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U.S. Is in a Trade War, Whether It Likes It or Not

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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.