On July 26, 2018, the PBS News Hour reports:
As the Trump administration stokes a trade war with China and tries to smooth over relations with long-term allies like Canada and the European Union, other nations are forging ahead with free trade agreements among themselves, a shift that could isolate the U.S. economy in the long term.
President Donald Trump has argued that past trade deals hurt the U.S. economy and should be renegotiated or scrapped in favor of agreements that benefit American workers. But if the U.S. is not at the negotiating table, economists and former U.S. trade officials warn, it risks missing out on substantial economic benefits and the chance to shape international trade rules that American companies will be forced to follow.
“It seems like country after country and region after region are pursuing trade deals with each other,” said Wendy Cutler, vice president of the Asia Society Policy Institute and a former Obama administration official who oversaw negotiations of the Trans-Pacific Partnership, known as TPP.
The European Union finalized the largest trade agreement in its history earlier this month. The deal with Japan covers nearly a third of the global economy and creates one of the largest free trade areas in the world.
Negotiators from the 11 countries involved in the TPP, which has been renamed the Comprehensive and Progressive Trans-Pacific Partnership, have also begun talks to allow more countries to enter into the agreement.
Trump withdrew the U.S. from the TPP his first week in office. In April, he floated the idea of rejoining the deal, which would have covered $1.5 trillion worth of trade with the U.S., but tweeted the next day that he would consider reversing course only “if the deal were substantially better than the deal offered to Pres. Obama.”
President Donald Trump and President of the European Commission Jean-Claude Juncker speak about trade relations in the Rose Garden of the White House in Washington, D.C. Photo by Joshua Roberts/Reuters
Meanwhile, Mexico and South Korea have announced their interest in becoming a part of the Pacific Alliance, a trade bloc of countries bordering the Pacific Ocean. The Pacific Alliance this week began talks of a free trade agreement with the South American bloc Mercosur, made up of Argentina, Brazil, Paraguay and Uruguay.
That comes as Mercosur, the world’s fourth largest trading bloc, is pushing to conclude a free trade agreement with the EU by September.
Many of these deals were already in the works long before Trump came into office. But Cutler said countries are now trying to “hedge their bets” with more free trade deals in case the U.S. hits them with tariffs. Trump has imposed tariffs on $34 billion worth of Chinese goods, threatened tariffs on another $200 billion worth of goods from the country, and set a 25 percent tariff on all steel imports and a 10 percent tariff on aluminum imported into the U.S. Trump issued a temporary exemption from the tariffs for Canada and Mexico, but later withdrew the exemption.
“We’ve helped accelerate a trend that is working against us,” Cutler said.
Trump has said the tariffs are not isolating the United States. Instead, he argues they are doing the opposite — forcing foreign nations to the bargaining table.
“Countries that have treated us unfairly on trade for years are all coming to Washington to negotiate,” Trump tweeted Tuesday, the day before European Commission President Jean-Claude Juncker’s visit to the White House.
After their meeting Wednesday, the two leaders announced they would halt any new tariffs while they work toward eliminating all tariffs on non-automotive goods, including steel and aluminum.
Cathryn Clüver Ashbrook, the executive director of the Project on Europe and the Transatlantic Relationship at Harvard University, said the agreement was a symbolic win for both sides but should not have been necessary in the first place.
“A lot of these trade questions with NAFTA, the European Union and China are self-created conflicts intended to create momentum with the base of the Trump electorate,” Ashbrook said.
In addition to imposing new tariffs, the Trump administration has halted negotiations between the U.S. and EU on the Transatlantic Trade and Investment Partnership, or TTIP, which had been in the works since 2013. Ashbrook said now the U.S. is looking at negotiating a “TTIP-lite.”
“I think it will take us a significant amount of time to get back to where we already were,” she said.
The long-term consequences of U.S. trade policy
International trade deals typically take years to negotiate so the consequences of the U.S. isolating itself might not be fully known for some time.
