system has a tremendous impact today and serves 31,000 manufacturers each year. The next step is to build on the current system in other key areas: help manufacturers introduce profitable products faster, enter new domestic and international markets and put in place sustainability processes that make bottom-line sense. We ought to be using the MEP system to strengthen domestic supply chains so that we can keep jobs and business in the U.S.

Q: Of the 282,000 small- and medium-sized manufacturers, the American Small Manufacturers Coalition found last year that 90,000 of them are at risk of going out of business. Is there anything that can be done to save many of these companies?
Klonsinski: It starts with the current leadership of those firms. If that leadership is committed to surviving and changing, then resources like MEP can help them. But if those manufacturing leaders are unwilling to change, then they won't survive no matter how big MEP is or what federal or state policies are in place.

Q: What is happening right now on the ground with these companies in Wisconsin?
Klonsinski: We've lost more than 10 percent of our manufacturing jobs -- 60,000 people -- since the recession began. There's a sense that the manufacturing economy has stabilized but no one is willing to bet on sustained growth, which means they're not adding jobs even when they do see an increase in orders. At the same time, the people who run small manufacturing companies are some of the most resilient and innovative around. They are unbelievably creative at cutting costs, finding new markets and maintaining an optimistic outlook. In many cases, they've gone to extraordinary lengths to keep their people employed even in the face of a tough economy. It's inspiring to work with this group.

Q: If things don't improve soon, do you think the 90,000 at-risk companies will disappear?
Klonsinski: We will continue to see an erosion until the economy turns around. Beyond that, many firms will have the problem of not being prepared to compete for new business. It's important to point out the reason these firms are at risk is because they don't have the right strategies in place to compete globally -- and that can change. This was a key finding of the Next Generation Manufacturing Study.

Q: What percentage of manufacturers are in survival mode right now?
Klonsinski: It wouldn't be far fetched to say that a quarter of them are in survival mode. One-quarter of the manufacturers in our study know they are going to have a succession over the next five years. They will either turn the business over to a new generation or they may say it's just not worth it and close up shop.

Q: What is the impact on the U.S. economy if the country loses 90,000 manufacturing companies?
Klonsinski: Devastating for all the obvious reasons but also in ways that will not be immediately apparent. It will have a disproportionate impact on rural communities where a manufacturer is often the primary employer in the area. There is the ripple effect of losing high-quality jobs in supplier and service industries that support those manufacturers. There are extra stresses on the state and local governments as the regional wealth creation of manufacturing disappears. More insidious is the erosion of the nation's competitive manufacturing capability and the impact on our economy and standard of living. The loss of one manufacturer can be absorbed but ongoing losses deplete critical talent and capability.

Q: Do you get a sense that there is concern -- a crisis -- that there is a need to act?
Klonsinski: There is concern but nowhere close to a crisis that compels action. The landscape is so dominated right now with priorities like health care that it's hard for manufacturing to get any air. I'm encouraged by people by Mr. Nosbush [CEO] at Rockwell and Mr. Immelt [CEO] at GE who have stepped out as visible advocates for American manufacturing. We need more industrial leadership like that.

Q: Have you seen change in the government?
Klonsinski: I'm cautiously optimistic with the appointment of Ron Bloom [as special counselor to President Obama for manufacturing policy] and the release of the President's Framework for Manufacturing. That is at least a statement that manufacturing will have some attention. Policymakers understand that we're not going to cut our way out of our deficit problems. Robust manufacturing export growth is the fastest path to wealth creation and deficit reduction in this country. That realization alone should produce more action.

Q: What does the future hold for MEP? Klonsinski: MEP will retain the core of what makes it work today -- local centers that are close to manufacturers, a focus on results, staff with manufacturing experience -- while expanding services into areas of strategic importance for manufacturing success such as innovation and sustainability. The MEP system will engage in more regional and national actions such as supply chain development. MEP centers will become more visible as champions and advocates for American manufacturing. And MEP will expand its role as a strategic partner for state and national economic development initiatives.

