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Robert Kagan makes the case for continued leadership of the U.S as a champion of liberal democracy and free trade, as the view that it will just happen in a multipolar world of China, India, the U.S. and Europe, is not credible. The existing democracies- India, Brazil, Turkey, S. Africa, Australia -are weak and lack the experience to provide this leadership. India and China could easily end up in rivalry in a multipolar world. This has implications for today. The U.S. cannot provide this leadership as a services economy- it needs a strong manufacturing base to do this. Lessening inequality was a hallmark of the progress made in the 20th century, and especially the six decades since World War II when the U.S. clearly exercized this leadership. The progress to European unity was another hallmark of these six decades. A healthy Japan was also part of this.

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Galston of the Brookings Institution says globalization has hurt workers in manufacturing with job losses and declining incomes. It has produced outcomes that have favored some industries such as tech, and not others such as automobiles which in the past helped create the broad middle class by offering good paying jobs to people with less than a college education. Immigration has created an issue that political leaders outside of the main parties have appealed to in France, the U.S. and Britain. The result is a polarization in the voters that has rarely been seen to this extent before. The middle class in the period from the 1950's to the 1980's is not the middle class that we see today in Europe and the U.S. The 2008 financial crisis added to the problems with the slow and uncertain recovery for some groups such as white men, the less educated, students, and people on minimum wage. 

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The limited options the US has to get China to appreciate the value of its currency, the yuan. Some of the options depend on getting the IMF or the WTO to prod the Chinese, others depend on a Plaza type Accord.

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U.S. Vice President Biden and Vice President Xi Jinping visited a high school in Dujianyan, in Sichuan province, China. Xi Jinping is expected to be the new President of China in 2013. This is the first time he has spent extensive time with a U.S. leader. Xi Jinping shared his experiences of meeting with ordinary citizens with Joe Biden. Xi's daughter is a student at Harvard University. He showed considerable interest in the political situation and debt ceiling negotiations in the U.S. Li Keqiang, who is close to Premier Wen Biao, is expected to become prime minister of China in 2013. Li gave a speech to students at the University of Hong Kong during the Biden visit with Jinping, and at one point talked to students in English.

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A joint article by Robert Rubin, Clinton era Treasury Secretary and Jared Bernstein of the Economic Policy Institute. Rubin was senior adviser to Citigroup during the period that Citigroup leveraged itself and invested in lower quality securities that have left the firm exposed to substanital losses, and led to hiring a new CEO Vikram Pandit to clean up the mess. And this may explain the joint article with a less well known economist Jared Bernstein, and the tentative nature of their advice as the two differ on the important issue of long term fiscal deficits and still agree on investing heavily in healthcare, education infrastructure, worker training and energy. In a short recession they may be complementary and you could have the best of both worlds as in the other postwar recessions. But this is unlike any of the postwar recessions and is shaping up to be a long and deep downturn unlike anything seen in the postwar period. That Rubin does not even mention this shows that probably he is out of touch, as he was during his years when Citigroup was acting much like the other banks that were in serious trouble this year. Some of the decisions for lax regulation during the Clinton years were taken with the support of Rubin and Greenspan. What Rubin calls the longest expansion could have been for the most part good fortune and a steady period for the economy with Rubin's contribution being fiscal discipline, stewardship of the Mexican rescue package and committment to free trade policies, but not facing upto huge headwinds in the economy that required challenging leadership and judgement. Here Rubin mentions nothing that suggests bold vision and judgement, instead hoping that old policies that worked during the good times would somehow work today. And on some issues like labor being squeezed and getting a smaller portion of the economic pie with no support for unionization, a drop in the number of unionized workers and weakened labor bargaining strength, Rubin who now sees this as a bad trend for the working middle class incomes, did little in his years in the Clinton administration to reverse or slow this trend. He cites productivity growth of 20% from 2000 to 2007, and yet the real income of working age middle class households was falling $2000 or 3%. ...

