Conservative sees free trade as threat to manufacturing

John E. Jones is my kind of conservative. The white-haired, vigorous banker is a fierce defender of capitalism and believes that only through hard work and a vigorous spiritual life (he's a devout evangelical) can one truly be fulfilled. At the same time, he is a devastating critic of some multinational corporations which, he says, have given us ''free trade,'' and a crusader for legislation to protect American manufacturing. In fact, free trade to him means America with its guard down; it's a threat to our economy and to the security of the nation.

And Jones has the facts to prove it. More than 56,000 U.S. manufacturing jobs were lost in June, the 35th straight month of losses due largely to foreign competition--particularly from China, where goods can be made at a fraction of the cost and sold cheaply on our market. Forty-nine states have shared in the loss of more than 2 million manufacturing jobs since July 2000. Illinois' record is devastating. In 1974, it had 1,345,000 manufacturing jobs, or 30 percent of all state jobs. By 2001, it was down to 907,000, only 15 percent of state jobs. By 2002, we were down to 870,000, and we're still dropping. This state has lost one of every 12 manufacturing jobs since July 2000, he says.

''Don't forget that the rule of thumb for each new manufacturing job is that it creates 1.6 jobs in other manufacturing and service industries. Also the loss of one manufacturing job will cause the loss of 0.8 jobs in service industries.''

Jones knows whereof he speaks; he is a manufacturer as well as a banker. His Cummins Allison Corp. is, because of its patented technology, the only U.S.-owned company that manufactures coin and currency processing equipment. His competitors have withered away to foreign ownership. Cummins Allison is now engaged in litigation to save its many patents. This could be a national security issue, Jones says. Cummins' equipment ''helps protect against the possible flooding of the world with fraudulent currency and the tracking of drug and terrorist money.''

As Jones sees it, when the U.S. economy was protected by high tariffs, effective anti-trust, anti-dumping, minimum wage and patent laws, it flourished on a relatively level playing field with world competitors.

But after World War II, ''the 'free trade, free market' doctrine was embraced . . . and by 1971, the United States became an open, unprotected economy.''

If free trade worked as touted, Jones says, ''incomes for the poor, the middle class and rich should be significantly greater . . . the growth rates of gross domestic product, per capita income and real wages per worker would all have substantially increased. This has not happened.

"Instead, growth rates for GDP and per capita income have declined and real wages per worker have turned negative. Our nation is now a net debtor rather than a net creditor as it was when protected. Over 45 percent of U.S. government treasury notes, 35 percent of U.S. corporate bonds and 13 percent of the U.S. equity market are foreign-owned, and 9 percent of U.S. corporations are subsidiaries of foreign companies. Our balance of payments deficits for 2002 was over $500 billion. We now have 6.5 million citizens looking for jobs, 2.7 million who have lost hope and stopped looking, and 4.8 million only working part-time. The real unemployment rate is probably over 10 percent--not the 6 percent reported by the government.''

Jones levels blame on segments of big business for making ''free trade sacred doctrine.'' Some ''large U.S. multinational corporations see it as a way to break the power of the unions and reduce the wages of their workers. They believe that manufacturing in poverty wage level countries will enable them to compete with high-tech and large-scale manufactured products dumped here from high-wage countries like Germany and Japan that protect their domestic markets. But this is not working. U.S. multinationals are still losing the trade war, even with access to labor that is paid at poverty-level wages.''

The answer is a return to a protected economy, Jones says. He was just getting warmed up. More of his blunt analyses next week.

Hello All:
There is a quote in the Sunday Denver Post by the president of an outsourcing company called Technology Crafters:

“There’s a lot of interest,” said Robert Welch, the company’s president. “American software teams are awesome for innovation, but in terms of being able to crank things out in a productive manner, they’re no the best on the planet.”

I find this quotation completely laughable! What a joke! If the Indian software companies were held to the same high standards that the software companies in the United States are held to, their prices for labor and product would be the same. A good example would be that a customer product takes 10,000 lines of “C” code in order to provide the customer with the amount of functionality they need. The Indian programmer writes the code and the documentation in order to install and use this piece of software. The Indian’s American counterpart writes the 10,000 lines of code, the documentation to support the installation and use of the software and he/she will also write the ISO9001 documentation required to go along with the software product which includes the project planning document, the software design document, the software testing documentation, the architecture review board documentation, etc. As you can see it’s obvious who takes more time to produce their product and who does a more careful and a better job. So just how many Indian software companies are ISO9001 certified? I wonder! American IT management would like their customers to think the quality is the same but underneath it all, we all really know the truth.
Let me relay an actual customer event that took place recently, a large Swiss Bank found an operating system defect on their system while trying to write an application to produce custom graphics for their bank statement printing. The function they found the bug in was wcstombs which converts wide character set strings to multibyte character set strings. Anyway this customer was/is paying for 24 X 7 development support and called into the 1-800 number and talked with a support engineer here in the United States. The customer was told that the engineers where looking at it and that they would be updated every morning until the fix was shipped. The software these days is written in India, it was Friday morning here in the United States, the Indian programmers don’t work weekends or overtime and are not required to be called out even if there is a customer emergency. The support representative from the United States called the customer on Saturday morning, Sunday Morning, Monday morning, always telling the customer that the engineers were working on the fix even though they weren’t. The customer finally received their fix the following Thursday afternoon, thus making the delivery of their bank statements late and costing them a lot of extra money for shipping, etc. Previous to this instance that same software had been written here in the United States, the customer would call in on Friday morning and a real software engineers was working on it within the hour, a test fix was usually supplied before the weekend was out and the customer would have shipped their statements on time. Now if you were that customer, would you be happy with your 24 X 7 development support?
I have one last comment, I find it interesting that a Japanese company named Toyota can produce a superior car with American workers and the CEO only earns 1.5 million dollars a year and an American company named GM pays their CEO 30 million dollars a year, uses foreign labor and produces cars with twice the number of defects per thousand cars shipped. I personally believe that the real problem in this country is the inept management running our companies, they cost more, create more headaches and redtape and then pass the blame down to the engineers and those doing the real work.
When will it stop? Enron continues to go on and on and on, this time the management is pushing the blame on the engineers and replacing them with foreign workers when the real responsibility and problem lies with them, they are the ones who agreed to all the extra work for the products, not the engineers and yet they take no responsibility for their own actions. And lastly, you think the stockholders will see any of the benefits from these costs savings via a dividend? Or do you think the execs will give each other bonuses?

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.