Jewish World Review Jan. 20, 2004 / 26 Teves, 5764
U.S. selling itself short with "free" trade
Despite this week's report that our trade deficit declined in November, the 2003 U.S. trade deficit will be the largest on record, and our market is flooded with cheap foreign imports while consumers who want to buy American-made products often can't even find them.
Most Americans would like to support domestic manufacturers, but chances are the majority of us own goods made predominantly outside the United States. Wal-Mart alone will import nearly $12 billion in goods this year from China. Seventy-six percent of consumers who look for American-made goods say they have a hard time finding them, and the reason for this is simple: We've given away our manufacturing base through "free" trade.
In 1951 the average U.S. trade tariff was approximately 15 percent. By 1979 the average industrial tariff sank to 5.7 percent, and now our industrial tariff on foreign goods is just under 3 percent. As a result the United States has become the world's greatest customer, accumulating a trade deficit every year since 1976 - the cumulative total of which is a staggering $3.5 trillion. And countries like China, Japan, Germany, Canada and Mexico are the primary beneficiaries.
The United States' economy has become trapped in a vicious cycle in which we pay more and more money to the very countries to which we've surrendered our manufacturing base. The average manufacturing wage in China is 61 cents per hour while the average in America is $16. At least 75 percent of toys sold in the United States are foreign-made, according to the Toy Industry Association. Ninety-six percent of all clothing purchased in the United States is now imported. It's surprising that we've lost only 3 million manufacturing jobs in the past three years.
But companies also know that, given the choice, many American consumers would prefer to buy American-made products. And some companies are resorting to deception in an effort to convince U.S. consumers that their products are made in America. Unfortunately, there are no penalties in the United States for violators who make such false claims. Congressional intervention may be needed to ensure that companies that falsely claim their goods are made in America suffer severe consequences. But, to date, Congress' track record supporting American manufacturers has been less than stellar.
The United States certainly needs to ramp up efforts in identifying American-made products, but we also need to stem the tide of imports that drive our trade deficit ever higher. The first step should be the negotiation of bilateral trade agreements, not multilateral NAFTA-like agreements that result in millions of American jobs lost. Because of vast differences in wages and labor and production costs, the United States must consider trade agreements individually.
Amazingly, this week Federal Reserve Chairman Alan Greenspan referred to our record-high trade deficits as "seemingly uneventful." I assume the Fed chairman has heard the boiling frog analogy, in which a pot of water's temperature rises gradually to near boiling while all is seemingly uneventful for the ill-fated frog inside. But the Fed chairman apparently has no problem proclaiming the dangers of what he calls "clouds of emerging protectionism," apparently referring to a number of calls by members of Congress for this country to conduct fair and balanced trade. Those calls so concerned Greenspan that he said, "The costs of any new protectionist initiatives . . . could significantly erode the flexibility of the global economy."
Joining those members of Congress are Democratic candidates for the presidential nomination: Reps. Richard Gephardt of Missouri and Dennis Kucinich of Ohio, Sens. John Kerry of Massachusetts and John Edwards of North Carolina, and Vermont Gov. Howard Dean.
Trade has hardly become a central issue on the campaign trail, to this point. But I suspect it is about to. The United States can no longer afford the price of "free" trade.
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