The United States has been engaged in a trade war since the end of World War II. Having the only industry after the World War II, we spread the doctrine of free trade to open markets in Europe and the Pacific. But the most important country in the East, Japan, closed its market, subsidized its manufacture, and sold its exports at cost, making up the profit in the closed market. By 1960 the country was losing a substantial portion of its textile industry and jobs due to the predatory practices of Japan. I testified before the old International Tariff Commission as Governor of South Carolina on behalf of the Northern and Southern textile industries about the loss of jobs and the trade war that ensued. When the Commission ruled against us, President John F. Kennedy, in May 1961, promulgated his seven-point program saving and protecting the textile industry. The War Production Act of 1950 called on the president to ensure that we had the equipment and materiel necessary to the nation's security. President Kennedy called for a cabinet hearing; I helped bring the witnesses, and the hearing concluded that, next to steel, textiles were the most important to our national security. At the time the saying was: "We can't send them to war in Japanese uniforms and Gucci shoes."
Corporate America was fully engaged in this trade war. As a U. S. Senator in 1968, Senator Norris Cotton of New Hampshire co-sponsored my textile amendment to secure better enforcement of our trade laws. And with the help of corporate America, the bill passed the United States Senate on a 68 bi-partisan vote. The White House immediately blocked any consideration of the measure in the House because they knew it would pass overwhelmingly, and President Johnson, not wanting to veto it, thought it more important to spread capitalism against communism in the Cold War. Coached by the Tri-lateral Commission and the Council on Foreign Relations, President Carter vetoed one of my trade bills; President Reagan vetoed two others, and President George Herbert Walker Bush vetoed a fourth. To pass these bills through both Houses of Congress, I had the enthusiastic support of corporate America. But President Clinton went for the money. He put the white tent up on the White House lawn, and the Fortune 500 came with their contributions. A vanguard of Corporate America with labor helped Evelyn Dubrow and me garner the votes to defeat NAFTA with Mexico. But President Clinton changed enough votes for passage by giving a cultural center to Jake Pickle, joining in golf matches, giving two C-17s to a Congressman and other freebies reported by the New York Times. When President Clinton sponsored China's admission to the World Trade Organization as an emerging nation, corporate America decided: "If you can't beat them, join them." And then came the off-shoring of America's industry and jobs hemorrhaged.
Corporate America changed sides, joining Wall Street, the big banks, and the financial world in calling for free trade. This is the crowd with Larry Summers and Secretary of the Treasury Geithner counseling President Obama against protectionism and "starting a trade war." And the poor president intentionally or stupidly goes along. No one thinks President Obama is stupid, so it must be intentional. If the president enforces the trade laws, immediately coming down on his head will be Wall Street, the big banks, the financial world, the Business Roundtable, the United States Chamber of Commerce, the National Federation of Independent Business and Corporate America -- all interested in cheap Chinese imports and big Chinese profits to keep the market up. The Congress, like the president, refuses to engage in the trade war for fear that the contributions will be cut off or used against them. And all the media go along with this nonsense of free trade, "don't start a trade war," when we've been in one for over fifty years.
As Henry Clay, one of Jack Kennedy's Profiles in Courage, stated about free trade on the floor of the United States Senate in 1832: "It never existed; it never will exist...." China makes Clay's free trade forecast true. China, like Japan, closed its market for all things produced in China, but has adopted an industrial policy of attracting research, technology, development, and production with complete control of finance and labor. China sets the pace in globalization, and countries in the Pacific, Europe, and South America all engage in globalization to protect their economy. Globalization is nothing more than a trade war with production looking for a country cheaper to produce. And in this commercial chaos, a nation must move to protect its economy. There is no free trade.
Now comes the best of political writers, Joe Klein, with the cover article of Time magazine entitled "An American Journey." "One road trip reveals the issues people are talking about -- but politicians aren't," writes Klein. In the first sentences of the Klein article, Joe writes: "Americans get to talking about politics these days ... that our best days as a nation are behind us ... that China is in the driver's seat." And he closes his article: "Bill later took me to a community meeting that was filled with all the same complaints -- about the incivility of public discourse, about the loss of jobs to China." Klein is on target. The people have known for some time that we are in a trade war. Long before the recession, South Carolina lost its textile industry; North Carolina lost its furniture industry; Michigan lost its automobile industry; Silicon Valley and Intel had moved to China, with Bill Gates' Microsoft supporting research in China. An American industrialist is not invited to Jack Welch's GE seminar on competition. It's always been limited to an in-house seminar. But recently Jeffery Immelt held it in China with two dozen Chinese entrepreneurs invited. All of America is catering to China. Even Klein writes: "Clinton used to say that the manufacturing jobs that went away weren't coming back, and he was undoubtedly right about that."