Q: The MEP budget hasn't really changed for 20 years.
Klonsinski: The federal investment hasn't changed much during that time despite the growing challenges of intense competition and a new global marketplace. It's important to note that the return on the federal investment in MEP has grown beyond the increase in federal dollars. Ongoing investment in MEP will go a long way to helping U.S. manufacturers compete and win in a rapidly-evolving global economy.

Q: How about just shutting the whole system down?
Klonsinski: That would be a shame. MEP has been proven to work and the return on investment is huge. It has taken 20 years to establish a brand, build a national network of talented staff, and put in place the infrastructure, partnerships, and operating models that really work. It would be a wasted opportunity to let that crumble. A better question is how can we make the MEP system an even better resource for American manufacturing advantage in the next 20 years?

Intel's CEO Says His Company's Investment In The United States Is Not Guaranteed

Intel Corp. CEO Paul Otellini says the United States is on the verge of losing its competitive position in the global economy and must take steps to assure a viable future for millions of Americas. Intel is investing in U.S. semiconductor manufacturing facilities that will not generate revenue for the company for five or 10 years, says Otellini. "But there is no guarantee that the U.S. will receive all of this investment in the future," he told an audience at the Brookings Institution on Feb. 23. "We need to address the fact that government policies can create dis-incentives to investing in America. The trends are worrisome."

The United States is focusing on the "crisis of the day" at the expense of making a long-term investment in research, education, digital technology and human capital. The country has lost its commitment to "policies that made the United States an entrepreneurial powerhouse for more than a century," says Otellini. "This is the bitter truth and we don't hear enough about it."

The United States was a generation ahead of world competitors in information technology. It produced the world's best students in math, science and engineering. "That is simply no longer the case," says Otellini. "Over the past decade, our competitors have focused on the very things that made America's innovative economy the strongest in the world."

As Otellini travels around the world, he sees countries investing heavily in innovation. China, India, Finland, Korea, Japan, the Netherlands "and many other places" are creating national policies to build a digital infrastructure and to embrace sustainable energy. "All this activity on their part is making them far more potent competitors in the next phase of the global economy."

U.S. policymakers are not alert to this challenge. The country was recently ranked last among 40 nations in its rate of change in "innovative capacity" -- investment in such things as IT infrastructure, economic performance and human capital. "The news may sound shocking, but it shouldn't be," says the Intel boss. The United States no longer provides adequate incentives for private sector investment in R&D; its immigration policies are driving the smartest people away from the country; the U.S. tax rate is the second highest in the industrial world; and there are too many uncertainties regarding energy and health care policy.

Intel is stepping up to the challenge, Otellini said. Its Invest in America Alliance of 24 venture capital firms has committed $3.5 billion over two years to young companies involved in clean energy, biotechnology and information technology. Intel Capital is making a $200-million investment in the alliance. Intel is also working with Accenture, Adobe Systems, Autodesk, Broadcom CDW, Cisco, Dell, eBay, EMC, GE, Google, HP, Liberty Mutual, Marvell Semiconductor, Microsoft and Yahoo to double the number of college graduates the companies hire to 10,500.

The future, Otellini concludes, "is going to be more demanding, more competitive and, frankly more disruptive to American business. But those conditions, as anyone who has worked in Silicon Valley knows, can be exactly the right environment for new thinking and breakthrough innovations."

Last Summer's Huge Detroit Economic Summit Produces A Three-Page PowerPoint

The Detroit Economic Club's much-publicized "National Summit" held last summer to discuss policies needed to revitalize American manufacturing has produced a "To-Do List" of recommendations from the event. The Summit, hosted by Bill Ford, chairman of Ford Motor Co., and Andrew Liveris, chairman of Dow Chemical Co., concluded that government and business must "develop a national manufacturing strategy that re-establishes an environment for U.S. businesses to thrive and compete on a global basis," according to a PowerPoint document released recently from the event.