But “the longer it goes on, the more we have an international set of rules that are not to our interests,” said Peter Allgeier, who served as the U.S. deputy trade representative under Presidents George W. Bush and Barack Obama.
In the agriculture sector, for example, farmers could be denied access to developing markets. Pharmaceutical companies could face new barriers to establishing drug patents in foreign countries, and the telecommunications industry could be forced to play by different rules when transferring data across borders.
The Trump administration has said it is open to bilateral deals — trade pacts between two countries — that would achieve similar results as multilateral deals between several nations. The trouble, Allgeier said, is that if the U.S. makes bilateral deals with multiple countries, instead of agreeing to a regional deal, each individual agreement would establish a different set of rules.
“That’s tough for our businesses because they could have to comply in six different ways for six different countries,” he said. “If you do it as a multilateral deal, a rule is a rule is a rule.”
Even if countries were open to bilateral deals, the Trump administration’s unconventional approach appears to be making many nations more wary of doing business with the U.S.
“The United States’ trading partners are turning to other nations, where the requests are more predictable and in line with traditional trade practices,” Cutler said.
But being left out might not be such a bad thing, according to opponents of more recent trade deals like the TPP.
“We like to think of ourselves as being open, free-market, globalist, and the protector of the free world. In that mode, you don’t have to do every deal that’s been given to you,” said Clyde Prestowitz, the president of the Economic Strategy Institute, a Washington, D.C.-based think tank that focuses on trade.
Canada’s Prime Minister Justin Trudeau and G7 leaders France’s President Emmanuel Macron, Germany’s Chancellor Angela Merkel, Britain’s Prime Minister Theresa May and U.S. President Donald Trump hold a meeting with staff on the first day of the G7 meeting in Charlevoix city of La Malbaie, Quebec, Canada, June 8, 2018. Picture taken June 8, 2018. Adam Scotti/Prime Minister’s Office/Handout via REUTERS.
Prestowitz echoed Trump’s view that the global system has been unfavorable toward the U.S. for many years. Until the U.S. can get a better shake in the global market, he said, it “largely doesn’t matter” whether the country signs on to new trade deals.
The success or failure of the Trump administration’s approach to foreign trade could be determined less by who gets the last jab than by the state of the U.S. economy.
If retaliatory tariffs slow economic growth, more businesses could follow Harley Davidson and move overseas.
On the other hand, if the U.S. economy continues to grow, the long-term consequences could be negligible.
The public spectacle
Trade experts may disagree on policy, but most acknowledge the atmosphere around international trade negotiations has changed. Under Trump, there is a heightened sense of showmanship to all of the trade talks, said Tim Keeler, a former chief of staff to the U.S. trade representative in the George W. Bush administration.
“There’s a lot of public jousting, and that’s unusual,” said Keeler, who works as an attorney representing clients on trade issues at the law firm Mayer Brown LLP.
Negotiations on trade issues can get heated, but that back and forth typically takes place at lower levels of government and would not catch the public eye, Keeler said.
But with Trump regularly issuing threats on Twitter, foreign leaders have also started their own public campaigns.
When the U.S. offered to make free trade deals with its allies at a recent G20 meeting, European leaders made clear such offers were nonstarters as long as the U.S. was imposing tariffs on steel and aluminum.
French Finance Minister Bruno Le Maire told reporters the EU would not negotiate “with a gun to our head,” according to Reuters.
During the ceremony solidifying the trade deal between the EU and Japan, European Council president Donald Tusk said the deal indicated Japan and the EU would be “predictable,” and would “continue defending a world order based on rules, on freedom, on transparency and common sense.” Economic analysts viewed that as a not-so-veiled message to the U.S.
Gary Reber Comments:
As I have stated before the Trans Pacific Partnership (TPP), now re-named the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), would have further incentivized American-based corporations to invest in production facilities outside of the United States to take advantage of no-tariff provisions and lower wage workers, even child workers and far, far less regulation to protect and enhance the environment and provide safety for workers. The TPP would have reduced or eliminated many tariffs, further encouraging companies to move factories out of the United States to low-wage countries like Vietnam, a Communist State.
