Patrick J. Buchanan Examines "The Slow Awakening of George W."

Washington Times ^ | 09-17-03 | Buchanan, Patrick J.

[Theodore R.]

The slow awakening of George W.

-------------------------------------------------------------------------------- Posted: September 17, 2003 1:00 a.m. Eastern

© 2003 Creators Syndicate, Inc.

Last July, U.S. Trade Representative Bob Zoellick delivered a halftime pep talk to dispirited globalists, thrown on the defensive by the hemorrhaging of U.S. manufacturing jobs.

"What ... a surprise," Zoellick railed at his troops, "to see that the proponents of [free trade] ... have so often abandoned the debate to the economic isolationists and purveyors of fright and retreat."

But by September, Zoellick's own boss seemed to be drifting toward the camp of the "economic isolationists and purveyors of fright."

At a rally in Ohio, which has lost 160,000 manufacturing jobs since mid-2000, President Bush railed: "We've lost thousands of manufacturing jobs because production moved overseas. ... America must send a message overseas – say, look, we expect there to be a fair playing field when it comes to trade."

Yes, friends, at long last, we have their attention.

What's behind this radically revised presidential rhetoric? It is this: U.S. manufacturing jobs are vanishing, and unless he turns it around, Bush's presidency may vanish along with them.

The numbers are breathtaking. Manufacturing jobs have been disappearing for 37 straight months. Not since the Depression have we lost production jobs three years in a row. Since 2000, one in every six manufacturing jobs, 2.7 million, has disappeared. These jobs paid an average wage of $54,000.

Unfortunately for President Bush, while he has a good heart, he was horribly miseducated at Harvard. He simply cannot comprehend that it is free-trade globalism that is destroying U.S. manufacturing jobs, and may yet destroy his presidency.

The serial killer of manufacturing jobs is imports, which are now equal to almost 15 percent of GDP, four times the level they held between 1860 and 1960. What has caused this flood of imports? The trade deals that people like Robert Zoellick negotiate and George W. Bush celebrates.

Consider the numbers.

In July alone, the United States exported $86.1 billion in goods and services. But we imported $126.5 billion, for a trade deficit of $40.4 billion. The total trade deficit for 2003 is estimated at between $480 billion and $500 billion. But the deficit in goods will run closer to $550 billion.

The president's father and Bill Clinton contended that every $1 billion in exports created 20,000 jobs. Thus, a $550 billion trade deficit kills 11 million production and manufacturing jobs.

Say goodbye to blue-collar America.

What is the Bush prescription for curing this metastasizing cancer? In Ohio, he declared, "See, we in America believe we can compete with anybody, just so long as the rules are fair, and we intend to keep the rules fair."

How, Mr. President?

Consider the nation that runs the largest trade surplus with us. In July, we bought $13.4 billion in goods from China and sold China $2.1 billion. U.S. imports from China this year should come in around $160 billion, and U.S. exports to China at $25 billion.

We will thus buy 10 percent of the entire GDP of China, while she buys 0.25 percent of the GDP of the United States. Is this "fair trade"? But how does Bush propose to close this exploding deficit? How can he?

Where a U.S. manufacturing worker may cost $53,000 a year, a factory in China – with $53,000 and using the same machinery and technology as a U.S. factory – can employ 25 reliable, intelligent, hardworking Chinese at $1 an hour.

If you force U.S. businessmen to pay kids who sweep the floor a $5-an-hour minimum wage, while their rivals pay highly skilled Chinese workers $1 an hour, how do you square that with the 14th Amendment's guarantee of equal protection of the laws?

Does the president, when he goes on about keeping "the rules fair," mean he will insist that China start paying its skilled workers $25 an hour and subject their factories to the same payroll taxes, wage-and-hour laws, OSHA inspections and environmental rules as ours?

Beijing will tell him to go fly a kite, Made in China.

It is absurd to think we can force foreign nations to accept U.S. rules and regulations on production and American standards on wages and benefits. And why should foreign nations comply, when – with their present policies and laws – they are looting our industrial base and walking away with our inheritance?

The men who have custody today of what was once the most awesome manufacturing base the world had ever seen are ideologues, impervious to argument or evidence. Like the socialists of Eastern Europe, zealots like Zoellick are beyond retraining. They are uneducable. They have to go. The sooner they do, the sooner we can get about rebuilding the self-sufficient and sovereign America they gave away.

[ninenot]

Sort of like having McNamara run the Vietnam War, right

Except that in a trade war, it's bankruptcy petitions, not bodybags.