The three-page document does not describe what this manufacturing strategy is, per se, only that the United States needs one. It also does not discuss specific means by which the United States can counter intense foreign competition, although that was a topic of the summit. And it does not include a strategy to convince Washington policymakers to implement its recommendations.

The To-Do List includes a call for "support for R&D and innovation as catalysts for economic growth, job creation and environmental improvement." It says there needs to be improvement in educational systems to promote science, technology, engineering and math training. It calls for a "focus on skill-building and workforce retraining to provide 'just-in-time' talent to meet changing business needs." It wants there to be a "shift of perception of national 'stars' beyond athletes and entertainers to include engineers, scientists and thinkers."

On infrastructure, it says the country needs to upgrade its "airports, sea ports, highway systems, water systems and waterways." It says a smart grid needs to be installed. And there needs to be the creation of a "transportation infrastructure to support electric vehicles and alternative fuels."

At the summer 2009 Summit, which was attended by 4,000 people from 550 organizations, Bill Ford said other countries understand the need to focus on creating a competitive industry. But not the United States. "In Detroit, we have seen first hand that having no policy is a policy choice in itself -- and a bad one," he told the gathering. "We need policies that define where we want to go as a society and that help get us there. And an industrial policy and an energy policy to name two urgent examples -- policies that create a framework that allow companies to compete fairly and freely."

He added that other countries "bend or even break the rules to gain a competitive advantage over the U.S." He lamented the fact that there are Americans "who aren't concerned about our manufacturing base. They believe that we live in a borderless world of unlimited choices and zero consequences. According to this thinking, where a business is located is irrelevant and the fate of any one enterprise, or even an entire industry, is unimportant in the big picture. Someone from somewhere else can always step in to provide the products and services desired with no harm done. The problem is, in the real world, there is harm done."

Ford has met with Commerce Secretary Gary Locke to discuss the "To-Do List." According to the Detroit Economic Club, no follow up is planned, save for releasing proceedings from the event.

Ten Senators Ask President Obama To Develop A Manufacturing Strategy

Ten members of the U.S. Senate have asked President Obama to adopt a national manufacturing policy. "We need a multi-industry strategy to propel job and economic growth, one that deploys federal resources and private-public partnerships to promote emerging manufacturing opportunities," write the senators. "We are convinced that the recovery and long-term health of our economy depend on a strong, competitive U.S. industrial manufacturing base."

The Obama team's recently produced "Framework for Revitalizing American Manufacturing" is a good first start. But without an "an adequate commitment of resources and coordination among every executive branch department, we are afraid that the tenets of this framework may not be appropriately fulfilled," the senators write. "We would therefore respectfully request additional information about how the administration is putting these strategies to work, including specific goals, detailed initiatives supporting those goals and performance measures to help ensure continuous progress."

The letter was signed by Sens. Sherrod Brown (D-Ohio),  Lindsey Graham (R-S.C.), Christopher Dodd (D-Conn.), Olympia Snowe (R-Maine), Debbie Stabenow (D-Mich.), Thad Cochran (R-Miss.), Jack Reed (D-R.I.), Carl Levin (D-Mich.), Robert Casey (D-Pa.), Jeff Bingaman (D-N.M.) and Sheldon Whitehouse (D-R.I).

Obama Tells Sen. Arlen Specter That He Won't Challenge China On Trade

When it comes to "change you can believe in," there isn't going to much of a change in U.S. policy towards China, according to President Obama. During a meeting with the Senate Democratic Conference, Obama was asked by Sen. Arlen Specter (D-Penn.) if he would "support an effort to revise, perhaps even revoke, [the] bilateral treaty which gives China such an unfair trade advantage?" The President replied: "I would not be in favor of revoking the trade relationship we've established with China."

Specter told the president that trade imbalances with China have caused the loss of 2.3 million American jobs. "The remedies to save those jobs are very ineffective," Specter said. "We have China violating international law with subsidies and dumping. It's really a form of international banditry."

Obama replied: "Our future is going to be tied up with our ability to sell products all around the world, and China is going to be one of our biggest markets, and Asia is going to be one of our biggest markets. For us to close ourselves off from that market would be a mistake."

