Posted on 10/13/2003 3:58:17 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
More evidence of the short-sighted nature of the “penny wise, pound foolish” practice of outsourcing manufacturing was provided by the President´s Council of Advisors on Science and Technology last week. PCAST´s Subcommittee on Information Technology Manufacturing and Competitiveness issued its “Preliminary Draft Findings and Observations” on October 3.
President George W. Bush created PCAST on September 30, 2001 by executive order, re-establishing a body formed by his father when he was president in 1990. Members of the this particular subcommittee include chairman George Scalise, president of the Semiconductor Industry Association; Michael Dell, CEO of Dell Computer Corp.; Bobbie Kilberg, president of the Northern Virginia Technology Council; Gordon Moore, chairman emeritus of Intel; Steve Papermaster, chairman of Powershift Ventures; and Luis Proenza, president of the University of Akron.
PCAST's draft warns that U.S. technological preeminence is not assured because as manufacturing is moving overseas, research and development is following, risking a shift in future innovation which could leave America behind the technology curve. Global R&D centers are emerging around manufacturing in India and Asia (especially in China) where labor costs for R&D design capabilities are one-third to one-tenth what they are in the United States. Companies are deciding to locate near strong R&D centers and “clusters of innovation.” Confidence in the quality of foreign design capabilities is slowly growing, as is the management of global design systems.
Foreign government subsidies of all types are wide and varied and include tax rebates, tax holidays, stock options (with no capital gains taxes), science-based industrial parks, direct subsidies and worker training programs. “We are not just competing against foreign companies but foreign countries,” concludes the PCAST paper.
PCAST considers R&D and manufacturing as the two basic anchors of the modern economy. R&D is coupled with manufacturing in an “innovation ecosystem” that drives successful innovation, new products, and improved productivity. With manufacturing leaving the country, the United States runs the risk of losing the strength of its innovation infrastructure of design, research and development and the creation of new products and whole industries. One aspect of the de-industrialization problem that is often overlooked is that it is manufacturing that generates the revenue that supports R&D and innovation. Loss of American high-tech leadership in both production and technology would have serious implications for the nation's economic vitality, living standards, and national security.
PCAST´s findings, though alarming, are not new. In the late 1980s and early 1990s the Berkeley Roundtable on the International Economy, a group of economists and business experts at the University of California at Berkeley, predicted this would happen. The BRIE philosophy is laid out in detail in the 1992 book The Highest Stakes: The Economic Foundations of the Next Security System. Trade and industrial policies affect a nation's “trajectory” towards the future. Losing key industrial sectors can sidetrack an entire economy, making it dependent on others for critical inputs and future developments. One of the BRIE´s mantras was that a nation “cannot control what it cannot produce.” It then becomes a follower rather than a leader.
The BRIE warned, “U.S. military success in the Persian Gulf rests on past industrial strength, it is not a reliable indicator of future capabilities. Even American weapons mastery rests on electronic components and subsystems largely designed in an era when U.S. industry dominated the civilian computer and semiconductor industries. That era is fading fast.” A decade later, it has nearly faded away, as defense prime contractors now argue that they cannot produce more than half of the components of major weapons systems in the United States in opposition to legislation passed by the U.S. House mandating that 65 percent of weapons be manufactured in domestic plants. Without a major change in national policy, the next generation of American military systems slated to be built over the next 10-15 years will have large slices of foreign dependency built into them, reflecting the loss of both manufacturing and R&D capabilities in the United States.
There was a moment of hope that America would rally and take corrective measures when newly elected President Bill Clinton appointed BRIE Director of Research Laura D´Andrea Tyson first to his Council of Economic Advisors and then as head of the National Economic Council, which was supposed to design a strategy for American competitiveness. Unfortunately, Ms. Tyson proved no match for the administration´s “New Democrat” allies on Wall Street and U.S. multinational corporations, and the Clinton administration, including Tyson, quickly adopted the same destructive “free trade” notions that have repeatedly crippled Republican economic policy. Nor did Clinton or his cronies care about national security and the defense industry, which declined precipitously during the 1990s.
PCAST committee member Bobbie Kilberg has recounted a discussion she had with an executive from a major high-tech firm. He told her that by 2010, 90 percent of his company's R&D, design, and manufacturing will be conducted either in China or India. “What can we do about that?” Kilberg asked. The executive answered, “Not much. We are not coming back. Unless the government prohibits us from going, we are gone.” Neither tax incentives nor tort reform (centerpieces of the Bush economic program) will keep his company in the United States, and there is little the United States can do to compete with low-cost and highly trained labor in India and China.