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Jeffrey Immelt of GE makes a critical point in this op-ed article- that the concept of the US transitioning from a technology-based, export-oriented economic powerhouse to a services-led, consumption based economy was a bad idea because it would lead to a loss of jobs, prosperity and prestige. Immelt calls it "fundamentally wrong." In this piece he makes the point repeatedly and takes his role as head of the President's Council on Jobs and Competitiveness seriously, saying that there is nothing inevitable about the decline of manufacturing in America, that it can and must be reversed. For over two decades business leaders have taken a complacent attitude about the effects of a continued decline of manufacturing in America and the loss of jobs in the US, even as they built plants and expanded overseas. Now for the first time Immelt articulates a new policy for government and business leaders. He says businesses should invest more in advanced products and technologies that create jobs in the US. In doing this he joins Intel's Andy Grove and other business leaders who expressed a growing frustration with the pessimism that this loss of jobs and competitiveness is creating among young people in the US, and the cloud it is creating about America's future. Immelt adds that it is imperative to care about what happens at home in the US, and the growing pessimism that lack of jobs growth in the US creates should not be accepted....

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Mike McNamara, CEO of Flextronics, on the increasing competitiveness of U.S. manufacturing and the return of manufacturing jobs to the U.S.

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Difficult conditions for public sector unions as state governors work to reduce deficits. A weak economy leads to concessions by private sector unions in 2010-2013. This is one of the most difficult periods in union history following the financial crisis of 2008 and large job losses in many industries, especially the auto industry. Maher describes conditions in different industries including telecom, auto, airlines oil, retail,and rail.

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The Japanese yen surged in value following the 2008 financial crisis as it was seen as a safe haven. As a result the Korean won declined by 42% against the Japanese yen. This continued till 2012. Japanese companies had to compete overseas at 80 yen to the dollar and shifted operations overseas. Now with the policy of monetary expansion of the Japanese central bank the situation is reversed in December 2014. The Korean won is up 40% against the Japanese yen since 2012. The Japanese yen is now down to 118 to the dollar in Dec. 2014. Abenomics gets a new mandate with the snap election in Dec. 2014. Aaron Back says Samsung may have gained ground in televisions and smartphones but other areas in electronics such as chips, displays and image sensors remain competitive and responsive to price. In autos Hyundai market share has declined to 4.4% by Dec. 2014 from 5.1% in 2011, according to MotorIntelligence.com. So far Japanese companies have used the currency advantage to improve profits and come up with better products. By using profits to invest in new technology and productivity Japanese companies can provide more features at the same price points to gain market share without having to cut price. After years of declining margins in electronics, autos and other markets this appears to be the current strategy. Another reason for this is that Japanese companies have already shifted production overseas, the shift being higher for Honda than for Toyota. Technological improvements from investments in R&D in Japan can be transferred to manufacturing operations overseas just as Apple is doing with smartphones manufacturing in China. The currency shift also improves Japan's position relative to American and European competitors in international markets....

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For every 10 yen change in the exchange rate, profits of exporters are likely to increase by 7-10%, according to Goldman Sachs. This includes companies such as Toyota, Sharp, Panasonic, Sony and Asahi Group Holdings.

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A Wall Street Journal/NBC poll conducted in September 2010 shows a big change in public opinion in the US towards outsourcing of production and on free trade agreements. Poll respondents were asked "Do you think free-trade agreements have helped or hurt the US?" The response in 1999 was close to 30% for those who said hurt and those saying helped. By 2005 the curves diverged seriously with more people saying that it hurt and fewer saying it helped. In 2010 this swing is sharp with about 50% saying it hurts the US and only about 10% saying it helps. When asked "Do you agree or disagree that outsourcing of production and manufacturing work to foreign countries is a reason the U.S. economy is struggling and more people are not being hired?" the response is overwhelmingly agreeing that this is bad for the U.S. job situation. The answers are the same across party affiliation, in fact higher for Republicans than Democrats 90% to 84%, higher by income level with 93% for those making over $75,000 agreeing and 86% for those making less than 75,000 agreeing, 93% of professionals and managers agree compared to 89% white collar and 83% blue collar agreeing. This shows all segments of society agree that that the manner in which free trade and outsourcing of production is taking place is not helping the U.S., and this time the highly educated segments are leading the way. Bill McInturff, the Republican pollster who helped do the survey points to the big change in the way well educated and upper income people perceive free trade agreements. In 1999 only 24% of this group making over $75,000 said free trade hurt the U.S., now 50% of this group says it hurts the US. This is sure to lead to big changes in U.S. trade and currency issues with China and other countries. ...

