Ecxecutive Session

EXECUTIVE SESSION

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Mr. ALEXANDER. Madam President, I congratulate the Senator from Oklahoma for making an obvious and compelling point, which is that the problem is high gasoline prices. Why is the Democratic solution to raise them more? That is all their tax would do.

The Republican plan for dealing with high gasoline prices is to find more American energy and use less. The Democratic plan seems to be to find less and tax more. That is not going to solve the problem. We need to use less. We agree with that.

There are a variety of ways to do that: through conservation and electric cars, which I favor, and finding research for crops--for alternative fuels from crops we don't need. More important, we need to find more American energy and natural gas offshore, on Federal lands, and in Alaska. That will not completely solve the problem of high gasoline prices, but it will help. If less oil from Libya is a factor in raising gasoline prices, more oil from the United States would be a factor in lowering gasoline prices. We are, after all, the third largest producer of oil in the world.

I thank the Senator from Oklahoma for an excellent point. The Democratic proposal is to find less American energy and to tax more.

NLRB AND BOEING

Madam President, I wish to speak about the events of the last few weeks that have followed the decision by the National Labor Relations Board general counsel to file a complaint against the Boeing Company, alleging basically that the fact that they are expanding their production of airliners at a new plant in South Carolina, which is a right-to-work State, is prima facie evidence of an unfair labor practice. This would, in effect, establish for the first time since the Taft-Hartley Act was passed in 1947, the idea that it is against the Federal law for a company that is producing in a union State to move or expand its facilities in a right-to-work State, of which there are 22.

We are talking about the first new plant in 40 years to build large airplanes. The Boeing Company builds most of its planes in Washington State. It is the Nation's largest exporter. It has 170,000 employees around the world, and 155,000 of them are employees in the United States. These are good jobs.

But at the Senate Health, Education, and Labor Committee hearing on Thursday, the general counsel of Boeing said the company expects to lose their appeal of the general counsel's complaint when it is heard before an administrative judge on June 14. Then they expect to lose the appeal of that decision to the National Labor Relations Board because the company assumes that the general counsel is following the same view of the law that the President's appointees on the NLRB are following. However, then Boeing expects to win the case when it goes to the U.S. court of appeals or, perhaps, even to the Supreme Court. But it will take 2 to 5 years for all that to happen.

I ask, what happens to American jobs in the meantime? Well, first, this complaint against Boeing will slow the number of good, new jobs into my State of Tennessee, which has a 9-percent unemployment rate, and it has had that for 2 years. I have watched our State grow over the last 30 years,

from the time I was Governor. We had a hearing last week that Senator Harkin called, chairman of the Health, Education, and Labor Committee, about middle-class incomes. What I said at the hearing was that the effect on middle-class income in Tennessee--the State I know the most about--is that 30 years ago we were the third poorest State. Because the auto industry chose to come to our State, partly because it was a central location in the population market and because it is a right-to-work State with a different sort of labor environment in it than other States--because the auto industry came to Tennessee, middle incomes have gone up.

One-third of the manufacturing jobs in our State are now auto jobs. Nissan is there. General Motors is there. Volkswagen just came there. Hundreds of suppliers have come to Tennessee. They like the environment. They like the road system. They like the central location. But they like the right-to-work law.

Suddenly any supplier or any manufacturer who wants to create a new facility in 1 of the 22 right-to-work States, including Tennessee, according to the National Labor Relations Board counsel, is going to have to think twice because that company, which could be a small company, may not want to spend 2 to 5 years before the National Labor Relations Board. I think this counsel knew exactly what he was doing. He was trying to freeze job expansion in the United States at a time when we need job expansion the most.

There is an unintended consequence to this. If jobs cannot move into Tennessee and other right-to-work States because of the Boeing complaint, they may not move into the States that do not have a right-to-work law. Why is that? According to Jim McNerney, the CEO of Boeing:

An unintended consequence of the Boeing complaint [is that] forward thinking CEOs also would be reluctant to place new plants in unionized States--lest they be forever restricted from placing future plants across the country.

If you want to put a plant in, say, Michigan, which is a unionized State, you might not do that because under the general counsel of the NLRB's rule of law, you then could not move to South Carolina or Tennessee or Arkansas or any other State with a right-to-work law.

If you cannot go to a unionized State, and if you cannot go to a right-to-work State, then where do you go if you want to make things? You go overseas. This action by the NLRB general counsel is the single most important action I can imagine that would make it more difficult to create good, new jobs in Tennessee and would make it more likely that manufacturing jobs would go overseas.