Trade deals mostly benefit the wealthy ownership class, not workers. The wealthy capital asset ownership class owns operations globally and it does not matter where goods and products are physically produced as long as the production generates profits. Of course workers are excluded from owning as the system is rigged to create a past-saving obstacle that few people can meet or risk, and then they are limited to the speculative stock exchanges trading in previously-owned stock, not opportunities for investment in new productive capital asset formation.
If the President really wants to ensure that the United States succeeds far beyond China, then he would advocate broadening personal productive capital ownership of ALL future productive capacity formed by American corporations, and unleash the productive power of the non-human factor — the “tools” and “machines” that can produce goods, products and services far more efficiently than labor alone.
Not surprisingly, past trade agreements, including the TPP, the EU Transatlantic Trade and Investment Partnership (TTIP), NAFTA and the Pacific Alliance promote the interests of giant, multinational corporations over the interests of labor, environmental protections, consumers, human rights, or other stakeholders in democracy, AND FURTHER CONCENTRATE OWNERSHIP OF THE NON-HUMAN PRODUCTIVE CAPITAL MEANS OF PRODUCTION!
The REAL STORY is a story about the collusion among a globally wealthy capital asset ownership class to further concentrate private sector ownership in ALL FUTURE wealth-creating, income-generating productive capital asset creation on a global scale. A sorta FREE TRADE ON STEROIDS!
Decades of ever-freer, but not necessarily fair trade, and cross-border mergers have led to the domination of many industries by a handful of narrowly-owned multinationals dependent on easy flows of raw materials, parts and labor. Those companies have invested hundreds of billions — if not trillions — of dollars in other countries on the assumption that the wheels of global commerce will continue to turn with increasing ease.
Trade agreements in the past, were designed to enable the largest corporations to completely monopolize the OWNERSHIP of all future wealth-creating, income-producing capital assets on a global scale.
Without tariffs and/or quotas, however, new U.S. technological invention and innovation will continue to be used by American corporations to produce in low-wage, non-environmentally regulated countries what they sell here.
Trade pricing should be equalized and America should focus on significantly improving efficiency and cost-reducing measures employing new technological invention and innovation measures. At the same time, we need to finance this re-growth to build purchasing power into the broadest possible spectrum of individual citizens by creating equal opportunities for EVERY child, woman, and man to acquire personal ownership stakes in the corporations growing the economy using insured, “pure” interest-free capital credit, repayable out of the future full earnings of the investments in rebuilding our productive capabilities, without the requirement of past savings or any other requirement except for citizenship. This policy will, over a relatively short period, create general affluence for EVERY citizen and create a massive base of “customers with money” to provide the demand to build a future economy that can support general affluence for EVERY citizen.
As I have said before, appeasement will not work in the long run. America needs to bring back and develop its manufacturing capabilities or the American people will become completely dependent on other populations. Others will get stronger and more independent while America will get weaker and more dependent. Plus, the opportunity to create new capital asset owners with the growth of our economy will be far less as other countries’ oligarchs in partnership with our wealthy oligarchs will end up owning the world.
By making equal the fair price of goods, products and services imported with those of goods and products manufactured in the U.S., the result will be no significant advantage to outsourcing our manufacturing, and instead staying home and investing in our own country’s capabilities. But with this investment there must be the creation of new productive capital owners inclusive of all children, women, and men simultaneously with the growth of the economy. Thus, empowering EVERY citizen to be productive. This is especially important to ensure that our children will be able, over time, to acquire a significant financial portfolio of ownership stakes in the corporations growing our economy today and in the future, and not become dependent on the government for financial support. Capital asset acquisition needs to be facilitated using “pure”, interest-free capital credit, solely repayable out of full future earnings of the investments in our economy, without the requirement of past savings to serve as bank collateral. The collateral requirement would be capital credit insurance instead of pledging savings or equity holdings.