[harpseal]

First I asked for a net study using the Same methodology on the cost and benefit side for tariffs. You have yet to provide this. The Steel Consumers study of the costs has a large number of flaws among them that it is not and does not claim to be a net effect study it is a study of the costs side. Now others have posted the steel industry study showing benefits exceeding the costs. A one sided screed is not evidence merely proof of intellectual dishonesty and an attempt to decieve. If this were teh first time you had this explained to you you could be forgiven but as it is YOUR REFERENCE TO THIS STUDY IN THIS CONTEXT SHOWS YOU TO BE A LIAR WHO IS INTENTIONALLY LYING TO DECIEVE PEOPLE TO FUTHER YOUR AGENDA

When you are ready to discuss tariffs and their economic effects honestly I will be glad to. These randge from the early steel tariffs of the 18th and 19th Century to the Smoot Hawley tariff and the current steel tariff. I actually would like to see a net study showing any one tariff was harmful to the USA. It would at least provide evidence that tariffs were not universally beneficial.

[harpseal]

Of course tariffs raise prices on goods that is the point to balance out the government interference in the American Free Market by foreign governments. Read Adam Smith and David riccardo to get a clue about what constitutes Free Trade and when tariffs are justified.

[Mamzelle]

Our hidebound regs are to blame in many ways, but one is that the mfgers use them to claim that they can't afford (or "can't find qualified") Americans to do a job. What they really want is cheap illegal slave-labor, quasi-off the books.

They cannot be accommodated without a loss of jobs and a lowering of our standard of living.

The other elephant in the room is our crushing "lawyer tax"--the indirect costs of greedy lawyers and crazy, runaway litigation, to the point that an honest and law abiding American must be terrified of the very court system his taxes pay to support.

[ninenot]

It's pretty clear that Dawggie hasn't a clue.

The steel tariff, as I understand it, was a typically-mismanaged Gummint deal, affecting certain grades/qualities of steel, not others, and almost guaranteed to produce dislocations and confusion.

It was certainly a sop to USW interests.

The "cohesive, strategically-based, and consistent" tariff policy has yet to be written.

Serious proposals are getting floated, though. One involves a flexible tariff arrangement using a matrix, with the "x" factor being the economic health of the USA, the "y" factor being the country in question (PRC, Phillipines, Spain, etc.) and their general conformance to labor standards, ecological concerns, etc., etc.

You'll hear more about this over the next 60 days as the proposal takes shape. It's being worked over right now by a large alliance of small-manufacturing trade associations (PMA, NTMA.)

The MOST IMPORTANT component is actually having a set of standards which are consistent and strategically-driven--something the USA has really never had to this point.

[hchutch]

Who died and appointed you the Mikahil Suslov of the conservative movement?

[Paul Ross]

You are tilting against 200 years of U.S. Trade Policies and their associated empirical evidence which disproves your thesis. The evidence of the trade imbalance disproves your thesis. The evidence of the growing economic supremacy of China and India disproves your thesis. They have massive tariffs against us, BTW.

[Recourse]

(The following is a repost of No. 509):

I've explained the benefits in several posts, but I suppose you don't feel my arguments are "serious" because they don't agree with yours.

According to your novel theories, massive amounts of U.S. capital should be flowing to low-wage countries, especially China and India. Your theories utterly fail to explain why most capital leaving the United States, including manufacturing investment, flows to other high-wage countries, such as Canada and Europe. According to a study by Deloitte and Touche Consulting, 94 percent of outward U.S. foreign direct manufacturing investment in 2001 flowed to other rich countries. Yes, 94%. If low wages drive investment, how do you explain the fact that, during the past decade, the United States has been a net recipient of an annual average of $20 billion in foreign manufacturing investment?

As many American companies can attest, investing profitably in China and India remains a challenge—because of their underdeveloped infrastructure and legal systems, undereducated workforces, remaining trade barriers, and limited consumer markets. American companies invest less than $2 billion a year in China, and far less in India. That compares to the nearly $200 billion invested each year in our own domestic manufacturing capacity, and $100 billion a year invested by American companies in the rest of the world (and most of that in other rich countries). At the end of 2001, American companies owned more than 10 TIMES as much direct investment in the tiny, high-wage Netherlands ($132 billion) than they did in China ($10.5 billion) and India ($1.7 billion) combined. Obviously, wages are not the only, or even the main, driver of foreign investment.

Your flawed theories also fail to explain America's continued export success in world markets. Americans remain the world's leading exporters of manufactured goods. The United States today accounts for a steady 12 percent of global exports, the same share as two decades ago, and three times China's share. Chinese exports to the United States have indeed grown rapidly in recent years, but at $125 billion last year, they represent just above 1 percent of America's gross domestic product of almost $10.4 trillion. There is nothing alarming about the fact that Americans spend 1 percent of our income on products made by the one-fifth of mankind that lives in Mainland China.