Obama sounded a lot like former President George W. Bush on the issue of massive trade imbalances with China. He said he is "putting constant pressure on China and other countries to open up their markets in reciprocal ways." He added that "if we are able to compete on an even playing field, nobody can beat us."

http://www.youtube.com/watch?v=jsmE3E7jCuk

Americans Say Keeping Manufacturing In U.S. Should Be The Country's Top Economic Priority

The best way for the United States to create more jobs is by saving the manufacturing sector, according to the American public. An "open-ended" poll of Americans taken by Gallop on November 20 – 22, 2009, asked: "In your opinion, what would be the best way to create more jobs in the United States?" Here is how people voluntarily answered the question:
• Keep manufacturing jobs here / stop sending them overseas, 18 percent
• Lower taxes, 14 percent
• Do more to help small businesses, 12 percent
• Create more green jobs, 12 percent
• Create more infrastructure work, 10 percent
• Reduce government regulation, 7 percent
• More stimulus money, 4 percent
• Higher taxes on imports / Buy American, 4 percent
• Improve education, 3 percent
• Hire more U.S. citizens, less immigration, 3 percent
• Cut government spending, reduce deficit, 3 percent
• Make more credit available, 2 percent
• Improve the economy overall, 1 percent
• Encourage more spending, 1 percent
• Other (9 percent), no reason in particular (4), no opinion (16 percent).

When breaking down the results by Republicans, Democrats and Independents, there was general agreement on the manufacturing issue, with 15 percent of Republicans calling for keeping manufacturing jobs in the United States, 20 percent of Democrats and 18 percent of Independents. Keeping manufacturing jobs in the United States was by far the most cited by Democrats (20 percent, followed by "create more infrastructure work" (13 percent). For Republicans, the best way to create jobs is by lowering taxes (29 percent), followed by keeping manufacturing jobs in the United States. Only 2 percent of Democrats said lowering taxes is a way to create jobs.

"The main factor in public perceptions of a jobs recovery appears to be politics -- a finding that suggests Americans consider their jobs outlook to be a referendum on the Obama administration's economic policies," says Gallop.

Thirty-eight percent of Republicans, 37 percent of Independents and 10 percent of Democrats say they think the jobs market will get worse rather than better over the next year, while a majority of Democrats (52 percent) say it will get better (versus 23 percent of Republicans and 27 percent of Independents).

"Just over a third of Americans predict the job market won't change much in the next year -- not a particularly positive sentiment given the current climate," says Gallop. "Of the remainder who believe the job market will change, most -- 43 percent of all Americans -- foresee fairly small changes (either improvement or decline). However, a combined 20 percent believe it will change a lot, with most of these saying the problems will deepen rather than improve."

National Science Board Starts Worrying About Globalization

The National Science Board is becoming more worried about U.S. competitiveness. So what should the United States government do?

How about asking rhetorical questions. "What does growth in U.S. privately funded R&D abroad imply for the viability and growth of domestically based private R&D activities?" the National Science Board asks in a special report issued on Feb. 22. "Are there certain S&E research capabilities that are critical to be conducted within the Nation's borders? If yes, what are they and what are the implications for licensing and global trade?"

The National Science Board says President Obama's science and technology policy operation should tell every agency in the federal government that is conducting research to "make adjustments necessary to ensure that their agency's research is world-leading."

It calls on the Office of Science and Technology Policy to do what it was mandated to do in a law passed by Congress and signed by President Bush: create a "President's Council on Innovation and Competitiveness as described in the COMPETES Act." This council would "discuss" what's gone wrong with the U.S. science and technology enterprise. Among the subjects: "Relationships between U.S. and foreign-supported R&D to ensure continued vitality and growth of U.S. technical strength, safeguarding national interests in intellectual property, ensuring that the U.S. economy benefits from R&D support abroad, and assessing critical research areas for which the U.S. should be the global R&D leader."