Issuing tariffs is the only way to bring about trade fairness and dampen, if not eliminate outsourcing, which is increasingly weakening our economy.
Critics of the trade war never discuss outsourcing and the gutting of our manufacturing capabilities and the fact that American corporations are investing in China and Vietnam, both Communist State-Controlled economic sectors, and other Asian countries with low labor costs, even child labor, instead of investing in the United States and building up our own home economy.
We need to build consumer power at home by simultaneously creating new productive capital asset-formation investments and new capital asset owners, with corporations incentivized to pay out 100 percent of their earnings to their owners, thus creating wide-spread “customers with money” to create demand for continued responsible capital asset investment and further economic growth at home, resulting in a home economy that can support general affluence for EVERY citizen while protecting and enhancing the environment.
The United States is dealing with a Communist country (largely the means of production owned by the so-called collective but controlled by a dictatorship), China, who does not compete fairly. In other times, our nation would not be dealing with a Communist State in any event, and instead be putting sanctions on them.
But in this case, critics of short term tariffs appear not to care about the further loss of manufacturing capability and the associated intellectual property that enable such manufacturing, as well as the job losses that will (and have) result.
Such critics believe it is acceptable that we continue to allow cheap foreign competition and unfair trade practices because otherwise goods, products and services produced in the United States would result in higher prices paid by American consumers.
Critics believe that education and job-training to equip Americans for higher-skill, higher-wage jobs will solve the problem without reckoning with tectonic shifts in the technologies of production that continue to eliminate masses of jobs as “machines,” IT and AI replace the necessity for human labor. (See my article “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058.)
The fault for this situation rests with our governments who over time have allowed cheap Chinese and other cheap foreign goods and products to be imported into the United States without being subject to fair-based tariffs, which, in return, encouraged American corporate owners to invest in the formation of plant and machinery in such cheap slave labor, non-manufacturing-regulated countries, only to export the cheap foreign-made goods and products into the United States without tariff penalty.
When does it stop?
If it does not stop, we will continue to weaken our manufacturing capabilities and subject our intellectual property to foreign entities who will use this to undermine our ability to compete. Already, for instance, more industrial robots operate in China’s production plants than in the European Union or North America. China is already the world’s largest developer and market in the manufacturer and sale of industrial robots. The automation of China’s production plants is well under way, as a result largely of American intellectual property. With technology, anyone can lean the current technology parameters and build upon those without having to learn from the very beginning. And the Chinese government is simultaneously pushing forward with robotic and AI research.
Of course, robotics sales, AI and the development of labor-saving computerized operations are increasing in all markets, as competitive intensity races to gain more efficient, lower-cost productive gains from the non-human factor of production. This tectonic shift in the technologies of production is rapidly shifting toil work from human labor to smart, collaborative “tools” that reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which goods, products and services are produced from labor intensive to capital intensive — “the core function of technological invention and innovation.
But what is damaging to U.S.-based production is that American-owned corporations are investing in foreign countries and outsourcing rather than investing in U.S. manufacturing and building new plant and machinery. Further, such American corporations are narrowly owned by a tiny wealthy capital asset ownership class, and not by their employees and other citizens on a broad scale.
All this is resulting in a role reversal as China is quickly surpassing the United States in the innovative and economic world. With its increasing wealth (thanks in large measure to American consumers buying China-manufactured goods) empowered with American outsourcing, China is expanding its presence and influence throughout the world.
China will soon be in a class by itself, using its rapidly increasing wealth to expand its presence and influence all over the world, to develop and construct many forms of infrastructure within other countries; an agenda that is designed to vastly increase commerce and trade between
China and other nations and, at the same time, to generate a multitude of benefits for China. China will pour untold billions into these endeavors and is confident that is will earn a significant return on its investments.