Like many before you, and including Pat Buchanan, you confuse the passing pain of a recession with a shift in fundamentals. Yes, the recession of 2001 and the slow recovery have been especially hard on the manufacturing and high-tech sectors, but neither is in danger of disappearing. Manufacturing output in the United States remains 40 percent higher than it was a decade ago, and double what it was in the 1970s. We can produce more with fewer workers because of soaring productivity. In information technology services, the United States remains the world's top provider. Under what contorted economic theory does rising worker productivity—up an amazing 4.8 percent in the Untied States last year and still rising—turn a rich country into a poor country?

Obviously, competition from China hurts some U.S. sectors and companies and will even drive some of them out of business. That is an expected result of competition. Trade with China allows our economy to shift production to those products and services where we enjoy an even greater advantage, raising our overall productivity. Erecting new barriers to trade and investment with China would restrict the liberty of Americans and would weaken our economy by reducing competition and raising prices. It would benefit the few at the expense of the many.

American workers retain huge advantages when competing in the global economy. When we shake off the current slowdown, as we have every other postwar recession, American workers will be more productive than ever.

[Paul Ross]

Run that calculation since 1998. You will get a seriously different picture. Your proportion of investment allocation to the other advanced countries is also no longer valid. The introduction of China into MFN status and then the WTO has obsoleted ALL of your pretty numbers.

[Paul Ross]

Manufacturing output in the United States remains 40 percent higher than it was a decade ago, and double what it was in the 1970s

False. These are numbers you posit wihtout sources or basis for credence. Deloitte & Touche brought us ENRON. Need I say more.

I do know that the basic primary industrial declines are structural (i.e., PERMANENT) not cyclical which is what the Free Traders always try to assert. And it has not been 'productivity' increases, but outsourcing which accounts for the structural destruction of our industrial infrastructure. Aircraft production is down to a puny fraction of what it was in the 80's. Car production is also way down when you look at actual value-added by the so-called 'U.S. assemblers' of cars from the foreign car companies. Steel production is way down. Computer production is way down. Tool Manufacturing is almost extinct. The U.S. industrial base is running on fumes.

And this little gem of yours deserves a rejoinder:

At the end of 2001, American companies owned more than 10 TIMES as much direct investment in the tiny, high-wage Netherlands ($132 billion) than they did in China ($10.5 billion) and India ($1.7 billion) combined.

No sources. No credence. And the actual PRODUCTION CAPACITY of China's U.S.-owned 'assets' DWARFS the Netherlands. And let's look at your '$10.5 billion number. First, you should be aware that the foreign companies can only own 50% of Chinese enterprises. They have to partner. But guess who actually supplies ALL the capital, hmmmm?? So double your number right there. GM is outsourcing $10 billion in parts production to China. Gee, you think they are doing that on less than state-of-the art machines? Motorola is investing by 2006 $10 billion in the latest state-of-the art semiconductor fabrications facilities...and their R&D labs that go with them... 'saving $50 billion if invested in the U.S.' Right there, that should tell your numbers are drastically understated for their real value.

It's Just like China's Army budget. Don't be fooled. The low wages skew every calculation. It is in reality a sizable entity, getting more modern all the time. Boeing is outsourcing its tail-section fabrications operations to China. Pretty soon that will be the end of Boeing. It is already forced into outsourcing 95% of its next plane design.

These are not massive amounts of U.S. capital exiting? You live in a paper castle if you persist in that fable.

[Paul Ross]

The following excerpted article bears repeating here:

"So what is limiting the market for American-produced goods? The answer, of course, is imports. Despite the slowdown in the U.S. economy during the 2000-2002 period, American consumers still increased their annual purchase of foreign-made autos and auto parts by $6.9 billion and of imported consumer goods by $21.5 billion. In all, Americans imported almost $1 trillion worth of manufactured goods last year. Though there was a slight drop in total manufactured imports during this period, the cause was concentrated in certain sectors, such capital goods where imports dropped by $66.5 billion. But capital goods are used in American production, so this decline is consistent with a cut in U.S. manufacturing. Indeed, the main cause of the slow recovery is the decline in business investment spending in the United States, as major firms look to invest in factories overseas.