"The continued expansion abroad of R&D activities by U.S. private firms, driven by global competitive pressures and financial incentives, poses long-term challenges for U.S. continuing domestic economic strength and the domestic employment of highly-skilled and highly educated technical personnel," says the NSB. It recommends that the National Science Foundation start supporting "truly transformative research."

"We urge federal attention and action to sustain U.S. world leadership in S&E research in response to growing S&E capacity around the world," the National Science Board concludes. "Our nation's future prosperity and security depend on a strong and unwavering federal commitment to this goal."

(http://www.nsf.gov/statistics/nsb1003/#s4)

Only Five U.S. Banks Are In The Top Global 50

The United States is a relatively small player in the global banking industry. In 2009, only five American banks were rated in the top 50 globally. Those five banks (JP Morgan Chase, Bank of America, Citibank, Wachovia and Wells Fargo) had combined total assets worth $5.523 trillion, according to the Bankers Almanac. The combined total for the U.S. banks is 10.4 percent of the $53 trillion in combined assets of the world's top 50 banks. The United States has fewer banks in the top 50 than does Germany (seven), United Kingdom (six) and France (six). China and Japan both have five banks ranked in the top 50. Switzerland and the Netherlands both have three. The data is located at http://www.bankersalmanac.com/addcon/infobank/bank-rankings.aspx.

1. Royal Bank of Scotland, UK, $3.483 trillion
2. Deutsche Bank, Germany, $3.068 trillion
3. Barclays PLC, UK, $2.977 trillion
4. BNP Paribas, France, $2.891 trillion
5. Crédit Agricole, France, $2.303 trillion
6. UBS AG, Switzerland, $1.881 trillion
7. JPMorgan Chase Bank, U.S., $1.746 trillion
8. Société Générale, France, $1.574 trillion
9. Bank of Tokyo-Mitsubishi, Japan, $1.494 trillion
10. Bank of America, U.S., $1.472 trillion
11. Banco Santander, Spain, $1.462 trillion
12. UniCredit, Italy, $1.457 trillion
13. ING Bank NV, Netherlands, $1.442 trillion
14. Ind. & Commercial Bank of China, China, $1.430 trillion
15. HSBC Bank, London, UK, $1.340 trillion
16. Citibank, U.S., $1.231 trillion
17. Calyon, France, $1.194 trillion
18. China Construction Bank, China, $1.107 trillion
19. Credit Suisse Group, Switzerland, $1.092 trillion
20. Sumitomo Mitsui Banking, Japan, $1.089 trillion
21. Agricultural Bank of China, China, $1.028 trillion
22. Bank of China, China, $1.018 trillion
23. Credit Suisse International, UK, $976 billion
24. Bank of Scotland, UK, $934 billion
25. ABN AMRO Holding, Netherlands, $929 billion
26. Intesa Sanpaolo, Italy, $886 billion
27. Commerzbank AG, Germany, $871 billion
28. Rabobank Nederland, Netherlands, $853 billion
29. Fortis Bank, Belgium, $818 billion
30. Natixis, France, $774 billion
31. Banco Bilbao Vizcaya Argentaria, Spain, $756 billion
32. Mizuho Corporate Bank Ltd., Japan, $718 billion
33. Mizuho Bank Ltd., Japan, $683 billion
34. Danske Bank, Denmark, $663 billion
35. Nordea Group, Sweden, $661 billion
36. Bayerische Hypo-und Vereinsbank, Germany, $639 billion
37. Wachovia Bank, U.S., $635 billion
38. Lloyds Banking Group, UK, $632 billion
39. The Norinchukin Bank, Japan, 627 billion
40. Landesbank Baden-Württemberg, Germany, $624 billion
41. Royal Bank of Canada, Canada, $595 billion
42. Deutsche Zentral-Genossenschaftsbank, Germany, $595 billion
43. Banque Fédérative du Crédit Mutuel, France, $592 billion
44. Bayerische Landesbank, Germany, $588 billion
45. KfW Bankengruppe, Germany, $550 billion
46. Hongkong and Shanghai Banking, Hong Kong, $550 billion
47. Wells Fargo Bank, U.S., $539 billion
48. National Australia Bank, Australia, $512 billion
49. Bank for Intl. Settlements (BIS), Switzerland, $511 billion
50. Commonwealth Bank of Australia, Australia, $469 billion