So what is it to be? is the question we should be asking with the answer driving our economic policies.
We are at a pivotal point that will largely dictate our future economic status and for the possibility of an economically secure and affluent future for our children.
Our governments during the past several decades have taken us down a path in which we have become very dependent on the outsourcing of the production of the goods and products needed and wanted by American industry and consumers. Now that the current government, alone and without support from others seeking to replace this government, is finally imposing federal tariffs to boost the cost of unfairly low cost imported products manufactured in China, certain American corporate interests and their lobbyists, as well as the Chinese, are having a fit. Why? Because tariffs seek to adjust unfair trade that is supported by Communist Party State subsidies to key industries, and who impose technological-sharing stipulations for American corporations to operate in China, as well a State co-ownership.
We should be asking ourselves why have we been effectively incentivizing American corporations to outsource their production to China and to other low-wage, non-environmentally- and non-worker-safety-regulated countries without penalty of a federal tax on foreign-made goods and products exported back to the United States? Such products are produced with the aim of competitively producing at the lowest cost, while decimating home-based production. They have effectively been entering the United States tax-free.
As a result of our past governments doing nothing about American corporations abandoning the American heartland, we have undermined our once powerful industrial capabilities with the outsourcing of production to China and other developing countries. This means American corporations have been investing in the development of China’s capabilities to produce cheaper than us due to the no-choice compliance of their masses to become low-wage slaves working in far-less-than-ideal conditions. American corporations have left our country and have continued to leave in droves to outsource their production, or to source parts used in the assembly of products in the United States.
We also should be asking why have our governments used our taxpayer dollars to provide lucrative federal contracts to some of the largest overseas outsourcers in America, who have not only robbed us of productive development at home but shipped thousands of jobs to Asia, India and Europe?
There needs to be a policy to deny federal contracts to companies that outsource American jobs overseas. We should be awarding federal contracts to companies that create, not destroy, good jobs in the United States and whose ownership includes all of their employees and other Americans.
The greater impact derived from fair trade and tariff policy should be to stimulate the return of American corporations to the homeland, who over decades have invested and outsourced production to foreign countries instead of investing in productive development at home, and to stimulate exports of American-made goods to other countries at competitively fair prices.
Of course, we should expect that as a result of a trade policy that readjusts the cost of imported products, prices in the short term will increase for both home-based American manufacturers and assemblers, who have come to rely on foreign-made materials and parts, and consumers, during the time American corporations readjust and return or expand to manufacture goods and products in the United States and embrace fair trade supply chains, in cases where we are unable to produce all the material necessary for production. No doubt, tariffs, in the short term, will force some U.S. importers and retailers to raise prices and in turn, the tariffs imposed by foreign countries on United States exports will make those American goods and products less competitive. But looking ahead, this is a cost we need to absorb.
But should we reason, as is sadly prevalent, that, because prices will increase for certain materials and parts, as well as for certain consumer goods and products imported into the United States, we should abandon policies that deter outsourcing and provide new opportunities for Americans to produce at home American-made replacements? The short-term thinking to stop taxing goods and products imported into the United States is, in reality, a rally for continued outsourcing of American manufacturing and investment in China and other low-wage, non-environmentally- and non-worker-safety-regulated countries, depriving Americans of opportunities to become productive at home. Those engaged in “Stop Imposing Tariffs” thinking are obviously no-restriction. free-trade advocates, not fair-trade advocates and are OK with the continued outsourcing of the production of goods and products, even services, as long as wholesale and end user prices can be kept lower than if those goods, products and services were produced in the United States. In essence, they support outsourcing and the development of other countries, not our own country.
What Americans do not see is how, with the earnings boost provided by American corporations outsourcing productive capital asset investments, China is spending billions to automate Chinese factories. Also, China is exempting foreign investors and American outsourcers from being taxed on profits from investments in China provided the proceeds are reinvested in industries high on the Communist Chinese government’s priority list. In other words, China is using tax breaks to discourage foreign earnings from flowing out of the country. These measure are aimed at gaining an edge in global competitiveness.