The President of the United States asked the chief executive of Boeing, Mr. McNerney, to chair the President's Export Council. I presume what President Obama would like for Mr. McNerney to do is to export airplanes, not export jobs. But what the NLRB ruling will do is cause the export of jobs, not the export of airplanes.

Boeing has 170,000 employees. About 90 percent of them are in the United States. But Boeing sells its airplanes everywhere in the world, and Boeing can make its airplanes anywhere in the world. There may be other countries that come to Boeing and to other manufacturers in the United States and say: We want you to make in our country what you sell in our country. After this NLRB decision, they may be more tempted to do that.

Fortunately, there are other trends suggesting that manufacturing companies around the world may be more likely in the next few years to make here what they sell in the United States. That is what President Carter said to the Governors 30 years ago: Governors, go to Japan. Persuade them to make in the United States what they sell in the United States. Off I went to Tokyo. I asked Nissan to come to Tennessee, as most States. They chose us because of our central location and right-to-work law, just as other auto jobs have done that. Nissan tells me soon 85 percent of what they sell in the United States will be made in the United States. Thirty years ago they were making almost none of what they sold in the United States in the United States. They were making it in Japan. We were worried then Japan was going to take us over. That has changed. Now they are making here what they sell here.

The Economist article this week says there may be a manufacturing renaissance coming. What is happening in China where they are making things today is a lot like what happened in Japan 30 years ago. As China becomes more prosperous, wages will go up. As Japan became more prosperous 30 years ago, wages went up. In the auto industry, where wages only constitute maybe 20 percent of the total cost of what a supplier may have to spend to make a part for a Volkswagen assembly plant, wages get to be less important.

People look at other things. Manufacturing would look at a variety of actions by a government before the manufacturer decides where to make the airplane or where to make the car or where to make the appliance that might be sold in a country.

They are going to have plenty of incentives naturally to make a lot of products in the United States because the country that produces 25 percent of all the money in the world, which we do, is going to be buying a lot of stuff unless we do our best to throw a big wet blanket on making here what we sell here, which is precisely what this administration has been doing.

We have a high corporate income tax. Give the President the credit. He said maybe we want to change that. We should because it makes it better for manufacturers to make products overseas.

The health care law takes profits away from companies that they might use to create new jobs here. I have had heads of restaurant companies tell me they are not going to invest anymore in the United States because the health care taxes take away all of their profits. Regulations make credit harder to get, and regulations drive up energy and gasoline prices. All of this makes it harder to make here what manufacturers sell here.

Now we have a regulation from the National Labor Relations Board that may have the effect of law for 2 to 5 years that says it is prima facie evidence of an unfair labor practice if a company that is producing in a union State expands or moves to a right-to-work State. This is an assault on every middle-income Tennessean and on millions of middle-income Americans who have manufacturing jobs--certainly, everyone in the 22 right-to-work States. But as the Boeing chief executive said, it could be just as much of a disincentive to a State such as Michigan or Illinois or some other State that does not have a right-to-work law because why would you put a plant in Michigan if later you would not be allowed to put it in Tennessee?

If General Motors has plants in both right-to-work and non-right-to-work States, we are going to make it more difficult for General Motors to expand in America. Where are they going to expand? They can expand overseas. They can be making there what they sell there instead of making it here.

Some of my friends on the other side of the aisle like to talk about outsourcing jobs. This is the mother of all outsourcing jobs plan--the idea that it is prima facie evidence for a company that expands in a right-to-work State, that is an unfair labor practice.

For the next 2 to 5 years, we have the unhealthy situation for jobs that any manufacturer who wants to expand will have to think twice about expanding in a right-to-work State and then think at least once about coming in the first place to a State that does not have a right-to-work law. The only other option I can see for those jobs is to make them overseas. That will not only slow job growth in the United States where we desperately need it, but it will be speeding up the sending of American jobs overseas.

Madam President, I ask unanimous consent to have printed in the Record two articles--one by George Will this week on the South Carolina Boeing plant and the action of the National Labor Relations Board complaint, and the second, an article from the Economist magazine.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

[From The Economist, May 12, 2011]

Multinational Manufacturers--Moving Back to America

THE DWINDLING ALLURE OF BUILDING FACTORIES OFFSHORE

``When clients are considering opening another manufacturing plant in China, I've started to urge them to consider alternative locations,'' says Hal Sirkin of the Boston Consulting Group (BCG). ``Have they thought about Vietnam, say? Or maybe [they could] even try Made in USA?'' When clients are American firms looking to build factories to serve American customers, Mr. Sirkin is increasingly likely to suggest they stay at home, not for patriotic reasons but because the economics of globalisation are changing fast.