Bankruptcies Are Growing Especially In The Industrial Belt

Bankruptcy filings grew last year to 1,473,700, up from 1,117,600 filed in 2008, according to the U.S. Federal Courts. "Filings have grown steadily since calendar year 2006, when bankruptcy filings totaled 617,660 in the first 12-month period after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect," says the Courts. In 2005, there were more than 2 million bankruptcies filed as people raced to the courts before the law took effect.

Business bankruptcy filings amounted to 60,800 in 2009, an increase of 40 percent from the 43,500 filings in calendar year 2008.

Nevada had the highest bankruptcy filings for per 1,000 population at 11.28, followed by Tennessee (8.64), Georgia (7.65), Indiana (7.51), Alabama (7.43), Michigan (6.96), Ohio (6.13), Kentucky (5.58), Illinois (5.75), Arkansas (7.74) and California in eleventh place with 5.68 filings per 1,000 population. Hawaii had the fewest bankruptcy filings per 1,000 population (1.43) followed by the District of Columbia (1.96), South Carolina (2.15), Texas (2.24) and South Dakota (2.31). The data is located at http://www.uscourts.gov/Press_Releases/2010/Bankruptcy FilingsDec2009.cfm.

USTR To Listen To Small Business Trade Concerns

The Office of the United States Trade Representative has created a new position to look out for the interests of small businesses in international trade. The new Assistant USTR for Small Business, Market Access and Industrial Competitiveness will be filled by Jim Sanford, "who now adds responsibility for small business issues to his existing portfolio and previous title of Assistant USTR for Market Access and Industrial Competitiveness," according to the USTR. Sanford's job will be to ensure that the federal government's trade policies "address challenges facing small exporters and promotes the global export opportunities these businesses need to create jobs here at home," says USTR Ron Kirk. Sanford joined the USTR in 1998, having served as an international economist at the Commerce Department. He has a Masters degree in public policy from the University of Michigan and a Bachelors degree from Swathmore College.

In Copenhagen, The U.S. Realized That Global Warming Negotiations Were All About Keeping Industrial Jobs, By William Hawkins

Understanding how the Copenhagen Accord that ended the UN Climate Conference in December is being implemented is essential to understanding why the "cap and trade" legislation that narrowly passed the U.S. House last summer is stalled in the Senate. Business lobbyists are now rallying to shift the focus of legislation from curbing energy use to control climate change to promoting expanded energy production to support economic growth and jobs creation.

The message from Copenhagen was that the UN process has never been about the weather. It has always been about economic growth within a highly competitive international arena. President Barack Obama confronted this fact during his personal diplomacy leading to the Accord. It was a game changer for the president. With the United States trying to drag itself out of the Great Recession, a recommitment to material progress and the creation of "jobs that can't be outsourced" has assumed top priority.

The Copenhagen conference was supposed to be the climax of two years of negotiations that started in Bali. The goal was a new treaty to replace the 1997 Kyoto Protocol that will expire in 2012. The plan had been to impose on the "rich" developed countries a requirement that greenhouse gas (GHG) emissions be cut by 25-to-40 percent by 2020 from 1990 levels. Such a drastic measure would have locked the developed countries into a permanent recession. Meanwhile, the developing countries, led by the BASIC (Brazil, South Africa, India and China) coalition, would not have had any mandated restrictions on their GHG emissions because they refuse to have any limits placed on their "right" to economic growth.

