Our nation faces rising unemployment, staggering debts, shrinking trade, and no sense of when (and if) a real recovery -- one that reaches Main Street and working families -- will take hold.
As the federal government responds to these concerns, and especially since President Obama was sworn in, shrill warnings against protectionist measures have been issued by editorial pages and foreign officials. The specter of widening and deepening the current recession, or returning to 1930s Smoot-Hawley trade policies, has been repeatedly invoked.
But American protectionism is a myth. If one wishes to point fingers, they should be directed toward Beijing, Tokyo, Brussels, and Seoul, where mercantilism and subsidies still reign supreme.
This is the untold story of protectionism: the barriers that other governments erect to block American goods and the mercantilist measures they utilize to gain market share in the U.S. These practices range from China's currency misalignment and massive industrial subsidies to non-tariff barriers in Korea and Japan. All these impediments have been well documented by U.S. trade officials, but the mere act of identifying these practices is now viewed as protectionism, even though taking action to eliminate them would expand world trade, reduce global imbalances and preserve the free market.
The obsession with American protectionism is nothing more than a diversion from the real questions that need to be answered. How do we end global imbalances and achieve a balance between our exports and imports? How do we revitalize our nation's manufacturing sector, which is responsible for a large share of America's innovation and production? How do we begin growing jobs again in this difficult business environment?
Congress took a very small step forward in the stimulus package passed in February by requiring some materials used in infrastructure projects to be sourced domestically to the extent permitted by U.S. trade obligations. The value of the materials affected is only a small fraction of the $4 trillion in two-way trade that crosses the U.S. border annually, but it is providing a much-needed boost to the American manufacturing sector. Contrary to widely held perceptions, this Buy America rule is not a new requirement, nor does it make America a renegade nation.
Buy America has served as an effective jobs generator and a smart economic policy for decades. It applied to materials used in the construction of the interstate highway system in the 1950s. In the midst of a recession during the early 1980s, President Reagan signed legislation that strengthened Buy America requirements. Some sort of domestic sourcing requirement has applied to most major infrastructure expenditures passed by Congress since World War II, so it would have been a surprise if a requirement had not been attached to the stimulus spending.
And Buy America can create good jobs. A study prepared earlier this year by economists at the University of Massachusetts at Amherst estimates that strong domestic sourcing requirements create about one-third more manufacturing jobs than otherwise would be the case.
In fact, Buy America won't just help the United States. For example, because of integration, the provision works to the benefit of the entire North American steel and auto industry, including in Canada.
Buy America policies also reward other nations with reciprocal government procurement agreements by exempting them from certain types of restrictions. Current procurement rules allow states and some localities to opt out of reciprocal obligations, leaving decision-making in the hands of local officials, who know far better than bureaucrats in Geneva or Washington what is best for their local economies.
There will never be a repeat of the Smoot-Hawley tariffs, at least not in America. We have not asked for sky-high tariffs. We have not asked for domestic procurement measures that violate our trade obligations. But we will continue to insist that countries like China honor the commitments they made to gain access to our market and stop their cheating, and we will work with Congress to ensure that tax dollars devoted to infrastructure spending are reinvested in the American economy.
The success of American manufacturing depends on a fair application of international trade rules. Buy America is fully consistent. But the market-distorting practices emanating from places like China are not. Let's stop protectionism where it really festers.
Follow Scott Paul on Twitter: www.twitter.com/ScottPaulAAM
We also need a solid countrol on energy costs, as energy does higher our jobs drop. The Auto industry has been the backbone of our economy for 90 years and when oil went through the roof in the 70's it took a toll on the US as a whole and took years to recover, history is repeteing itself with oil prices and their effect on us. Im the 70's auto companies tried to make smaller cars mainly by importing them this started us down the path we are on today. Auto companies want to import smaller cars and the government is allowing it.
STAND UP AMERICA and demand jobs. not imports
The beneficiaries of this lop-sided arrangement are cutting their own throats for short term gains and the longer term results will eventually put them in the same basket.
Some suggest comparitive advantage. The US supplies the technology and the Third World supplies the labor. However, the Third World, mostly China, just steals the technology anyway so what is the advantage? Assumptions that foreign governments are fair and reasonable is a delusion. They are not and they will hang you from the nearest tree.
Yeah, welcome to the global economy...
We should addrss these advantages. They are extensively detailed in a new book, "Manufacturing A Better Future For America," edited by Richard McCormack. There's a chapter on Foreign Incentives by Peter Navarro, author of the book, "The Coming China Wars." It includes this, explaining why the U.S. market has been flooded by Chinese pipe, virtually killing U.S. steel pipe manufacturers:
"In November 2006 and in April 2007, China reduced export VAT (Value Added Tax) rebates that had been available on a wide range of semi-finished and finished steel products, as part of its efforts to discourage further unneeded creation of production capacity for these products in China. At the same time, these export VAT rebate reductions did not target all steel products, and the result was that Chinese steel producers shifted their production to steel products for which full export VAT rebates were still available, particularly steel pipe into products, causing a significant increase in exports of those products -- many of which found their way into the U.S. market."
There is no lack of information about foreign protectionism. Remember the flap back in the '80s with "revisionists" speaking about Japan. But the idea never got traction. The U.S. media is guilty of misfeasance regarding the subject. Let me refer you to "How the Press Stabbed Detroit in the Back" by Eamonn Fingleton at http://www.unsustainable.org/index.asp?type=article&contentID=48.
Neither are U.S. economists free of blame. With theories that do not reflect the real world they have done immense damage to the U.S. economy.
Simple fact is that the U.S. has frittered away its competitive advantage over the last 50 years and will only recover if it looks abroad for best practices and adapts them as needed. That means industrial policy. What we are doing is letting foreign firms access U.S. markets and tech with little reciprocity. The question is room at the top. It is limited and we won't be there if we keep on.
But then just try Googling "Trade Deficit". There has been a generation of fools (or traitors) arguing that deficits don't matter. And that is mostly what you find. No other country believes this.
Time to decide to eliminate trade deficits and excessive foreign borrowing and rejuvenate American manufacturing.
Rich Country, Strong Army - in that order. And add Healthy Country for good measure.
These are reasonable assertions.
Perhaps we should also address the unfair advantage that other countries gain through lower wages and lower ecological standards. These can be equalized by levelist policies which use countervailing but not excessive tariffs on those countries. This is not protectionism because high wage high ecological standards countries are unaffected.
http://corporatestatesmen.com/images/LEVELISM.pdf
http://corporatestatesmen.com/policiesandinitiatives.html
+
foreign interests playing the protectionist card.