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How far has America’s economy sunk?

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The following is an interview with Ian Fletcher, CPA’s Senior Economist.  Reposted from The Washington Times, it’s the second in a three part interview series.

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How far has America’s economy sunk?

Joseph Cotto  |  The Washington Times  |  June 27, 2012

FLORIDA, June 27, 2012 — When it was up for debate during the 1990s, NAFTA was billed as an economic superhighway of sorts. The academics, politicians, and pundits more or less claimed that it would lead America into a new golden age.

Nearly two decades later, have we moved forward, or has this fabled highway actually detoured us from prosperity?

Beyond NAFTA, free trade agreements with South Korea and various Latin American countries have been signed as of late. How should these bode for our already stressed economy? Is opening the door for cheaper imports — in more ways than one, from my standpoint — really such a frugal idea in the long run?

What about China? Aside from the fact that it owns an enormous share of our national debt, the country’s notorious currency manipulation schemes have left our trade deficit at staggering levels.

In this second part of our discussion, Ian Fletcher, the senior economist at the Coalition for a Prosperous America, addresses these very issues.

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Joseph F. Cotto: Since it went into effect during late 1995, the North American Free Trade Agreement has formed a trilateral commerce bloc between Canada, the United States, and Mexico. From your research, has this proven to be of benefit to our country?  

Ian Fletcher: No.  It has worsened our trade deficit and undermined wages in the United States.  Ross Perot was an odd individual, but he was right about  NAFTA.  That’s fairly obvious now.  The Department of Labor says NAFTA cost us over half a million jobs. This all should have been obvious beforehand.  Mexico was far too poor a country to become this vast market for American consumer goods we were promised. I think the people who framed NAFTA actually knew this. Paul Krugman has written about how the economic projections of the Clinton administration were blatantly faked, about how it was all driven by a political agenda with the economics tacked on as a rationalization. And Mexico has been losing its manufacturing to China, so it hasn’t been a great success for them, either.

Cotto: Recently, the federal government approved further free trade agreements with South Korea and several Latin American countries. What sort of effect should these be expected to have on the U.S. economy?

Fletcher: Our trade deficit with South Korea is already up sharply.  The reality is that these trade agreements are not a solution to America’s trade mess, because our big trading partners are practicing various kinds of mercantilism and these agreements are predicated on the assumption that both sides are like the U.S. in not having any conscious trade strategy at all.  Now they’re adding Canada and Mexico to the proposed Trans-Pacific Partnership, and U.S. Trade Representative Ron Kirk has said he’d “love nothing more” than to have China join.  A free trade agreement with China?  That’s a truly frightening thought.

The other problem with these agreements is that they’re so secretive, so anti-democratic, so lacking in public accountability.  Why should we sign away our right to make our own laws, on everything from labor standards to environmental protection to financial regulations?  Why should we sign treaties where even U.S. senators have a hard time finding out what’s being put in them?  Why should we let foreign judges supervise our economy or give foreign investors rights Americans don’t have?

Cotto: China is notorious for its currency manipulation schemes. Beyond this, however, it not only owns a tremendous amount of America’s national debt, but accounts for much of our trade deficit as well. How do you suppose that the U.S. could level the playing field in the near future? 

Fletcher: We can stop China’s manipulation of our currency any time we have the political will to do so. All we have to do is stop selling them our debt and assets. The underlying economics is not complicated, because the only way you can drive a currency up or down is by supply and demand, same as with anything else that has a price.  If we end the artificial Chinese demand for dollars caused by their government’s purchases of our debt and assets, we end the problem.  There have been cases of currency manipulation that were stopped before.

Unfortunately, the “American” multinational corporations that are pulling the strings in the Obama White House don’t want this problem solved. They make so much money producing for export to the U.S. from China that they don’t want any change to the status quo. Beijing also plays them like a fiddle and forces them to lobby on China’s behalf in exchange for access to China’s cheap labor.  The White House has apparently forbidden the U.S. Trade Representative from even talking to China: only the Treasury Department and the White House itself are allowed to do that now.  This is a national-security problem, too.

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Despite more than a few attempts to stimulate the economy, nothing has stopped the Great Recession from rolling along. If America’s manufacturing sector is restored, might things turn around?

The Republican Party’s Ron Paul faction is making a lot of noise, but does it have the strength to seriously push its fiscal policy? Finally, how was it that Mr. Fletcher became such an outspoken fair trade economist?

Find out in part three.

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