"The result is a loss of jobs that is structural, not cyclical. Two economists at the Federal Reserve Bank of New York, Erica L. Groshen and Simon Potter, have recently published a paper that answers in the affirmative the question they pose in its title "Has Structural Change Contributed to a Jobless Recovery?" They found that 79 percent of employees who have lost their jobs worked in industries affected more by structural shifts than by cyclical shifts, meaning that their jobs are not going to come back by the natural working of the business cycle. "Job losses that stem from structural changes are permanent: as industries decline, jobs are eliminated, compelling workers to switch industries, sectors, locations, or skills in order to find a new job," write Groshen and Potter. They add, "In our view, this shift to new jobs largely explains why the payroll numbers have been so slow to rise: Creating jobs takes longer than recalling workers to their old positions and is riskier in the current uncertain environment."

Oddly, though 90 percent of the jobs lost over the last three years have been in manufacturing, Groshen and Potter never mention this sector. Instead, they note that several of the fastest growing industries in the 1990s, communications, business services, and security trading have suffered as their bubbles have burst (e.g. "structural downturns because of unsustainable overexpansion"). These, of course, were among the much hailed "new economy" jobs which were supposed to replace manufacturing. Groshen and Potter do mention "reorganization of production, and local or international outsourcing" as causes of structural job losses. Local outsourcing would, however, only shift jobs within the economy. It is international outsourcing, along with the "reorganization of production" into global supply chains, which has cost the United States manufacturing jobs and manufacturing capacity.

Groshen and Porter do not make policy suggestions, but the implications are obvious. Macroeconomic policies like tax cuts, deficit spending, and low interest rates will not revive the manufacturing sector because they do not address the structural challenge of imports and outsourcing. The structure of American production for the American market has to be purposely rebuilt. The foundation of a new American economy that preserves manufacturing as the most important sector is a new trade policy that restricts imports.

William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.

In sum, your 'cyclical' explanation for the jobless 'recovery' is debunked. And so is the general notion that cyclical recovery can make things right again. It won't bring back Motorola, Intel, or Boeing. We need to take drastic measures to preserve the industrial heart of our national defense base.

[A. Pole]

Trade with China allows our economy to shift production to those products and services where we enjoy an even greater advantage, raising our overall productivity.

Argentina had "greater advantage" in producing beef and other agricultural goods. When the prices collapsed, neglected industry was not there to provide another "advantage". Short/middle term gain should not replace long term planning and policy.

[RLK]

#1 If you go $200,000 into debt on credit cards you will have to pay it back plus interest. You pay to "rent" this money. Same with the USA if we buy so much more from China and they hold US Treasuries rather than spend it, which in fact is what they do. Once more interest is collected as it is from all debtors.

-------------------------------

We expect the people buying bonds to put the interest into buying more bonds instead of collecting the money. Eventually, with the accumulation of bonds the potential interest will build until there is no way to createn enought more bonds to satisfy it, and no way to pay the interest without bankrupting the nation. We are deferring a disaster through employing methods that make the eventual disaster worse.

[dennisw]

One way they collect is to buy productive assets in the USA.

AKA colonization. Buy property that yields rents and factories that produce automobiles. That's what Toyotoa does. Stupid Americans hail the job creation by Toyota while the profits go to the Japanese. Was in Forbes that Toyota is 95% Japanese owned.

[RLK]

It was in 1991-92 that Americans woke up to find Japanese were buying this country. There was a big panic here about it and the Japanese backed off for a while. Now it is continuing with foreign nations buying up entire blocks of America and American businesses. I remember when Chrysler was Chrysler. Foreign investment in China is producing entire new industries there. Foreign investment in America consists of buying ownership to once-strong American industries with no real development here.

[Lael]

BTTT!!

[Barnacle]

Sigh... (Oh man...)

Could you be just a wee bit more explicit?

[Barnacle]

Foreign investment in America consists of buying ownership to once-strong American industries with no real development here.

Everything you see is based upon numbers punched into a calculator. MBA’s have removed the human factors and all other ethics factors out of the equation. There is no loyalty, no compassion, no patriotism, and no dedication. It’s bottom line. It’s numbers. Its, "Take the money and run."

Well, they’d better take enough money to make a early retirement to a Swiss chalet. Because the day will come thy will no longer be welcome in America.

[RLK]

No argument here. It will come to the point where a revolution will occur here in response to the deterioration. Paradoxically, it will be a communist/socialist revolution. Radical socialism will be touted as the only way out. We will be in socialistic free-fall. It's something that I will hate to see. However, we have been manipulated, and have allowed ourselves to be manipulated, to the point where that is what will happen. Equally paradoxically, the radical free traders and radical capitalist will have played a major hand it causing, forcing, this to happen.

[Barnacle]

Time to try on a new tag line.