Klein is right if nothing is done about the off-shoring of our economy. That's the nation's problem. That's the people's frustration. Nothing is being done. At the local level, governors and mayors have an industrial policy to attract industry and jobs. But Washington finances and supports the off-shoring of industry and jobs. Washington and the Wall Street crowd that got us into this mess are not a bit interested in U.S. jobs or the U. S. economy. Corporate America and the financial crowd are interested in opportunities in China, India, Vietnam, or wherever. But Article I, Section 8, of the Constitution emburdens Congress to regulate commerce, and the president is supposed to enforce the regulations. Our only hope is for President Obama and Congress to sober up from their political campaigning and take care of the country's needs. As Paul Craig Roberts, former Assistant Secretary of the Treasury for Ronald Reagan, states: "The only way the United States will again have an economy is by bringing back the off-shored jobs."
This economy can be turned around on a dime by cancelling the corporate income tax and replacing it with a 5 percent value added tax. The FY 2010 estimate for corporate tax revenues is $156.7 billion. A 5 percent VAT reaps $600 billion with $443.3 billion left over to pay down the debt. This will eliminate the tax incentive to off-shore; eliminate the corporate income tax; eliminate the tax on exports, and make it profitable to produce in the United States. All that industry or corporate America needs is the assurance that we will implement a plan to compete in globalization. The making of such a plan or policy is on the books. We have the War Production Act to make sure the United States has the necessary equipment and materiel for our security. We don't have to wait for an industry to go bankrupt, but when an industry vital to our economy is in danger, the President under Section 201 of the Trade Act can move with tariffs or quotas on imports. Suffering $6 trillion in trade deficits in the last ten years, we can move immediately with an import surcharge like President Nixon in 1971. We can enforce our anti-dumping laws. But Washington has to wake up and compete in the trade war.
Quit whining about China. China's leaders are students of government and are determined to develop its people economically and at the same time keep the Middle Kingdom together. China has a plan and follows its plan, while the Council on Foreign Relations and the Pentagon wait for China to collapse in chaos. China's not the problem. Washington has to stop waiting and whining, get into the trade war, and develop a plan or industrial policy for this country to survive.
But will Congress or the President ever act if it's not in their political self-interest? Isn't campaign finance reform our #1 priority if we want to persuade politicians not to act exclusively on behalf of corporations engaged in offshoring?
How do we persuade voters to demand repeal of the corporate tax, and replacement with a 5% VAT? I agree with you, but how do ever get there?
How do we convince politicians that the pro free-trade counsel they receive day after day from clowns like Larry Summers, and so many other economists sheltered in ivory towers is a recipe for continued economic tragedy in the U.S.?
I'm sorry to say it, but I think real action on trade is a long, long way off. First, we need to prevent corporations from anonymously influencing political discourse. Then, we might find ourselves with a slightly better informed electorate. Second, we need campaign finance reform so that the politicians we elect based on their promises aren't thoroughly bought and turned against us by corporations.
Keep writing, Senator! We're listening.
If you believe one of the key problems America has today is over-consumption and under-savings, this is the tax for you. Most usefully, it could be used not to raise new money, but to REPLACE existing taxes.
However, Sen. Hollings’ $600 bn figure is out of line. Private consumption expenditure is just over $10 trillion, so a 5% tax that hits every single bit of consumption – goods, services, medicine, books, housing, finance, poor people, everything – would only raise $500 billion and change.
To be politically palatable, the VAT would have to have so many exclusions that the base on which the tax is calculated would probably drop by two-thirds, meaning an 18.5% tax would be required to raise $600 bn.
Great idea, but it still needs work.
But the fact is, US manufacturing hasn't actually GONE anywhere.
In 2009, U.S. workers produced 21% of all factory goods made globally, about $1.7 trillion. While that's a bit lower than the peak of 28% in 1985, it's only marginally below the long-term average of 23% since 1970. The U.S. is by FAR the largest manufacturing producer. We are a manufacturing juggernaut.
China, the second-biggest global producer, doesn't even come close. It makes about 13% of the world's stuff, $1 trillion worth. Japan, 11%. And Germany, the "workshop of Europe", comes in fourth, with 7.4%.
During the last economic boom (under Clinton), manufacturing contributed more to US gowth than any other sector of the economy. Not finance. Not dotcoms. Manufacturing.
The myth persists because the media endlessly repeats the same tired fallacy; that and the fact that you can't turn over a price tag at a retail store without reading "made in China". Together they make a persuasive legend.
We're in a horrible economy, and we desperately need to fix our problems, but we first need to UNDERSTAND those problems.
As my old statistics professor used to say "there are 3 types of lies: lies, dam lies, and statistics"
The truth is even if your numbers are compleatly correct and mean the same thing, in the past 30years the average workers has recieved a total of 0% raise when adjusted for inflation. In the 30 years before that the worker recieved rasies that were in propertion to GDP growth and company profit growth. In the last 30 years corporate profits have gone up 289%. the rich poor gap has not been as large as it is today since 1929. The only way that the american workers stardards of living has gone up is because more people in a family (women) have gone into the workforce and the american family has used there homes like ATM machines.
