New Deal for U.S. Manufacturers

HumanEventsOnline ^ | 09/29/2006 | Patrick J. Buchanan

[NapkinUser]

In July, our trade deficit hit yet another all-time record, $68 billion, an annual rate of $816 billion. Imports surged to $188 billion for the month, as our dependency on foreigners for the vital necessities of our national life ever deepens.

China's trade surplus with us was $19.6 billion for July alone, moving toward an all-time record of $235 billion for 2006 -- the largest trade deficit one country has ever run with another. Our deficit with Mexico is running at an annual rate of $60 billion. With Canada, it is $70 billion. So much for NAFTA. With the European Union, it is running at $160 billion.

America as the most self-sufficient republic in history is history. For decades, U.S. factories have been closing. Three million manufacturing jobs have disappeared since Bush arrived. Ford and GM are fighting for their lives.

Bushites boast of all the new jobs created, but Business Week tells the inconvenient truth: "Since 2001, 1.7 million new jobs have been created in the health care sector. ... Meanwhile, the number of private sector jobs outside of health care is no higher than it was five years ago."

"Perhaps most surprising," writes BW, "information technology, the great electronic promise of the 1990s, has turned into one of the biggest job-growth disappointments of all time. ... (B)usinesses at the core of the information economy -- software, semiconductors, telecom and the whole gamut of Web companies -- have lost more than 1.1 million jobs in the past five years. Those business employ fewer Americans than they did in 1998, when the Internet economy kicked into high gear."

Where did the high-tech go? China. Beijing's No. 1 export to the United States in 2005, $50 billion worth, was computers and electronics.

If Americans are the most efficient workers on earth and work longer hours than almost any other advanced nation, why are we getting our clocks cleaned? Answer: While American workers are world-class, our elites are mentally challenged. So rhapsodic are they about the Global Economy they have forgotten their own country. Europeans, Japanese, Canadians and Chinese sell us so much more than they buy from us, because they have rigged the rules of world trade.

While the United States has a corporate income tax, our trade rivals use a value-added tax. At each level of production, a tax is imposed on the value added to the product. Under the rules of global trade, nations may rebate VAT levies on exports, and impose the equivalent of a VAT on imports.

Assume a VAT that adds up to 15 percent of the cost of a new car in Japan. If Toyota ships 1 million cars to the United States valued at $20,000 each, $20 billion worth of Toyotas, they can claim a rebate of the VAT of $3,000 on each car, or $3 billion -- a powerful incentive to export. But each U.S. car arriving at the Yokohama docks will have 15 percent added to its sticker price to make up for Japan's VAT.

This amounts to a foreign subsidy on exports to the United States and a foreign tax on imports from America. Uncle Sam gets hit coming and going. It is as though, after firing a round of 66 in the Masters, Tiger Woods has five strokes added to his score for a 71, and five strokes are subtracted from the scores of his rivals. Even Tiger would bring home few trophies with those kind of ground rules.

The total tax disadvantage to U.S. producers -- of VAT rebates and VAT equivalents imposed on U.S. products -- is estimated at $294 billion.

Exported U.S services face the same double whammy. A VAT equivalent is imposed on them, while the exported services of foreign providers get the VAT rebate. Disadvantage to U.S. services: $85 billion annually.

Why do our politicians not level the playing field for U.S. companies?

First, ignorance of how world trade works. Second, ideology. These robotic free-traders recoil from any suggestion that they aid U.S. producers against unfair foreign tactics as interfering with Adam Smith's "invisible hand," which they equate with the hand of the Almighty.

Third, they are hauling water for transnational companies that want to move production overseas and shed their U.S. workers.

How could we level the playing field? Simple. Impose an "equalizing fee" on imports equal to the rebates. Take the billions raised, and cut taxes on U.S. companies, especially in production. Create a level playing field for U.S. goods and services in foreign markets, and increase the competitiveness of U.S. companies in our own home market by reducing their tax load.

U.S. trade deficits would shrivel overnight. And jobs and factories lately sent abroad would start coming home.

Isn't it time we put America first -- even ahead of China?

[A. Pole]

So??? I don't recall seeing something in the Constitution in where every American is guaranteed a good paying job....

"The Congress shall have the Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common defense and general welfare of the United States ..."

See my tagline.

[Toddsterpatriot]

A nation that manufactures nothing IS nothing.

That's a great point.

We'll only make $3 trillion worth of stuff this year. Who makes more? Should we worry when we produce $4 trillion? Will the warning sign of our demise be $5 trillion? When are we doomed again?

[durasell]

300 million of Americans cannot live from banking. Unless you mean credit cards.






Uh, let's think that through for a second. This will virtually elminate lines at local branches. 700 tellers to a bank.

[redgolum]

One problem. If you can telecommute from home, then your job can telecommute from India. That and those types of jobs are "service" jobs, and not very sustainable.

[KevinDavis]

Well comrade, it doesn't mean protecting jobs....

[KevinDavis]

So we should demand that companies provide a living wage comrade???? How about banning robots in factories????

[A. Pole]

Well comrade, it doesn't mean protecting jobs ...

Sometimes it does.

[ancient_geezer]

Hmm, interesting, manfacturing shipments of $403.949 Billion only make up 12% of your 3 trillion in total products

.

