They didn't lose competitive advantage because of "open" market philosophy which opens other markets for already existing and the new tailor-made for new markets goods. They are losing it because of ever more intrusive, expansive and expensive role of the government in the production of such goods, for foreign or domestic consumption, basically pricing U.S. and U.K. products and/or services out of the free market.
Are the U.S. states with higher cost of production (taxes, regulations, "living wage" etc.) more or less competitive with their neighboring states? Just as an example, mandate minimum (or "living") hourly U.S. wage of $25 and see how much the dollar exchange rate is going to help you sell the products overseas, while businesses and people within the U.S. adjust themselves internally to new price regime. Is this equivalent to effective devaluation of the dollar? Yes, but would that make U.S. goods more competitive in other countries? Deliberately gross exaggeration, I admit, but it does make a point pretty clear. And there are many other, often hidden but mostly related to government interference, costs of production that make stagnant developed countries less competitive in trade, besides minimum wage.
To freely export things, you must allow for thing to be freely imported, to sell them you must allow them to be competitive against the others... Tinkering with the currency exchange rates or building a "Berlin Wall" around the trade of goods ignores the unintended (or, for some, intended) consequences and has never made the standard of living better - only enslaved the population to its government - and can only make the trade imbalance issues worse, not better.
"Big government is not the solution to our problems. Big government is the problem." - Ronald Reagan
I view all trade as managed; our alleged free market approach since the 1990’s has led to a situation where we are just not active in its management while everyone else is and it hasn’t worked well. Don’t get me wrong, the freer our markets are internally and the lighter the hand of government the better we do economically. I wouldn’t be a FReeper if I didn’t believe that. Reagan negotiated with the Japanese and they built the auto plants here. It didn’t happen by pure market forces. We’ve given up our big stick in trade and are left with just speaking loudly. Obama’s recent attempt to renegotiate with Korea and the general disdain of the world for us economically shows that.
If we cut the budget in 1/2 and taxes by 1/4, we’d boom. Simple as that, and likely end up with a balanced budget or a surplus over time. If we combined that with a more managed trading regime to let our manufacturers recover and eliminated the perverse incentives to go offshore, we’d recover some of our dominance in a decade or two.
Freedom doesn't make a nation less competitive, it allows people to create wealth. Ben Franklin said it well: "no nation was ever destroyed by trade." So many thanks to all for a rousing interchange. I know I've learned a lot about sharing information and I hope y'all are better off too.