I really would like to know where this mysterious manufacturing has come from? Our population is growing which drives a natural increase in food/essentials manufacturing. I've seen countless stories about industries shutting down and towns in ruin but have yet to see many stories about industries opening. Stuff that was made in America just 5-10 years ago is now all made in China, where are the gains in manufacturing that have offset this? If you compare the products consumed now with that 10, 20 or 30 years ago you'd see American's are consuming less and less American made products. I've seen lots of claims that manufacturing is growing strong but have yet to see where that manufacturing is actually growing to a point significant enough to offset declines in pretty much everything we find at the department store.
What we have is the hollowing out of industry. Much of what passes for mfg in the US these daysre are simply final assembly and repackaging operations of foreing made components, thus short circuiting the multiplier effect that mfg once had.
People believe what they see with their own eyes rather than some misleading and/or misinterpreted data. They see the closed factories in their towns in industrial parks that thrived as little as 5-10 years ago. they go to the stores and see the "hecho in china" on the packages, they see their freeinds family and neighbors who are now un and underemployed because the mfg jobs have gone
Much of the increases the globalists like to cite, are large capital equipment like airplanes or mining equipment - of course none of these are safe from outsourcing. The new Boeing dreamliner has 40% outsourced components, little wonder it has suffered serious delays due to quality and supply chain problems
China's manipulation applies to all freely-traded currencies, all nations have same disadvantage.
If this a this is a "trade war", it's China versus the world.
Of course the people of China have endured a great deal and been very industrious. The is no reason to begrudge China development and avoiding a foreign dominated economy. However, the currency set at 1/2 value, now ~40% low, is economic warfare.
In Sept 2003 the Economist said that workers in Mexico made 4 times China's factory wages in dollar terms. That's why NAFTA failed and why we have so many new neighbors. Sucking the air out of Mexico's economy was collateral damage.
Washington is so in hock to China that it is likely too late to respond and our vainglorious US is close to a Tributary State. Bush must still think that Sun Tzu is a fancy dessert and The Three Kingdoms a Disney Park. Even China doesn't buy US bonds now, the FED does.
Sorry, should have been written:
Note that China set its currency initially at about 1/2 value and pegged it to the US dollar which had been adopted worldwide as a reserve currency.
If currencies are not free traded nothing else is. Bush took a dive in the economic wars. The voters were lulled by the low prices and the US government borrowed back the $2+ billion per day US trade deficits for years on end. They financed wars, income redistribution upwards, and oddly bloated, but ineffectual government.
Through calculation and miscalculation/corruption like the Bush/Rove "Ownership Society" they broke America's back financially. Listening to Washington Republican speeches about the Pledge to America is like listening to a child molester making a speech about better schools.
All the Thomas Friedman/Philipe Lagrain free trade cheerleaders will say something to the effect of "Stop living in the past, man."
A fair trade system still has the benefits of the free trade enviroment and corrects for the problem - mainly the de industrialization of the first world and a race to the bottom when it comes to workers rights, wages and enviromental protection. something the VAT doesnt do.
And why change now, they get those other "states" to subsidize by paying their leaders off too.
We don't stand a chance until we the people -conservatives and liberals - revolt against Wall Street! That is the plain simple truth and fact of the matter.
We must turn our backs on consumerism that only serves instant gratification. When we can do that we can win against wall street. As long as we need one dollar pieces of plastic on an hourly basis, we will continue to swirl in the drain we are stuck in.
Rise up America, take a deep breath, and realize what our true detriments are. They are not homosexuals, liberals, crack heads, or mobsters, they are corporations and the tryrannts running them!
right out of the NRA playbook -----corporations dont pay taxes --people pay taxes
he is a tax cutter of the worst kind -----for his corporate friends only -----
sorry no sale
we are right --they are wrong----the emotional response
the reality is ---we are proponents of capitalism -----it takes a lot of rules ( regulation ) to make it work both internationally and at home -----
the home front capitalists got rid of the rules and the economy imploded -----and that leads to--- what incentive is there for others to adopt regulation when they (US) dont want it themselves
Obviously, you have not spoken to the head's of GE or Microsoft recently. Take a good look at their Chinese market share over the last 5-years in their key high margin sectors.
The core problem, as I see it, is that the notion has been embraced wholeheartedly that we can have "international trade" at the exclusion of "producing things ourselves." At the end of WW2 we virtually owned the world's manufacturing, and we have been giving it away ever since. One of the largest industrial nations on earth simply cannot do that. You can't build a nation on the effort of other nations, no matter how cheaply you think you can buy them.
Today, we -do- send our soldiers into battle wearing Chinese underwear. Or from anywhere else that we can get them cheaply. "Anywhere but here" is the mantra, and that is the downfall.
A nation must produce, first and foremost. It must promote and maintain healthy trade with others, but that necessarily means that ships which arrive full, must also go out full. You can stand next to any American port, any day of the year, and see for yourself that this is not so. This is not "trade," nor is it "fair." For anyone concerned.
We ought not blame "the other nations," whose people our short-sighted traders would cheerfully enslave to make a buck. We must blame our policies that ignore what every farmer knows: "tend to your own fields first."