Why are we not spending billions to fully developed our at-home productive capabilities? Highly automated production could just as feasibly be employed in the United States as in China or other countries. Tariffs are a means to incentivize the development of such production and other production in the United States and penalize investment in China and other non-fair trade-practicing countries.
Instead, duty-free imports over decades have resulted in propelling American corporations to outsource production to China and other low-labor cost third-world countries, enabling new investment in those countries and building their economies through exporting tariff-free back to the United States. This is at the expense of Americans, who have been losing jobs to outsourcing. Of course, the wealthy capital asset ownership class, who monopolize the ownership of the large American corporations doing most of the producing and who outsource investment to produce at the lowest possible cost, continue to enrich themselves by investing in productive capital asset formation in other countries, which then they own or share ownership with, for example, the Chinese Communist State-supported and controlled manufacturing elite. And as they do so economic inequality further widens.
We need a pro-active policy to stop allowing goods and products produced as a result of outsourcing from entering the United States without a stiff tariff applied so that the imported pricing is commensurate with the pricing for the same or similar goods and products produced here. This will help to deter American corporations from further outsourcing and bring back production to the United States. Much damage has already been done, and a re-direction not take some time before production is brought back to the United States with a focus on building an economy here that can support general affluence for EVERY citizen.
China in recent years has attracted our corporations to invest in China and decrease investment in the United States, significantly decreasing the availability of good-paying manufacturing jobs, and China has pilfered our intellectual property, as more and more American corporations move their production to China. China reportedly has also hacked into politicians files and our government offices.
And according to international trade experts, China has been “stealing” more than $5 TRILLION from Americans — each year. China and its American out-sourcing accomplices have devastated our heartland, our businesses, and the livelihoods of millions of Americans.
The American people share a large part of the blame for American corporations outsourcing as we, as consumers, have widely embraced buying lower-cost Chinese goods and products instead of higher-priced American-made equivalents. And this has further propelled more and more American corporations to outsource their production to stay competitive with those American corporations in the same industries who have preceded them.
This snowballing effect has been supported as the result of steadily increasing exports from China and other low-wage, low production countries over the past few decades, which have been allowed to enter the United States without tariff adjustment, with the result that “American Made” production can no longer compete, resulting in factory closings and underproducing.
But after years of sitting back and letting hardworking Americans take the brunt of China’s cost advantages and unfair trade policies, imposing tariffs is a way to de-incentivize American corporations from further outsourcing, and instead invest in the expansion of American-made production, while simultaneously creating new productive capital asset owners and jobs.
What is frustrating is that there is not a broader discussion on the national level in political circles over the threat to our economic well-being from Communist-ruled China. Over the last two decades, China has gotten away with robbing us of our jobs and the productive foundation that enables us to be self-sufficient in producing the goods, products and services that Americans need and want, and create and keep jobs at home.
If we continue on this outsourcing path it will do significant harm to our economy and our ability to strengthen our capability to produce at home. We need to uphold an economic policy that strengthens manufacturing in the United States, while ceasing production in China and other countries. This will strengthen our economy and galvanize “Made In The USA.”
In the current political climate, the question is why would any American support outsourcing? De-incentivizing outsourcing and creating a fair trade system should be an issue that receives bi-partisan policy support.
We need to call out those who advocate for continuing to allow cheap-labor-produced Chinese and other cheap-labor producing countries goods and products to enter duty-free or near duty-free when exported to the United States.
We need to face up to China’s mercantilist economic policy and plan for pushing its “Made In China 2025” campaign, an ambitious plan not only to upgrade Chinese industry — most notably in advanced sectors like information technology, robotics and pharmaceuticals, where IP is key — but to compete with and ultimately displace foreign companies domestically and globally. To that end, China has continued to aggressively push foreign companies to hand over technology and IP rights in exchange for market access — a possible violation of World Trade Organization (WTO) rules.
