How Nightline Blew the iSweatShop Story

While Nightline's Bill Weir is busy patting himself on the back for being the first to publicly report from inside Apple's iSweatShop in Shenzhen, China, he really needs to understand just how bad he blew that story. Memo to Bill and Nightline:

You cannot really talk about why Apple products are produced in Shenzhen rather than Portland or Seattle or Los Angeles without dealing with the most important source of China's competitive edge: Its unfair trade practices. China uses five major unfair trade practices -- what I rightly call its "weapons of job destruction" -- to tilt the global factory floor away from American workers, and for more than a decade now our political leadership has done nothing about it.

The most potent of these weapons of job destruction is China's currency manipulation -- a grossly undervalued yuan pushes companies like Apple and Caterpillar and GE offshore while simultaneously acting as a lucrative subsidy to iPads sold into the U.S. and a heavy tariff on American goods exported to China. This currency manipulation not only harms America, it is also administering one of the biggest economic screw jobs in global history to Asian competitors like Japan and South Korea and Vietnam along with virtually all of Europe. Barack Obama promised to end this practice while campaigning in 2008 but he has refused now on at least six different occasions since taking office to brand China a currency cheater.

A second powerful weapon is that of illegal export subsidies. Manufacturers like Foxconn get all manner of tax breaks, rebates, and subsidies for land, capital and energy -- and every single one is illegal under current fair trade rules. Check out this video interview Autry filmed when he had the opportunity to ask the right questions inside Foxconn City more than a year ago before Nightline's "exclusive." The Foxconn manager admits that "The government even constructed the buildings for free... that's because of Apple, not because of Foxconn." No wonder we aren't building Macs or iPhones in San Jose.

Still a third weapon is China's counterfeiting and piracy. The abiding fact here is that research and development and building brands costs a lot of dough and if Chinese competitors don't have to pay those costs, they get a competitive edge.

As for the fourth weapon of job destruction, that's the unrestricted ability of a Chinese manufacturer to "pollute for profits." If a company like Foxconn can foul the air and water with abandon in a metropolis like Shenzhen, that's a competitive edge over a plant built-in Portland.

The fifth weapon of job destruction is the only one that Bill Weir covered, albeit in a half-assed way. It's not just that these workers hit the assembly line for 16 hour days, seven days a week. They also get beaten or jailed if they try to organize their workplace.

When you add up all of China's advantages from cheating, it's no wonder that all the jobs are in cities like Shenzhen and Chengdu and Chongqing rather than Dayton or Charlotte or Youngstown. What's so disturbing isn't just Foxconn -- which sadly, is probably the very best factory in China -- it's that American corporate executives are so willing to take advantage of the Chinese people to make a buck while gutting this nation. The fact that a journalist from a reputable program like Nightline completely missed the underlying economics of trade with China is just damn depressing.

Wake up America. We are being sold down the Yangtze River both by the media and our political and business leaders.

And Nightline, any time you want the real story give me or Greg Autry or Clyde Prestowitz or Richard McCormack or Ian Fletcher or Dan Slane a call. We'd be happy to set you and your viewers straight.

Peter Navarro is the co-author of Death By China and the Executive Producer of the forthcoming documentary film based on that book.

Greg Autry is the co-author of Death by China and serves as Senior Economist for the American Jobs Alliance.