Labour arbitrage--taking advantage of lower wages abroad, especially in poor countries--has never been the only force pushing multinationals to locate offshore, but it has certainly played a big part. Now, however, as emerging economies boom, wages there are rising. Pay for factory workers in China, for example, soared by 69% between 2005 and 2010. So the gains from labour arbitrage are starting to shrink, in some cases to the point of irrelevance, according to a new study by BCG.

``Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,'' says Mr. Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.

The year 2015 is not far off. Factories take time to build, and can carry on cranking out widgets for years. So firms planning today for production tomorrow are increasingly looking close to home. BCG lists several examples of companies that have already brought plants and jobs back to America. Caterpillar, a maker of vehicles that dig, pull or plough, is shifting some of its excavator production from abroad to Texas. Sauder, an American furniture-maker, is moving production back home from low-wage countries. NCR has returned production of cash machines to Georgia (the American state, not the country that is occasionally invaded by Russia). Wham-O last year restored half of its Frisbee and Hula Hoop production to America from China and Mexico.

BCG predicts a ``manufacturing renaissance'' in America. There are reasons to be sceptical. The surge of manufacturing output in the past year or so has largely been about recovering ground lost during the downturn. Moreover, some of the new factories in America have been wooed by subsidies that may soon dry up. But still, the new economics of labour arbitrage will make a difference.

Rather than a stampede of plants coming home, ``higher wages in China may cause some firms that were going to scale back in the U.S. to keep their options open by continuing to operate a plant in America,'' says Gary Pisano of Harvard Business School. The announcement on May 10th by General Motors (GM) that it will invest $2 billion to add up to 4,000 jobs at 17 American plants supports Mr. Pisano's point. GM is probably not creating many new jobs but keeping in America jobs that it might otherwise have exported.

Even if wages in China explode, some multinationals will find it hard to bring many jobs back to America, argues Mr. Pisano. In some areas, such as consumer electronics, America no longer has the necessary supplier base or infrastructure. Firms did not realise when they shifted operations to low-wage countries that some moves ``would be almost irreversible'', says Mr Pisano.

Many multinationals will continue to build most of their new factories in emerging markets, not to export stuff back home but because that is where demand is growing fastest. And companies from other rich countries will probably continue to enjoy the opportunity for labour arbitrage for longer than American ones, says Mr. Sirkin. Their labour costs are higher than America's and will remain so unless the euro falls sharply against the yuan.

THERE'S NO PLACE LIKE HOME

The opportunity for labour arbitrage is disappearing fastest in basic manufacturing and in China. Other sectors and countries are less affected. As Pankaj Ghemawat, the author of ``World 3.0'', points out, despite rapidly rising wages in India, its software and back-office offshoring industry is likely to retain its cost advantage for the foreseeable future, not least because of its rapid productivity growth.

Nonetheless, a growing number of multinationals, especially from rich countries, are starting to see the benefits of keeping more of their operations close to home. For many products, labour is a small and diminishing fraction of total costs. And long, complex supply chains turn out to be riskier than many firms realised. When oil prices soar, transport grows dearer. When an epidemic such as SARS hits Asia or when an earthquake hits Japan, supply chains are disrupted. ``There has been a definite shortening of supply chains, especially of those that had 30 or 40 processing steps,'' says Mr. Ghemawat.

Firms are also trying to reduce their inventory costs. Importing from China to the United States may require a company to hold 100 days of inventory. That burden can be handily reduced if the goods are made nearer home (though that could be in Mexico rather than in America).

Companies are thinking in more sophisticated ways about their supply chains. Bosses no longer assume that they should always make things in the country with the lowest wages. Increasingly, it makes sense to make things in a variety of places, including America.

--

[May 13, 2011]

The Dreamliner Nightmare
(By George Will)

NORTH CHARLESTON, S.C.--This summer, the huge Boeing assembly plant here will begin producing 787 Dreamliners--up to three a month, priced at $185 million apiece. It will, unless the National Labor Relations Board, controlled by Democrats and encouraged by Barack Obama's reverberating silence, gets its way.