At home, there is virtually no political discussion of how the non-human factor of production — productive land structures, infrastructure, tools, machines, robotics, computer processing and apps, and artificial intelligence, which are owned by people individually or in association with others — is continually eliminating the need for masses of human workers. Yet, as tectonic shifts in the technologies of production continue, resulting in more and more robotic and AI-assisted automation, the result is less-educated workers, who have in the past performed the physical work needed by our industries, now must increasingly compete against labor-saving, efficient machinery. With plenty of want-to-be workers, willing to work for less pay, wage levels are dropping, especially for less-educated workers.
Unfortunately, in light of these decaying developments and opportunities, no politician has come forth to offer solutions to empower Americans to earn income by owning the productive capital assets that are continually eliminating the necessity for their labor.
Isn’t enough, enough? Or will we continue to not penalize American corporations who outsource to China and other countries? The plan should be to make “Made In The USA” the gold standard for quality.
Solutions to energizing our at-home economic growth have been developed since the 1960s but political leaders and academia have ignored the policy recommendations.
We do not have to depend on the Chinese or the wealthy, wherever they are, to create investment monies to re-build and build new productive capabilities in the United States and create a technologically advanced new industrial economy that can produce general affluence for EVERY child, woman, and man. We should and can manufacture the materials and parts necessary to supply industries at home and produce products for consumers in the United States, and adopt and expand the application of highly automated processes to create efficient production, and not rely on foreign producers.
The logical solution is Fair Trade throughout the world. But that will not be favored by the corporations who do not want a trade war because they export to foreign countries and/or manufacturer in foreign countries at lower costs, eliminate jobs in America, and then export back into the United States their goods and products, often produced through State (even Communist) partnerships. In either case, it is the owners of these corporations who benefit and the workers who remain enslaved or lose their jobs.
Consumers, are, of course, hurt, because we have gotten used to low prices for foreign made goods, products and services, but at the same time we are exporting our technology and productive manufacturing might, shutting down factory and factory, and thus at the expense of workers (us), whose ONLY means (currently) to earn an income is through a job.
In the short term, tariffs and possible subsidies will be necessary as an expedient, but they are not solutions. Both are signs that something is wrong in the economy and needs to be fixed.
The solution is to make U.S. industry and commerce more efficient than that of other countries, especially in key products affecting national security, notably food, fuel, and fiber. That is, the U.S. needs to produce what it needs at a higher quality and a lower cost than what it would have to pay to obtain it from other countries . . . without manipulating the cost by subsidizing domestic products or taxing foreign products.
Once upon a time, our peoples produced virtually everything we consumed in the United States. But gradually, American corporate owners (a very tiny group of people who OWN the corporations producing goods, products, and services) started to outsource their production to foreign countries because they could produce far, far more inexpensively. Why? Because of essentially slave labor conditions (far more so than in the United States) and virtually no regulations or environmental protections (which they are subject to in the United States). How was this possible? Because Americans (not looking out for their own job interests and those of their fellow Americans) saw cheaper prices as a huge draw, as they do today. We have become accustomed to buying far cheaper-made and priced goods, products and services exported from foreign countries. At the same time, we have steadily outsourced our manufacturing capability, creative knowhow, assembly, and service deliverables. This continues today. Why? Because to be competitive with those corporations outsourcing, every competing American corporation that is left producing in the United States eventually is faced with having to also outsource their production. It is a continuous circle of outsourcing and exporting back into the United States while destroying our own productive capability at home.
This whole trade issue and the ownership composition of the global players is an involved discussion, but essentially this is about protection of their ownership interests to maximize profit in their operations throughout the world and to ensure they will own the future. They have caused massive imbalances in trade and created unfair trade practices. This includes American corporations who are outsourcing production of goods, products, and services.
