By Patrick J. Buchanan
Though Bush 41 and Bush 43 often disagreed, one issue did unite them both with Bill Clinton: protectionism.
Globalists all, they rejected any federal measure to protect America’s industrial base, economic independence or the wages of U.S. workers.
Together they rammed through NAFTA, brought America under the World Trade Organization, abolished tariffs and granted Chinese-made goods unrestricted access to the immense U.S. market.
Charles McMillion of MBG Information Services has compiled, in 44 pages of charts and graphs, the results of two decades of this Bush-Clinton experiment in globalization. His compilation might be titled, “Indices of the Industrial Decline and Fall of the United States.”
From 2000 to 2009, industrial production declined here for the first time since the 1930s. Gross domestic product also fell, and we actually lost jobs.
In traded goods alone, we ran up $6.2 trillion in deficits — $3.8 trillion of that in manufactured goods.
Things that we once made in America—indeed, we made everything—we now buy from abroad with money that we borrow from abroad.
Over this Lost Decade, 5.8 million manufacturing jobs, one of every three we had in Y2K, disappeared. That unprecedented job loss was partly made up by adding 1.9 million government workers.
The last decade was the first in history where government employed more workers than manufacturing, a stunning development to those of us who remember an America where nearly one-third of the U.S. labor force was producing almost all of our goods and much of the world’s, as well.
Not to worry, we hear, the foreign products we buy are toys and low-tech goods. We keep the high-tech jobs here in the U.S.A.
Sorry. U.S. trade surpluses in advanced technology products ended in Bush’s first term. The last three years we have run annual trade deficits in ATP of nearly $70 billion with China alone.
About our dependency on Mideast oil we hear endless wailing.
Yet most of our imported oil comes from Canada, Mexico, Venezuela, Nigeria and Angola. And for every dollar we send abroad for oil or gas, we send $4.20 abroad for manufactured goods. Why is a dependency on the Persian Gulf for a fraction of the oil we consume more of a danger than a huge growing dependency on China for the necessities of our national life?
How great is that dependency?
China accounts for 83 percent of the U.S. global trade deficit in manufactures and 84 percent of our global trade deficit in electronics and machinery.
Over the last decade, our total trade deficit with China in manufactured goods was $1.75 trillion, which explains why China, its cash reserves approaching $3 trillion, holds the mortgage on America.
This week came a report that Detroit, forge and furnace of the Arsenal of Democracy in World War II, is considering razing a fourth of the city and turning it into farm and pastureland. Did the $1.2 trillion trade deficit we ran in autos and parts last decade help kill Detroit?
And if our purpose with NAFTA was to assist our neighbor Mexico, consider. Textile and apparel imports from China are now five times the dollar value of those imports from Mexico and Canada combined.
As exports are added to a nation’s GDP, and a trade deficit subtracted, the U.S. trade deficits that have averaged $500 billion to $600 billion a year for 10 years represent the single greatest factor pulling the United States down and raising China up into a rival for world power.
Yet, what is as astonishing as these indices of American decline is the indifference, the insouciance of our political class. Do they care?
How can one explain it?
Ignorance of history is surely one explanation. How many know that every modern nation that rose to world power did so by sheltering and nurturing its manufacturing and industrial base — from Britain under the Acts of Navigation to 1850, to protectionist America from the Civil War to the Roaring Twenties, to Bismarck’s Germany before World War I, to Stalin’s Russia, to postwar Japan, to China today?
No nation rose to world power on free trade. From Britain after 1860 to America after 1960, free trade has been the policy of powers that put consumption before production and today before tomorrow.
Nations rise on economic nationalism; they descend on free trade.
Ideology is another explanation. Even a (Milton) Friedmanite free-trader should be able to see the disaster all around us and ask: What benefit does America receive from these mountains of imported goods to justify the terrible damage done to our country and countrymen?
Can they not see the correlation between the trade deficits and relative decline?
Republicans seem certain to benefit from the nation’s economic crisis this November. But is there any evidence they have learned anything about economics from the disastrous Bush decade?
Do they have any ideas for a wholesale restructuring of U.S. trade and tax policy, for a course correction to prevent America’s continuing decline?
Has anyone seen any evidence of it?
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Utterly brilliant Pat. I love your columns on economic nationalism and the folly of free trade. One would think that the damage inflicted on the US economy by our insane trade policies would be a wake-up call. Alas, we now have Obama embracing the same bankrupt policies as Bush. You stated it best Pat. “Yes, indeed, we have arrived at the Day of Reckoning for Uncle Sam.”
Comparative Advantage is a stupid theory unless you’re talking about raw materials. No country has an advantage in finished products. The slant eyed ones are not better with electronics, the negroes are not better at manual labor, and the whites are not better at privilege.
And Free Trade does not lower the price to the consumer. American Labor may produce a widget at 100 cents, Chinese Slave Labor may produce widget at 10 cents, but the Chinese slave owner only undercuts the Free Labor product and sells at 99.9 cents. However since the dollar is devalued from the years and years of cumulative trade deficit, the Chinese slave owner effectively sells widget at 150 cents. That’s a price increase. Free Trade with cheap foreign labor countries INCREASES the price of imported goods to the consumer, not DECREASES.
And it doesn’t matter if the FED stops selling deficit bonds, China would just accumulate dollars faster which would increase in price of imported goods even more. And all that would accomplish is pressure China to devalue their currency even more.
I work on the front lines of this issue and I often find that the mile-high viewpoint doesn’t jive. Here are two specific examples.
I am making my own product for the first time. The best price I could find on a tool for the product in the U.S. was $60,000. I have many customers and contacts who do manufacturing so I had a very solid list of suppliers to get quotes from. The Chinese supplier offered to make the same tool for $2000. Note that per piece cost of the product was the same both in China and here after shipping costs. If I did not have the option of making the tool for $2000, then I would not be making the part. That would be less opportunity for my business, and fewer products for consumers to purchase, and the ones they do purchase will come at a higher price.
There is another Chinese factory I work with. It is a $60 million, 1300 employee factory, with about 1000 production workers. The production workers come from rural backgrounds. Most cannot read and though their lifestyle is humble to us, it is measurably improved over subsistence farming and they are happy to be employed. The other 300 employees are supervisors, middle managers, admin, finance, engineers, sales, etc., whose wages are surprisingly on par with similar positions here in the U.S. (If you can make a factory owner money, you are equally valuable anywhere).
If you take this entire factory and put it in the U.S., who loses? Nobody loses, except China. The lowly production workers will purchase things like cell phones and clothes. The upper level employees will purchase cars, houses, and iPads and invest in other parts of our economy. The reason we cannot do this is because of Federal public entitlements programs, Federal wage and labor laws, and Federal regulation of businesses. Protectionist policies will only make us poorer. Picking on China will just move production to Vietnam. The solution is to end these policies and open our borders to legal immigration.