Posted on 05/25/2003 1:23:39 AM PDT by sarcasm
We're in a modest economic recovery, one that is still fragile. And this recovery is not creating jobs. I'm far more concerned about the jobless nature of this recovery than the level of interest rates or market levels.
Government and corporate policies are sending more jobs, capital and American know-how overseas to produce goods and services more cheaply. The proof is in the numbers: The U.S. account deficit, the broadest measure of transactions with other nations, swelled to $503 billion in 2002.
That's not the way it was supposed to work. Increased global trade was supposed to lead to better jobs and higher standards of living by opening markets around the world for U.S. goods. Now some people, myself included, are rethinking the belief that free trade benefits all nations.
According to the Economic Policy Institute, rising trade deficits cost 3 million jobs in the U.S. between 1994 and 2000. And a report by Forrester Research predicts that nearly 500,000 tech jobs will be moved overseas by 2015.
We're also exporting capital. Companies like Motorola have invested billions in China - the country with the largest U.S. trade imbalance with the U.S.
Another problem resulting from America's trade imbalance: Intellectual capital is being shipped overseas - in some cases, raising national security concerns.
So what's gone wrong? Alan Tonelson, author of "Race to the Bottom," says unequivocally that corporate America is largely to blame. "They sold America a bill of goods during the 1990s, because they said that all of these new trade agreements ... were going to boost exports from their American factories. And what they've done is they've used these trade agreements to send production abroad."
Controlling costs
Of course, American business needs to look for ways to control their costs. And consumers are often driven in their purchases by prices.
But it's not just corporate America that needs to adjust to the new global marketplace. Federal and local policymakers need to recalibrate as well.
David Huether, chief economist at the National Association of Manufacturers, says policymakers need to ensure that the regulatory environment is conducive to maintaining our competitive edge.
"To make domestic manufacturers more competitive," he says, "we have to make sure that there aren't future increases in regulation that would push up costs here."
He adds that the federal government should promote trade adjustment assistance to help displaced workers find new employment.
We also need legislation that encourages companies to keep jobs here.
"The only way we can get in on this game is to ... make penalties for those who manufacture overseas and benefits for those who manufacture in the United States," Sen. Fritz Hollings (D-S.C.) told me. "I have a bill to keep the jobs in this country. It's going to be an uphill fight because we've got to really change the culture."
Changing the culture won't be easy: The middle class has little representation in Washington, the multinationals have little incentive to produce here at home, and working men and women in this country are watching their paychecks shrink in response to the competition of lower-paid foreign workers.
Trade barriers
Huether says that policymakers also need to lower barriers to trade overseas.
"Our tariff rates on industrial goods average less than 2%," he says. "The rest of the world, particularly developing Asia, is a lot higher - in the area of around 10%."
On the corporate side, Huether says businesses need to invest in their employees.
"The way that manufacturers compete is through their very high productivity, and one of the ways to do that is ... by maintaining a very able and trained work force," says Huether.
There's no easy corporate or government policy solution to America's export problem. It's time for corporate leaders and policymakers to heighten their efforts to keep American jobs from going overseas.
IMHO, the people here who think I should pay more for socks and shoes by barring imports, so that I subsidize the local workers making socks and shoes, are closet socialists.
Let the market decide.
That is a bogus and worn-out argument, just like the "buggy-whip" analogy from the movie Other People's Money.
In order for imported finished goods to benefit our overall economy, the retail price of the imported goods would have to be less than ten cents on the dollar of those same goods produced here, due to the lost multiplier effect on the imported goods.
That means a $50 pair of imported boots would have to cost over $500 retail for the domestically produced version before any positive economic benefit could be realized from the import.
It is disgusting that some of our most respected economists have bought into the free trade lie and are ignoring the economic rule that "second effects count".
We could slap a $450 tariff on imported boots without negative effect on our economy?
Response: The politicians can't stop. The balance is shifting to alien control. This has been a process and we are passed that point where it could be stopped. Any politician who now tried to stop it would simply not be allowed to hold office. Within about ten years one will begin to see serious attempts by various states(those under alien control) to secede. In the short the disintegration of the republic.
Fair trade, according to Adam Smith, wouldn't require a $450 dollar tariff on the boots, or other imported finished products. The tariff required to achieve trade equilibrium would only need to be the difference between the cost of production between the imported and domestically produced item. This would discourage the use of slave labor by one country to wage economic warfare on another country, which is precisely what is happening to the U.S. right now, with the approval of elected politicians of both parties.
That is only a decision for the factory owner to make. Period. Whether the worker accepts this contract or not is up to him/her.
A more important question is- does a person have a right to work in the shoe factory in the first place and if not, why do they have a moral right to a certain wage?
Could you explain the difference between a tafiff on goods imported to the US and a quota on the amount a country may export here?
That sounds like a perfect self description.
Trade doesn't always equal economic growth. Sometimes it does, but other times it doesn't. I have glaring real life, real world examples.
Mexico is one of our biggest trading partners, and that is not a one way "we buy their stuff" deal. For every $1 worth of goods we buy from Mexico (either through outsourcing etc) we actually sell just over 75 cents to Mexico. That means 75 cents to the dollar of real exports.
On top of that exporting to Mexico is not about overall 'revenue numbers'. The profitablility of selling in Mexico is by far greater than China (but maybe not as good as in the US).
With Mexico we have a much more balanced approach to trade with no one factor being exploited as in the case with China.
I can go into details if you want.
Are you at all suggesting that if the worker feels his salary is not just he should seize the capital of the factory owner?
I don't want to put words in your mouth so you go ahead and explain it.
Trade with Mexico is actually (as I said above) one of the more healthy agreements we have although its not perfect.
Profitability is the game. Real revenue numbers are a different ball of wax.
For example if we sell goods in China the profit margins are very low. There is hardly anything such as a mark up in their market. So, if you make something that costs $1m to make and end up with only $1m in the end, you haven't made any money. Margins are what is on top of the $1m in the end.
In Mexico margins are MUCH higher and hence contribute much more to profits.
Now on top of that there is higher volume as well as higher margins in Mexico. We sell over $100 billion dollars worth of stuff to Mexico. We sell just around $15 billion to China. Yet, we import almost just as much from China as Mexico. I ask you, which one is a better trade partner?
Overall it results in that with Mexico for every dollar we import for one reason or another we have a 75 cents (plus) real export opportunity. That means goods actually made in the US actually get sold in Mexico and at a profitable margin.
Not all trade is bad at all, some trade relations though are unfair and not very good though. Its a case by case situation.
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