Last month--17 months after Boeing announced plans to build here and with the $2 billion plant nearing completion--the NLRB, collaborating with the International Association of Machinists and Aerospace Workers (IAM), charged that Boeing's decision violated the rights of its unionized workers in Washington state, where some Dreamliners are assembled and still will be even after the plant here is operational. The NLRB has read a 76-year-old statute (the 1935 Wagner Act) perversely, disregarded almost half a century of NLRB and Supreme Court rulings, and patently misrepresented statements by Boeing officials.

South Carolina is one of 22--so far--right-to-work states, where workers cannot be compelled to join a union. When in September 2009, Boeing's South Carolina workers--fuselage sections of 787s already are built here--voted to end their representation by IAM, the union did not accuse Boeing of pre-vote misbehavior. Now, however, the NLRB seeks to establish the principle that moving businesses to such states from non-right-to-work states constitutes prima facie evidence of ``unfair labor practices,'' including intimidation and coercion of labor. This principle would be a powerful incentive for new companies to locate only in right-to-work states.

The NLRB complaint fictitiously says Boeing has decided to ``remove'' or ``transfer'' work from Washington. Actually, Boeing has so far added more than 2,000 workers in Washington, where planned production--seven 787s a month, full capacity for that facility--will not be reduced. Besides, how can locating a new plant here violate the rights of IAM members whose collective bargaining agreement with Boeing gives the company the right to locate new production facilities where it deems best?

The NLRB says that Boeing has come here ``because'' IAM strikes have disrupted production and ``to discourage'' future strikes.

Since 1995, IAM has stopped Boeing's production in three of five labor negotiations, including a 58-day walkout in 2008 that cost the company $1.8 billion and a diminished reputation with customers.

The NLRB uses meretricious editing of Boeing officials' remarks to falsely suggest that anti-union animus motivated the company to locate some production in a right-to-work state. Anyway, it is settled law that companies can consider past strikes when making business decisions to diminish the risk of future disruptions.

The economy is mired in a sluggish recovery. But the destructive--and self-destructive--Obama administration is trying to debilitate the world's largest aerospace corporation and the nation's leading exporter, which has 155,000 U.S. employees and whose 738 million shares are held by individual and institutional investors, mutual funds and retirement accounts. Why? Organized labor, primarily and increasingly confined to government workers, cannot convince private-sector workers that it adds more value to their lives than it subtracts with dues and work rules that damage productivity. Hence unions' reliance on government coercion where persuasion has failed.

The NLRB's complaint is not a conscientious administration of the law; it is intimidation of business leaders who contemplate locating operations in right-to-work states. Labor loathes Section 14(b) of the 1947 Taft-Hartley Act, which allows states to pass right-to-work laws that forbid compulsory unionization. But 11 Democratic senators represent 10 of the right-to-work states: Mark Pryor (Arkansas), Bill Nelson (Florida), Tom Harkin (Iowa), Mary Landrieu (Louisiana), Ben Nelson (Nebraska), Harry Reid (Nevada), Kay Hagan (North Carolina), Kent Conrad (North Dakota), Tim Johnson (South Dakota), and Jim Webb and Mark Warner (Virginia). Do they support the Obama administration's attempt to cripple their states' economic attractiveness?

The NLRB's attack on Boeing illustrates the Obama administration's penchant for lawlessness displayed when, disregarding bankruptcy law, it traduced the rights of Chrysler's secured creditors. Now the NLRB is suing Arizona and South Dakota because they recently, and by large majorities, passed constitutional amendments guaranteeing the right to secret ballots in unionization elections--ballots that complicate coercion by union organizers.

Just as uncompetitive companies try to become wards of the government (beneficiaries

of subsidies, tariffs, import quotas), unions unable to compete for workers' allegiance solicit government compulsion to fill their ranks. The NLRB's reckless attempt to break a great corporation, and by extension all businesses, to government's saddle--never mind the collateral damage to the economy--is emblematic of the Obama administration's willingness to sacrifice the economy on the altar of politics.

--

[From the Wall Street Journal, May 11, 2011]

Boeing Is Pro-Growth, Not Anti-Union
(By Jim McNerney)

Deep into the recent recession, Boeing decided to invest more than $1 billion in a new factory in South Carolina. Surging global demand for our innovative, new 787 Dreamliner exceeded what we could build on one production line and we needed to open another.

This was good news for Boeing and for the economy. The new jetliner assembly plant would be the first one built in the U.S. in 40 years. It would create new American jobs at a time when most employers are hunkered down. It would expand the domestic footprint of the nation's leading exporter and make it more competitive against emerging plane makers from China, Russia and elsewhere. And it would bring hope to a state burdened by double-digit unemployment--with the construction phase alone estimated to create more than 9,000 total jobs.