Hmm, wonder how much is double counted or services as intermediate production steps rather the summation value of final manufactured goods shipped.

[KevinDavis]

So we should limit technology cause it would protect jobs???

[A. Pole]

So we should limit technology cause it would protect jobs???

Founding Fathers established tariffs. They even specified them in the Constitution!

[Cringing Negativism Network]

protect
–verb (used with object)
1. to defend or guard from attack, invasion, loss, annoyance, insult, etc.; cover or shield from injury or danger.

-

It is time for Republicans, to protect American industry.

[snowsislander]

Hmm, interesting, manfacturing shipments of $403.949 Billion only make up 12% of your 3 trillion in total products...

Those numbers don't look right --- I think that there is a zero missing. What's your source for them?

[KevinDavis]

But excesive tariffs are not the solution... Everytime we raise tariffs, the economy does go south..

[DontBelieveAugPolls]

are you aware that the US ran consistent trade deficits from its founding until the 1870s?

[ancient_geezer]

Those numbers don't look right --- I think that there is a zero missing. What's your source for them?

Economagic, the same folks as Todsterpatriot's chart. Found the manufacturing output chart through google.

Went back and looked at the source information of the chart on Economagic.

http://www.economagic.com/em-cgi/data.exe/nipa/T5t7t5Bl4q

You are right there is a discrepency, the source data is a quarterly summation, not annual. Seems the charting cuts off part of the ledged describing the period of the measure.

The actual numbers need to be multiplied by 4 to get the annual figure. That would make the manufacturing shipments figure for the last year 1,620 billion. not $405 billion.

That's roughly half of Todster's numbers which is consistant with the idea of double counting of intermediate production stages contributing to final manufacturing value.

It is also consistant with 17% of GDP which has been published several places for the current level of manufacturing in relation to total GDP output in 2004 from the 2005 Economic Report for the President.

[A. Pole]

But excesive tariffs are not the solution...

Agree, EXCESSIVE tariffs are not the solution. But "free" trade means NO tariffs.

[RightInEastLansing]

"One other question begs to be asked. Why is China pouring so many resources into building a modern military when no one is threatening them? They know they will lock horns with the US and securing the pacific will be first and foremost on their mind."

Not my quote.

[RightInEastLansing]

"I understand that a large part of neocons are Jewish,..."

I bet you do.

[RightInEastLansing]

"It is time for Republicans, to protect American industry."

I say let the democrats protect American industry by working in sweatshops for 32 cents per hour! I will cheer those brave patriots on!

[snowsislander]

You are right there is a discrepency, the source data is a quarterly summation, not annual. Seems the charting cuts off part of the ledged describing the period of the measure.

The actual numbers need to be multiplied by 4 to get the annual figure. That would make the manufacturing shipments figure for the last year 1,620 billion. not $405 billion.

$1.6 trillion still sounds low. The last time that I looked at the total ship value for all manufacturing, I think it was more than double that figure.

Glancing over at the BEA's numbers (which I put more confidence in than "economagic"'s numbers), they have these manufacturing numbers (in billions of dollars):

Line		1999	2000	2001	2002	2003	2004
12	Manufacturing	3,978.0	4,144.5	3,896.4	3,849.7	3,919.5	4,311.6
13	Durable goods	2,287.7	2,328.2	2,128.8	2,084.5	2,103.0	2,304.2
14	Wood products	97.5	94.1	86.9	88.0	90.5	107.2
15	Nonmetallic mineral products	94.7	95.9	93.3	94.0	95.4	99.3
16	Primary metals	155.5	155.0	135.9	138.6	133.8	169.3
17	Fabricated metal products	253.1	263.9	248.5	242.7	239.3	263.1
18	Machinery	266.7	281.6	253.2	239.9	243.1	278.6
19	Computer and electronic products	454.3	500.8	418.8	351.9	351.2	392.7
20	Electrical equipment, appliances, and components	114.9	121.7	109.9	100.7	98.6	103.3
21	Motor vehicles, bodies and trailers, and parts	494.4	466.8	420.2	463.5	480.0	495.6
22	Other transportation equipment	174.3	156.8	173.9	163.6	163.8	175.4
23	Furniture and related products	71.8	74.0	70.6	74.4	74.8	80.8
24	Miscellaneous manufacturing	110.5	117.6	117.4	127.3	132.6	139.0
25	Nondurable goods	1,690.3	1,816.3	1,767.7	1,765.2	1,816.5	2,007.4
26	Food and beverage and tobacco products	538.5	557.1	571.3	572.2	597.2	627.0
27	Textile mills and textile product mills	86.2	84.5	76.2	74.6	71.8	75.2
28	Apparel and leather and allied products	69.9	66.4	56.5	46.2	40.6	42.7
29	Paper products	154.9	162.4	153.6	151.4	146.3	157.7
30	Printing and related support activities	101.5	103.4	100.1	95.2	91.3	91.2
31	Petroleum and coal products	158.7	230.4	217.5	212.5	232.8	319.5
32	Chemical products	411.1	437.6	425.0	443.7	464.0	505.2
33	Plastics and rubber products	169.5	174.6	167.5	169.5	172.5	189.0