Manufacturing’s Dismal Decade

Last year, Barack Obama committed his administration to doubling U.S. exports in half a decade.

The good news: He is on the way. U.S. exports of goods and services grew in 2010 by 16.6 percent.

Bad news: U.S. imports, starting from a higher base, surged by 19.7 percent.

Result: The U.S. trade deficit in 2010 worsened by 33 percent, rising from $375 billion to $498 billion, the largest percentage increase in a decade. If Obama keeps this up, he may prove as big a disaster for U.S. manufacturing as his predecessor, although these are big shoes to fill.

As he has each February for years, Charles W. McMillion of MBG Information Services has compiled the stats on the industrial decline of his country under our free trade presidents. Here are but a few numbers for the decade from December 2000, the month before George W. Bush took the oath, to December 2010, the end of Obama’s second year.

In that decade, America ran a total of $6.1 trillion in trade deficits, more than our entire economic growth. To finance those 10 years of deficits, America had to borrow $1.553 billion every day.

And we wonder why China owns America.

In 2010, our trade deficit in manufactures alone rose 27 percent to $416 billion, far exceeding our trade deficit in crude oil. A decade of such deficits in manufactures has devastated the industrial states.

From December 2000 to December 2010, 22 states lost a third or more of their manufacturing jobs. Massachusetts, New York and Ohio lost 38 percent of their manufacturing jobs, New Jersey 39 percent, North Carolina 42 percent, Rhode Island 44 percent, Michigan 48 percent.

Political result: Free trader John McCain lost all seven, including the formerly “red” states of Ohio and North Carolina.

Trade in autos, trucks and parts, an industry in which America was dominant in the lifetime of many of us, tells the story.

Last year, the United States ran a trade deficit in autos, trucks and parts of $110 billion. The deficits with Germany, Japan, South Korea and Mexico account for that entire total.

Consider South Korea. Though she has an economy one-fifteenth the size of ours, she exported to us 12 times the dollar volume of trucks, cars and parts that we exported to her.

Rather than make a free trade agreement with South Korea, why not tell our friends in Seoul: We are tired of arguing with you folks about opening your markets to our goods. Since you folks buy less than $1 billion in autos, etc., from us, while you sell almost $12 billion in your cars and trucks to us, you keep your market. We’re taking back ours.

The point: Despite all the propaganda about exports being the future, the foreigners’ share of the U.S. market is $500 billion more than America’s entire share of the world market.

If, as we once did, we produced here all the manufactured goods we consume and gave up every other manufacturing market in the world, we would add millions of jobs and our gross domestic product would surge.

And it is not only traditional manufacturing where America is getting her clock cleaned.

In the critical items identified as “advanced technology products,” the United States has been running a deficit with the world, beginning in Bush’s second year, soaring from $16 billion in 2002 to $82 billion in 2010.

With China, the U.S. trade deficit in advanced technology products alone in the past four years has totaled more than $300 billion, with the 2010 deficit in ATP with China reaching an astonishing $92 billion.

Does it matter that manufacturing in America now accounts for one-tenth of our economy and one-tenth of our labor force, figures unseen since before the Civil War?

If you read the history of Britain in the industrial age, of America from 1865-1945 and of Bismarck’s Germany, you will think it does. If you listen to the scores of thousands of economists, none of whom ever built a great nation, you may think it does not matter who produces what where.

Is it possible America could become again the dominant manufacturing nation she was from 1880 to 1980? Not only possible but easy to accomplish — and within a decade.

Paul Otellini, CEO of Intel, has half the answer. “We should offer tax credits or a five- to 10-year tax holiday to companies, domestic or foreign, that want to set up or expand a factory in the U.S.”

How would we finance it? As most foreign nations impose value-added taxes averaging 20 percent on U.S.-made goods that enter their countries, put a tariff of 20 percent on all foreign goods.

Hundreds of billions would suddenly pour into the U.S. treasury. Imports would slowly shrink. Production in America would soar.

That’s how Hamilton, Madison, Clay, Lincoln, McKinley and T.R. did it, before America forgot how she became great.