Trade today is not fair. Ideally, there would be no government subsidies, no wide disparities in labor costs and environmental protection that favor one or more countries over another or others. In such a scenario, there would be no need for tariffs anywhere and manufacturers would compete fairly, using technological invention and innovation to produce higher quality goods and products at lower costs. But that is not the reality.
The question then becomes how to fix the U.S. economy (or any economy, for that matter) so that it operates for the benefit of all its citizens, not just private sector capitalists or public sector bureaucratic élite.
The key to our success as we rev up to develop new production capabilities and factories is to finance their formation using financial mechanisms that will empower workers and other citizens to own the new productive capability. By simultaneously creating new productive capital owners with the development and growth of our future economy, there will be more financially sound “customers with money” who earn from the productive capital assets they own, as well as from their earnings from jobs that will be created as a result of the huge demand for workers to build a future affluent economy.
What we need to do is enact legislation that will empower EVERY citizen to acquire productive capital assets to be formed in the future, without the requirement of past savings (the exclusiveness of the wealthy), and whose investments pay for themselves out of the earnings generated (future savings).
There are solutions for establishing a trade system that is fair and for incentivizing American corporations who have outsourced their manufacturing to China and other countries to return to the United States to manufacture using the most advanced technological tools possible, and at the same time finance the formation of new productive capital assets in ways that empower their workers and other citizens to become owners.
One part of the solutions, proposed as the Bring Jobs Home Act (S.247 introduced by Senator Debbie Stabenow [D-MI] on January 30, 2017), amends the Internal Revenue Code to: (1) grant business taxpayers a tax credit for up to 20 percent of insourcing expenses incurred for eliminating a business located outside the United States and relocating it within the United States, and (2) deny a tax deduction for outsourcing expenses incurred in relocating a United State-based business outside the United States. The bill requires an increase in the business taxpayer’s employment of full-time employees in the United States in order to claim the tax credit for insourcing expenses. Senator Stabenow first introduced this legislation in 2012, and in every Congress since, but Senate Republicans have repeatedly blocked it.
Another Act introduced on April 7, 2017 by Senator Stabenow is the Make It In America Act (S.908), which closes loopholes in the current Buy American law so the federal government spends American tax dollars to buy products made in America. This Act also holds federal agencies accountable for how they spend taxpayer dollars.
The Buy American Act, which was passed in 1933, gives priority to American companies when the federal government purchases goods. The current law has numerous exemptions, which need to be eliminated. As a result of the loopholes, federal agencies issued over $92 billion in contracts to foreign companies between 2008 and 2016. For example, the Department of Defense awarded the most contracts to foreign companies — $154 billion during this time period. More than half of the Defense Department’s foreign spending was due to Buy American loopholes. These are contracts that could have gone to companies creating jobs and manufacturing, as well as capital asset ownership opportunities for EVERY citizen of the United States.
How could any American object to the logical sense that American tax dollars be used to purchase products made in America, not overseas? The Make It In America Act is aimed at creating more opportunities for American jobs and productive capital asset ownership by strengthening our current Buy American law and holding federal agencies accountable. In this age of American production outsourcing, the Act is a critical component of protecting our national security.
Still, another Act introduced by Senator Stabenow is the Made In America Act of 2018 (S.2865), which adds new Buy America requirement to 16 federal programs that provide $10 billion in federal funding or financial assistance to infrastructure projects.
But the most powerful legislation to re-invigorate home-based American manufacturing and economic growth is still yet to be introduced and enacted. This would be the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version at http://www.cesj.org/wp-content/uploads/2014/11/C-CHAflyer_1018101.pdf and Capital Homestead Accounts (CHAs) at http://www.cesj.org/learn/capital-homesteading/ch-vehicles/capital-homestead-accounts-chas/.
Complementary to this proposed legislation is the Agenda of The JUST Third WAY Movement (also known as “Economic Personalism”) at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/ and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/, as well as Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