The indisputable fact is that “market” solutions, even tweaked with tax breaks and other reform policies, are not going to reconstitute our world-leading manufacturing and technology base, which has provided such a high standard of living for the American people. The time of trivializing the issue with talk of “level playing fields” and vaguely racist slogans about “the American worker out-competing all others if given a fair chance” must end. The stakes are too high and policy is in full throttle in the wrong direction (though it is more correct to consider “free trade” an anti-policy, explicitly rejecting any concern for national advantage). To prevent the loss of R&D and future technological leadership, manufacturing must be kept at home to provide the anchor for national economic progress. That means preventing the displacement of domestic production by imports through a government system of trade restrictions.
William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.
No, combining a relatively low (10~15%) flat-rate revenue tariff on ALL imported goods with an offsetting reduction of the Corporate Income Tax would provide the necessary incentive for increasing domestic investment in both production technology and R&D while enabling domestic producers to compete more cost effectively on a global basis.
2. I failed to see any connection between your suggestion and my post.
3. I did notice that the quote is over-reaching: to speak of a single-year datum as "putting the nail into the coffin" reveals the writer as... well, not particularly scientific and certainly as having an agenda.
Agree
But I defy you to find a leader of either party who is not a globalist and still has a shot at being president.
This crap is pre-ordained by the elite and these people are well heeled enough to live wherever they want.
I have long maintained that they don't give a damn about this country, just their money!
Loss of American high-tech leadership in both production and technology would have serious implications for the nation's economic vitality, living standards, and national security.
"Hey! Who needs 'em. We got the stock market. Globalization is good. America? Well..trust us," say the free traders.
Unfortunately, Ms. Tyson proved no match for the administration's “New Democrat” allies on Wall Street and U.S. multinational corporations, and the Clinton administration, including Tyson, quickly adopted the same destructive “free trade” notions that have repeatedly crippled Republican economic policy. Nor did Clinton or his cronies care about national security and the defense industry, which declined precipitously during the 1990s.
Reason number 1001 why I loathe both parties but at least the Republicans have some members left who care about our heritage and soverignty over globalization.
I remember Ms Tyson being grilled by a senator from Colorado, I believe. Under tough questioning Ms Tyson broke down into tears. The tough questioning stopped. The senator apologized. I also remember Ms Tyson backing a Jesse Jackson "help the inter-cities scheme" where the feds would reach in and take fifteen percent of everyone's retirement money. Not a tax, a "one-time-only" take the money. I bet the plan is still out there.
Good one! I can imagine the slithery-tongued Rogue, er, Rove slobbering in Bush's ear.
How do you calculate this offset with a variety of situations of ratios of costs of goods sold, raw materials, etc? For example a company whose majority of expenses came from imported goods would have much less encentive produced by a 12% reduction in federal tax on profits. Also:
What about a) private companies; b) companies already paying less than 10-15% corp taxes; c) uncontrollable state corporate franchise tax increases which seem to follow inevitably; d) resold or value-added imported items still well below the threshold in cost [does cheap labor savings contribute only 10-15% of the price of foreign textiles for example?]; e) items which have no comparable value source in the U.S. ?
Do you really think you could devise a system that:
Encouraged domestic investment based on devising a system that actually balanced out - without losing it again on the paperwork/bookkeeping required?
Do you think 10-15% cost increase, if achieved would have an effect, for example, on whether companies still bought computer chips and electronics from Taiwan, textiles from Asia, tooled parts from the Pacific Rim, programming and call centers from India?
There's a logical problem here. To encourage companies not to buy foreign, it would have to hurt them to buy foreign. And hurting U.S. companies, hurts the U.S. economy.
thanks for your reply.
Yes, I agree with everything you said.
I'm getting all kinds of google hits on "Mexican diaspora" and similar phrases that lead to one central fact: moving Mexico's unwanted citizens here, endeavoring to maintain their loyalty to Mexico, and having the U.S. taxpayers pay for it all is a deliberate policy of the corrupt government of Mexico. Yet I see nothing in our free press of conservative Internet sites and hear nothing on the free press of talk radio. Yes, they talk frequently about ILLEGAL immigration. But from the other side and from our "leaders" it is not illegal.
Both of our political Parties obviously agreed to this migration mostly for the money, I suppose; but, perhaps also to prevent revolution in Mexico. I am outraged by this and hope to live long enough to see our "leaders" pay and pay dearly for their treason.
The goal of Free Trade & Globalism is to cripple the U.S. enough so that we can't take military action without first consulting the U.N. (or other global body). Anything that hurts the U.S. economy and helps an enemy economy (China) is disaster.
It's stupid that the Bush administration is more concerned about Cuba than China.
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