Eighteen months later, a North Charleston swamp has been transformed into a state-of-the-art, green-energy powered, 1.2 million square-foot airplane assembly plant. One thousand new workers are hired and being trained to start building planes in July.

It is an American industrial success story by every measure. With 9% unemployment nationwide, we need more of them--and soon.

Yet the National Labor Relations Board (NLRB) believes it was a mistake and that our actions were unlawful. It claims we improperly transferred existing work, and that our decision reflected ``animus'' and constituted ``retaliation'' against union-represented employees in Washington state. Its remedy: Reverse course, Boeing, and build the assembly line where we tell you to build it.

The NLRB is wrong and has far overreached its authority. Its action is a fundamental assault on the capitalist principles that have sustained America's competitiveness since it became the world's largest economy nearly 140 years ago. We've made a rational, legal business decision about the allocation of our capital and the placement of new work within the U.S. We're confident the federal courts will reject the claim, but only after a significant and unnecessary expense to taxpayers.

More worrisome, though, are the potential implications of such brazen regulatory activism on the U.S. manufacturing base and long-term job creation. The NLRB's overreach could accelerate the overseas flight of good, middle-class American jobs.

Contrary to the NLRB's claim, our decision to expand in South Carolina resulted from an objective analysis of the same factors we use in every site selection. We considered locations in several states but narrowed the choice to either North Charleston (where sections of the 787 are built already) or Everett, Wash., which won the initial 787 assembly line in 2003.

Our union contracts expressly permit us to locate new work at our discretion. However, we viewed Everett as an attractive option and engaged voluntarily in talks with union officials to see if we could make the business case work. Among the considerations we sought were a long-term ``no-strike clause'' that would ensure production stability for our customers, and a wage and benefit growth trajectory that would help in our cost battle against Airbus and other state-sponsored competitors.

Despite months of effort, no agreement was reached. Union leaders couldn't meet expectations on our key issues, and we couldn't accept their demands that we remain neutral in all union-organizing campaigns and essentially guarantee to build every future Boeing airplane in the Puget Sound area. In October 2009, we made the Charleston selection.

Important to our case is the basic fact that no existing work is being transferred to South Carolina, and not a single union member in Washington has been adversely affected by this decision. In fact, we've since added more than 2,000 union jobs there, and the hiring continues. The 787 production line in Everett has a planned capacity of seven airplanes per month. The line in Charleston will build three additional airplanes to reach our 10-per-month capacity plan. Production of the new U.S. Air Force aerial refueling tanker will sustain and grow union jobs in Everett, too.

Before and after the selection, we spoke openly to employees and investors about our competitive realities and the business considerations of the decision. The NLRB now is selectively quoting and mischaracterizing those comments in an attempt to bolster its case. This is a distressing signal from one arm of the government when others are pushing for greater openness and transparency in corporate decision making.

It is no secret that over the years Boeing and union leaders have struggled to find the right way to work together. I don't blame that all on the union, or all on the company. Both sides are working to improve that dynamic, which is also a top concern for customers. Virgin Atlantic founder Richard Branson put it this way following the 2008 machinists' strike that shut down assembly for eight weeks: ``If union leaders and management can't get their act together to avoid strikes, we're not going to come back here again. We're already thinking, `Would we ever risk putting another order with Boeing?' It's that serious.''

Despite the ups-and-downs, we hold no animus toward union members, and we have never sought to threaten or punish them for exercising their rights, as the NLRB claims. To the contrary, union members are part of our company's fabric and key to our success. About 40% of our 155,000 U.S. employees are represented by unions--a ratio unchanged since 2003.

Nor are we making a mass exodus to right-to-work states that forbid compulsory union membership. We have a sizable presence in 34 states; half are unionized and half are right-to-work. We make decisions on work placement based on business principles--not out of emotion or spite. For example, last year we added new manufacturing facilities in Illinois and Montana. One work force is union-represented, the other is not. Both decisions made business sense.

The world the NLRB wants to create with its complaint would effectively prevent all companies from placing new plants in right-to-work states if they have existing plants in unionized states. But as an unintended consequence, forward-thinking CEOs also would be reluctant to place new plants in unionized states--lest they be forever restricted from placing future plants elsewhere across the country.

U.S. tax and regulatory policies already make it more attractive for many companies to build new manufacturing capacity overseas. That's something the administration has said it wants to change and is taking steps to address. It appears that message hasn't made it to the front offices of the NLRB.

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