The two-track formula, where the developed countries (mainly the U.S., Europe and Japan) would have to do everything and the emerging powers would not have to do anything, was the basis of the Kyoto Protocol. In UN terminology it is called the principle of "common but differentiated responsibilities." It is why the United States under President George W. Bush refused to participate. The Obama administration held to the negotiating position of the Bush administration. The U.S. view is there should only be one track. The Obama administration spent 2009 trying to persuade China to accept mandated targets. The BASIC coalition insisted on the Kyoto precedent exempting them from targets. The conference collapsed over this fundamental conflict.

Into the void stepped President Obama who negotiated directly with BASIC. The Accord, which the full conference only "noted" and did not officially adopt, put matters on a one-track basis. No country would have mandates imposed on it. Each country would be free to pursue its own policies in its own interests. It would be the wide open competitive world that BASIC wanted; only with the United States in the game too.

Though the Accord continues to demarcate the developed (Annex I) and the developing (Non-Annex I) countries, the practical obligations are now the same. All countries need only list with the UN their voluntary targets for limiting GHG emissions every two years, and they will monitor their own implementation as a matter of sovereign right. The 25-to-40 percent GHG reduction target is now only a "recommendation" for the developed countries. The developing countries have a lesser "recommendation," a 15-to-30 percent cut from a "business as usual" (BAU) projections for 2020. Such an imprecise and vague standard renders national reporting meaningless. Even though the BASIC countries "communicated" their targets by the January 31 deadline set by the Accord, the UN Environmental Program (UNEP) cannot project how much of the UN goal is being met by the Non-Annex I states. For the Annex I states, pledges are running at less than half the UN recommendation and, even then, will not likely be fulfilled.

Looking at the attitude of the BASIC countries expressed in their pledges should keep the United States from adopting measures that would cripple it in global competition. Brazil has pledged a 36-to-39 percent reduction from the BAU scenario. But its main policy is "an 80 percent reduction in Amazon deforestation." In the energy sector, the reduction ranges only from 6.1-to-7.7 percent with a focus on efficiency and alternative fuels. Brazil's more meaningful target is for 5-to-6 percent annual economic growth.

The targets set by China and India use their own standard outside the UN framework. Beijing will "reduce the intensity of carbon dioxide emissions per unit of GDP in 2020 by 40 to 45 percent compared with the level of 2005." India has pledged a 20-to-25 percent reduction in "emission intensity" between 2005 and 2020. This means total GHG emissions will continue to grow as their economies expand. Chinese envoys stated this at the June UN climate meeting in Bonn. China and India will simply try to be more energy efficient, something they would be striving to do anyway.

Beijing's statement on the UNEP site declares, "This is a voluntary action taken by the Chinese government based on its own national conditions." The UNEP cites the assertion by Minister of State for Environment and Forests Shri Jairam Ramesh, "I have been saying time and again that India, of all the 192 countries in the world, owes a responsibility not to the world but to itself, to take climate change seriously. We are not doing the world a favor. Please forget Copenhagen; forget the UN. We have to do it in our own self-interest. Our future as a society is dependent on how we respond to the climate change challenge." Devoid of spin, New Delhi's response will be to put Indian development first.

The Copenhagen Accord did not create a competitive world where people strive to improve their condition, it just confirmed it. And in so doing, rejected the "limits to growth" model that the global Green movement had been pressing the UN to mandate. America must now act to protect its national interests as its rivals are doing. The Great Recession has given the public a taste of what negative economic growth means to living standards and career opportunities, financial stability and the survival of business firms.

Under the Accord, the Obama administration reported to the UNEP the GHG target set in pending Congressional legislation, a 17 percent reduction by 2020 from 2005 levels (which is only a 4 percent cut from 1990, the UN base year). The United States retains the freedom to decide how -- or even if, this goal will be met. The approach favored by Congress is no longer viable in the post-Copenhagen world. Imposing unilateral restrictions and higher costs on American economic activity will only cripple an already fragile national economy.