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50% of European CFO's surveyed by CFO magazine and 60% of Asian CFO's think the dollar decline is permanent devaluation compared to a third of US CFO's. The Commerce Dept figures show January exports 16.6% higher than a year earlier, and the trade deficit down by 7% in 2007 vs 2006 which will accelerae in 2008 with the larger dollar decline. As long as European and Asian economies continue to grow a bit slowly but not in a recession like the US the positive effect of growing exports should continue. So far for the last 6 quarters according to the WSJ exports have contributed 1 percentage point on average to economic growth measured at annual rate while the housing slump has subtracted just over one percentage point on average. So this is no small feat for exports and it has helped make the economy more resilient to the shocks of housing and oil price. As long as the growth overseas is not affected to a great extent by the economic slowdown in the US exports can continue to play this role. As the housing crisis is primarily a US and UK phenomenon this should not seruiously damage the economies of Asia and Europe and their ability to take in US exports....

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Supply chains are unraveling in many industries with the tariffs imposed by president Trump on imports from China, and renegotiated trade deals with South Korea and other countries. The growth in the value of foreign value added was possible with cuts in tariffs in the period after 1990 and the emergence of China as a low cost manufacturer with cheap labor. Foreign value added increased from 20% in 1990 to 30% in 2011. The impact on factory towns and communities in the U.S. of trade in which the U.S. manufacturing declined as it shifted to China resulted in the surge in support for president Trump. The tariffs war with China is an effort to correct this imbalance. The result is a shift in supply chains away from China in some industries and gradual shift in others. Rising wages in China had already resulted in early shifts and the the environmental costs adding to this trend. President Trump temporarily suspended a threatened imposition of duties of 25% on $325 billion of Chinese imports. A renegotiated Nafta agreement with Mexico for automobile production and determination of U.S. based content and wages was designed to reset the relationship with Mexico and the auto supply chain for production in Mexico. A threat of tariffs on European auto imports to the U.S. is set for a decision in November. The trade dispute between Japan and South Korea and threat of tariffs also shows the effect this is having in other countries. With the U.S. looking at its own interest in the global supply chain and its advantage or disadvantage, industries and companies are not free to make decisions based on which country offers the best arrangement and deal for manufacturing. Notions of competitive advantage in the tech race with China are affecting the way the U.S. and European nations are acting. ...

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Close to half of the respondents in the 2010 Annual Survey of the American Chamber of Commerce in Shanghai, say that they face regulators who show a preference for domestic companies. About 80% of respondents said their operations were profitable in 2010. In 1999, 58% of Shanghai members of the chamber said their profit margins were below worldwide levels. In 2010, 78% said their profit margins matched world levels. Just under half of the respondents said they feared a negative impact from China's effort to build "indigenous innovation" and encourage domestic champions in each industry. 63.1% of respondents say regulations are getting worse or staying the same. Chinese President Hu on a state visit to the US in January 2011 is presenting the idea of a level playing field for American companies.

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Research by Matthew Slaughter of Dartmouth shows that only 4% of all American firms and 15% of American manufacturers export. Overall 80% of America's trade is conducted by just 1% of the firms that export or import. Exports as a share of GDP are 10.9% in 2009, much lower than other exporting countries. These numbers will increase as America focusses on exports to rebalance the economy.