In his Feb. 3 address to State governors on energy policy, President Obama did not mention cap and trade, or any legislation. What he did say was, "I happen to believe that climate change is one of the reasons why we've got to pursue a clean energy agenda, but it's not the only reason. So even if you don't believe in the severity of climate change, as I do, you still should want to pursue this agenda. It's good for our national security and reducing our dependence on foreign oil. It's good for our economy because it will produce jobs. We can't afford to spin our wheels while the rest of the world speeds ahead." He also noted in regard to China and others, "they're very aggressive about wanting to make sure that these clean energy jobs are in their countries."

He went on to outline "a strategy of more production, more efficiency, and more incentives for clean energy. We're willing to make some tough decisions on issues like offshore drilling, so long as we protect coastlines and communities. We are moving forward on a new generation of nuclear power plants, although we want to make sure that they are safe and secure. One of the things that we're going to be talking about today is investing in the kind of technology that will allow us to use coal, our most bountiful natural resource here in the United States, without polluting our planet."

President Obama is treading a thin line. The Greens are a core element of the Democratic Party base. Many Green leaders have denounced the Accord as a failure and reject the idea of "clean" energy as a delusion. But there is a larger block of the public that gives material progress top priority.

In Copenhagen, the president was confronted with foreign governments that were working much harder to gain competitive advantages than to combat climate change. Reality has dictated a new course in energy and industrial policy from what was on the agenda when the Obama administration first entered office a year ago. Economic growth has regained its proper status as king of the hill.

— William Hawkins is a Washington based industry analyst who can be reached via HawkinsUSA@aol.com.

Senators Blame Commerce Department For Currency Inaction

Fifteen senators want the Department of Commerce to confront China for manipulating its currency. Sens. Charles Schumer (D-N.Y.) and Lindsey Graham (R-S.C.) and 13 others sent a letter to Commerce Secretary Gary Locke on Feb. 25 asking that he "launch an investigation into the U.S. manufacturing industry's allegations that China's actions with respect to its currency constitute a countervailable subsidy." Graham and Schumer were the original sponsors in 2003 of legislation (S-1586) that would have added a 27.5 percent duty on Chinese imports because of that country's manipulation of its currency. Graham and Schumer dropped the legislation after the Bush administration said it was making progress with China on the issue.

For the past eight years domestic manufacturers have argued to no avail that China's undervalued currency was destroying the foundation of the American economy. Congress has not considered any legislation aimed at ameliorating the currency distortion of the global trading system.

Now the 15 Senators are blaming the Commerce Department for the government's failure to act. "We write to express our serious concern that the Commerce Department has failed to properly consider allegations that China's manipulation of its currency is a countervailable subsidy," they write to Locke.

Schumer and Graham sent a similar letter to Locke on November 19, 2009, urging him to start an investigation into China's currency manipulation. Locke wrote back on December 22, in which he "assured the Senators that subsidy allegations involving China's currency practices would be assessed 'no differently than any other subsidy allegation,' " the senators note in their current letter. "The lack of agency action on this issue to date suggests otherwise."

Spurring the 15 senators was a case filed by U.S. paper producers on January 13, claiming the 21 percent increase of Chinese imports of coated paper between 2006 and 2008 was harming the industry. "As senators from key paper-product producing states, we are very concerned that domestic paper manufacturers and paper industry workers are substantially harmed by subsidized Chinese imports," they write. The increase of Chinese imports from $1.9 billion to $2.3 billion "is due in large part to substantial Chinese government subsidies," according to the letter. "Those government subsidies include China's continued devaluation of its currency vis-a-vis the U.S. dollar, a government policy designed to promote and fuel continued growth in export-oriented industries."

Senators signing the letter include: Charles Schumer (D-N.Y.), Lindsey Graham (R-S.C.), Robert Byrd (D-W.V.), Carl Levin (D-Mich.), Barbara Mikulski (D-Md.), Russ Feingold (D-Wisc.), Susan Collins (R-Maine), Olympia Snowe (R-Maine), Sam Brownback (R-Kansas), Jim Bunning (R-Ky.), Debbie Stabenow (D-Mich.), Ben Cardin (D-Md.), Sherrod Brown (D-Ohio), Bob Casey (D-Pa.) and Arlen Specter (D-Pa.).